We are starting off 2019’s Screen of the Week articles by searching for "cheap" stocks that look poised to surge. I put the word cheap in quotations because here at Zacks, we don’t love the word cheap because investors should try to pick stocks based on comparable and contextual factors, and not simply price alone.
With that said, stocks under $10 are almost always considered cheap. These stocks are often appealing as they may allow you to purchase a substantial position in a company. But before we get into some of the stocks currently trading for less than $10 that I screened for, it’s worth quickly breaking things down.
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 issued by small companies 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 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.
• Price less than or equal to $10
• Average Dollar Volume greater than or equal to $1,000,000
(Price x volume shows you how much money is trading in and out of the stock on a daily basis.)
• Weekly Volume greater than Previous Week's Volume (any two out of three weeks)
(Want to see increasing volume to show greater investor interest and demand.)
• Zacks Rank less than or equal to 3
(No 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 5 stocks that made it through this week's screen:
Sprint Corporation (S - Free Report)
Vitamin Shoppe, Inc. (VSI - Free Report)
Trivago N.V. (TRVG - Free Report)
Snap Inc. (SNAP - Free Report)
Aegon N.V. (AEG - Free Report)
Overall, all five of these stocks offer solid growth potential. Yet, it likely 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 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. You can do it.
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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.