The market was up and down through morning trading on Tuesday as Wall Street attempts to decipher the wave of earnings data coming in from big banks and others as the heart of the fourth quarter earnings season begins to beat.  

The bulls finally pushed the S&P 500 back above its 200-day moving average late last week after December’s CPI data showcased cooling inflation. The benchmark index still hasn’t hit the 4000 level that many traders are looking to as a bullish sign for the market as earnings and, more importantly, guidance roll in for 2023.  

U.S. inflation fell to 6.5% in December to match Wall Street expectations and come in below November’s 7.1%. The recent CPI reading marked the sixth straight monthly deceleration after inflation hit 9.1% in June. Wall Street in response increased its bet that the Fed will lift its core interest rate by only 0.25% at its next FOMC meeting at the end of January from 77% prior to the CPI release to 96% on Tuesday.

Wall Street is once again a bit more confident that the Fed will be able to take its foot off the gas and even start to lower rates sooner than expected. The next major catalyst will be how the broader S&P 500 earnings outlook shapes up for 2023 because earnings and interest rates are the two largest factors that impact stock prices.

Investors looking to buy stocks in January and throughout 2023 should consider focusing on stocks that have been able to improve their bottom-line outlooks amid the wider market and economic pullback that’s seen the broader S&P 500 earnings outlook fade.

Taking this all into account, we used one of our Zacks screens to show investors how to find highly-ranked Zacks stocks, which means they have improving earnings outlooks, that are trading for under $10 per share to consider buying in January and beyond.

Penny Stocks

One dollar or less used to be the common threshold for what we call “penny stocks.” Today, the SEC has expanded penny stocks to securities that trade for less than $5 a share. Many investors avoid these stocks because they are speculative in nature.

Meanwhile, penny stocks often trade infrequently and hold wide bid/ask spreads. These stocks also carry many other traits that, in many cases, cause excessive volatility. With that said, some penny stocks perform incredibly well, which helps them remain attractive.

Stocks Under $10

Moving on, let’s briefly discuss the next class of cheap stocks. Stocks that trade in the $5 to $10 range are generally less risky than their penny stock counterparts. Investors might be more likely to have heard of these companies or seen the tickers. They are, however, still inherently more speculative than many other higher-priced stocks.

Investors can obviously find winning stocks for under $10 if they are extremely selective. So today, we narrowed the list of thousands of these more speculative stocks down to a more manageable group of $10 and under stocks that might help boost your portfolio.

Screen Parameters

• Price less than or equal to $10

• Volume greater than or equal to 1,000,000

• Zacks Rank less than or equal to 2

(No Holds, Sells or Strong Sells.)

• Average Broker Rating less than or equal to 3.5

(Average Broker Rating of a Hold or Better.)

• # of Analysts in Rating greater than or equal to 2

(Minimum of at least two analysts covering the stock.)

• % Change F1 Earnings Estimate Revisions -- 12 Weeks greater than or equal to 0

(Preferably upward earnings estimate revisions, but definitely no downward revisions.)

Here are two stocks out of the nearly 60 highly-ranked names trading under $10 a share that made it through the screen today…

ADT 

ADT ((ADT Quick QuoteADT - Free Report) ) is a home and business security solutions provider. ADT boasts that it protects over 6 million customers, including over 160 Fortune 1000 commercial customers through its array of offerings that includes 24/7 professional monitoring. ADT is also in the rooftop solar installation business and smart home segments.

ADT, which currently trades for just under $10 per share, lands a Zacks Rank #2 (Buy) at the moment and an overall “A” VGM grade in our Zacks Style Scores system. ADT’s 2022 revenue is projected to climb 20% to $6.34 billion to help it swing from an adjusted loss of -$0.25 per share to +$0.51 a share. ADT is then expected to expand on this growth in 2023.

ADT’s dividend yields 1.4% at the moment. Plus, ADT shares have climbed 23% in the last year and 40% in the past six months to blow away the market and top its industry. And ADT is trading at a large discount to its own highs and its industry at 13.6X forward 12-month earnings.

Robinhood Markets 

Robinhood Markets ((HOOD Quick QuoteHOOD - Free Report) ) is the upstart online trading platform that went public in the summer of 2021. Robinhood is a mobile-first trading platform with no minimum account levels that aims to help a far larger swath of the public invest and trade. Robinhood has come under some scrutiny and its stock price tumbled as trading volumes slowed as people returned to their normal lives after the pandemic. 

Robinhood is also actively expanding its financial and investing service offerings. And it currently boasts over 12 million monthly active users. Zacks estimates call for HOOD to slash its adjusted loss from -$7.49 per share to -$1.12 a share in FY22. The firm is then projected to climb all the way to -$0.25 per share in FY23 with its fiscal 2023 revenue projected to bounce back to top its FY21 total.

HOOD’s bottom-line outlook keeps improving to help it grab a Zacks Rank #2 (Buy) right now. Robinhood is also part of the Financial - Investment Bank segment that is in the top 17% of all Zacks industries right now. HOOD currently trades 20% below its average Zacks price target. And Robinhood shares have soared 16% in 2023 so far.

Both stocks offer solid growth potential. Yet, it isn’t wise to pack your portfolio full of cheap, $10 or less stocks. Still, these stocks are certainly worth further investigation because grabbing a few of the top names from this list might bolster your returns. And let’s not forget that picking a few cheap stocks can also be quite fun.

Get the rest of the stocks on this list and start screening for the best stocks under $10 for yourself. And don't forget to backtest your strategy so you'll know how successful it's been before you put any of your money at risk.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance/.