Everybody loves a bargain, including investors. And at least on a share-price basis, stocks priced under $5 are about as bargain-esque as investors could hope for.
That doesn’t mean every low-priced stock is worth owning, though. Far from it. While share price broadly doesn’t tell you much about how good a company is or isn’t, stocks with very low share prices more often than not trade at such levels for a reason.
So, which sub-$5 stocks are the best stocks to buy right now? We’ll look at five that are cheap in terms of share price, but also great stocks to buy simply because their underlying companies have a bright future.
In no particular order…
Best $5 Stocks to Buy – Zix Corp. (ZIXI)
ZIXI Stock Price (9/4): $3.85
This week, consumers saw yet another example of the risks of an increasingly digital world. A handful of celebrities who own iPhones had some of their private, indiscreet photos accessed and posted on the web.
That hack follows one from the prior week, which stole customer information from five major U.S. banks.
Between the two hacks, the need for network security was underscored — yet again.
Enter Zix Corp. (ZIXI). It’s not a complete cybersecurity solutions provider, but Zix does address one key risk most individuals and organizations face every day — it encrypts e-mails, and determines which are safe to send or receive for subscribers. Its edge on the competition is that it allows subscribers to use the service with most any sort of device, including most smartphones.
Most important, at only $3.85 per share, ZIXI could be one of the most potent stocks to buy in the increasingly fruitful IT security space.
Best $5 Stocks to Buy – Semiconductor Manufacturing International (SMI)
SMI Stock Price (9/4): $4.76
Semiconductor Manufacturing International (SMI) is, just as the name suggests, a semiconductor manufacturing outfit. It helps semiconductor companies build a proverbial better mousetrap (aka “foundry”).
There’s nothing remarkable about the company. In fact, Semiconductor Manufacturing International is remarkably unremarkable … other than the fact that the company logged sales growth in four of the past five years, swung to a profit in 2012 and maintained it in the meantime, and is projected to improve revenue to the tune of 12% next year.
It might not be sexy, but it’s solid. What is sexy is the stock’s price. SMI shares currently are priced at only $4.73, making it one of the best stocks to buy from the under-$5 realm at this time.
Best $5 Stocks to Buy – Cowen Group (COWN)
COWN Stock Price (9/4): $4.14
Contrary to popular belief, not all the worthy brokerage firms and investment banks have been acquired by the industry’s biggest players.
With a market cap of only $474 million, Cowen Group (COWN) proves it can be small and still survive. Indeed, Cowen Group has proven it’s possible to be small and thrive. The company saw revenue surge last year, leading Cowen to its first profit in years… a bottom line of $4.65 million.
The ball really seems to be rolling now, however. Analysts see an 11% increase in next year’s revenue, with per-share profits supposed to widen from 30 cents per share of COWN stock this year to 45 cents next year. That translates into a forward-looking P/E ratio of 9.2, making this equity one of the best sub-$5 stocks to buy.
Best $5 Stocks to Buy – Sirius XM (SIRI)
SIRI Stock Price (9/4): $3.62
Despite myriad royalty headaches and more than a little new competition, Sirius XM (SIRI) has more than proven the satellite radio business model works.
In fact, it appears to be picking up steam.
Per-share earnings are on pace to grow from 6 cents per share last year to 8 cents this year to an estimated eleven cents per share next year. Sales have grown — and should continue to grow — accordingly.
Don’t doubt the positive outlooks, either. While the advent of mobile Internet theoretically should have up-ended the antiquated satellite radio technology by now, Sirius XM has figured out how to do one thing Internet radio hasn’t yet — give consumers outstanding, original programming.
For example, Skrillex is scheduled to perform a private concert for Sirius XM subscribers, the company is teaming up with sports news website Bleacher Report to start a new XM channel, and Jenny McCarthy will increase the airing of her exclusive radio show from a weekly to a daily broadcast this fall.
The breadth and depth of this creative and original programming has singlehandedly made SIRI one of the best stocks to buy at a price less than $5 per share.
Best $5 Stocks to Buy – Advanced Micro Devices (AMD)
AMD Stock Price (9/4): $4.24
Last but not least, it’s no real secret that Advanced Micro Devices (AMD) has struggled as the world migrated from desktop PCs, and even from laptops, to mobile devices like tablets and smartphones. Even after years of retooling itself, the alleged turnaround for AMD seemed to be losing traction again last quarter.
Is there any real hope here? Yes, there is, and the turnaround effort may well get traction again sooner than most investors realize.
Although the road ahead probably will be a rocky one for Advanced Micro Devices, over the past several weeks it has gotten back into some of its niches where it can dominate the market. Namely, the company has a renewed love for high-end graphics cards, and it’s also wading deeper into solid state drives. They’re still apt to be markets of limited size, but it’s an important acknowledgement that AMD isn’t simply going to keep going head-to-head against competition it will always struggle to top … like Intel (INTC).
In any case, while investors have kept AMD shares under $5 since the middle of 2013, they’re not going to be able to do so forever. Although it has been choppy, the turnaround effort still has been driving higher sales and bigger profits more often than not since it was put into place in the first half of last year — and that makes Advanced Micro Devices one of the market’s best stocks to buy in this price range.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
