Cheap stocks can provide a storehouse of opportunity for those looking to make trades for a solid single or double. If you’re lucky, you might even find a gem that offers up a home run if you either time a trade right, or you have long-term vision for a small company.
It’s important to remember that, just by the math, there’s no actual difference between owning, say, 50 shares of a $1 stock or 1 share of a $50 stock. You still have the same amount invested. However, nominally cheap stocks often find themselves in the crosshairs of traders, and ones on the way down can also find themselves heavy on short interest. Both are potential catalysts for big, sudden jumps.
I also should emphasize that these do not fit into my usual selection of stocks to hold for the long term in a diversified portfolio. These are short-term trades. But that said, you can actually do yourself a favor by trading these within a tax-deferred account such as a rollover IRA, as you can dodge the high short-term capital gains rates.
Here are five trade suggestions for a few cheap stocks where I think the path of least resistance is up, not down. As far as how each stock could run, I can’t offer clear guidance — your amount of risk is up to you. But personally, I’m happy if I can squeeze 10% out of a trade.