Most investors want to put their money in equities but may not be able to afford large stakes in valuable companies with higher-priced stocks. For them, low-priced stocks could be attractive as these will enable them to buy more number of shares instead of just a handful of higher-priced stocks for the same amount. For example, an investor willing to spend $10,000 can either purchase at least 500 shares of a stock trading under $20 or only 100 shares of a stock trading at $100.
Additionally, stocks under $20 reap huge profits as an increase of as less as a dollar in share price adds 5% to the portfolio. This is in contrast to stocks priced at $100 or above, which see 1% or lower gains if shares move up by $1. Further, most of the low-priced stocks have high levels of liquidity that give these stocks an added advantage. This means that cash can be converted quickly and investors could easily get their money out of the securities. In fact, trading in higher average daily volumes keeps the bid/ask spread tight and does not lead to extra cost for investors. And guess what, the beaten down prices have provided investors a great opportunity to tap some of these stocks from a long list. The preference is not only limited to the stock world but can be felt in the ETF space as well. In fact, there are only a handful of ETFs that currently trade below $20 out of nearly 2,000 funds, suggesting that choices are pretty worthy for investors who like to get a decent number of shares from their investment (read: Top and Flop ETFs of Last Week). VIDEO
So, let us dig into some of the ETFs that are below $20, and have AUM of over $50 million and average daily volume of at least 50,000 shares. These low-priced ETFs could lead to huge gains in the coming months.
First Trust Energy AlphaDEX ( FXN Quick Quote FXN - Free Report) This follows an AlphaDEX methodology and ranks stocks in the broad energy space by various growth and value factors, eliminating the bottom-ranked 25% of the stocks. This approach results in a basket of 44 stocks, each holding less than 4.5% of assets (read: Energy ETF Hits New 52-Week High). Last Closing Price: $16.96 Zacks Rank: #3 (Hold) AUM: $461 million Expense Ratio: 0.63% Average Daily Volume (in shares): 363,000 Invesco High Yield Equity Dividend Achievers ETF PEY This fund offers exposure to the dividend-yielding companies that consistently increase the payout and tracks the NASDAQ US Dividend Achievers 50 Index. Last Closing Price: $17.48 Zacks Rank: #3 AUM: $753.7 million Expense Ratio: 0.54% Average Daily Volume (in shares): 132,000 Alerian MLP ETF AMLP AMLP This fund tracks the Alerian MLP Infrastructure Index, holding 27 stocks in its basket with heavy concentration on the top six firms that collectively make up for 48.6% of the assets (read: MLPs on Rise: Best ETFs & Stocks Over One Month). Last Closing Price: $10.55 Zacks Rank: N/A AUM: $9.7 billion Expense Ratio: 0.85% Average Daily Volume (in shares): 13.2 million Bottom Line The abovementioned ETFs should draw the attention of investors seeking to accumulate a larger number of low-priced funds that are poised to outperform. Even small investors could add a decent holding of some of these names with a modestly sized investment. These products could fetch higher returns. Want key ETF info delivered straight to your inbox? Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>