Looking for cheap stocks to buy now can be a lot like digging through the discount racks at your favorite store. Sure, you might find plenty of cheap stocks … but they are clearly discounted for a reason. And when you eventually find something worth taking seriously, there’s always the nagging doubt you may be actually buying something that’s defective or damaged in order to be priced so low.
While it’s not true that all cheap stocks are bad investments, all bad investments inevitably become low-priced stocks when given enough time.
That’s why finding the best cheap stocks to buy now should involve discipline and a strict set of guidelines to avoid buying a bad company destined to go nowhere.
I just ran an intensive screen on every stock in the market priced under $10 a share, looking for the best cheap stocks based on the following criteria:
- Outperformance YTD in 2015 to show current momentum
- Earnings growth this year to show optimism going forward
- Listing on a major exchange, a market cap of at least $300 million and share price of at least $1 to weed out any high-risk gambles on the pink sheets.
To be clear, there are never any guarantees with cheap stocks — and volatility tends to be the name of the game for low-priced equities, particularly those with low volume and market values. For this reason, only the most aggressive investors should chase cheap stocks.
But if you’re not afraid of taking the tiger by the tail, here are the 12 cheap stocks I think are worth looking at … just make sure you do your own digging before buying, and always stay diversified!
Cheap Stocks to Buy Now – Sirius XM Holdings Inc. (SIRI)
YTD Performance: +12% vs. +2% for the S&P 500
Earnings Outlook: Projected EPS of 12 cents in FY2015, up 50% from 8 cents last year
Market Cap: $21.8 billion
Sirius XM Holdings Inc. (NASDAQ:SIRI) is one of the most popular cheap stocks to buy out there, with average volume of more than 25 million shares each day. That kind of liquidity, coupled with a massive market cap, means you get a bit more stability than other cheap stocks.
Of course, SIRI stock is not without its volatility. A year ago, shares were at about $4 before crashing to $3 over a few months … and only recently has Sirius XM started to flirt with $4 once more.
Earnings on April 28 will be a big catalyst for this stock, but given a nice beat last quarter and EPS that have met expectations for three consecutive quarters before that, SIRI stock has a bit of momentum.
It’s high-risk, high-reward, though, because SIRI stock has once again topped the list of most shorted stocks in the Nasdaq. Investors willing to bet on continued earnings momentum could benefit from a huge short squeeze should the next few weeks play out well.
Of course, if the shorts are right … buckle up.
Cheap Stocks to Buy Now – First Bancorp (FBP)
YTD Performance: +13%
Earnings Outlook: Projected EPS of 45 cents in FY2015, up 10% from 41 cents last year
Market Cap: $1.4 billion
First Bancorp (NYSE:FBP) is a small regional bank with 15 or so offices in Eastern Maine that serve local consumers and businesses. As a small outfit, the Maine bank doesn’t quite have the liquidity to make big-time bets like mega-cap financials — but ultimately, that might be a good thing for shareholders as FBP stock mostly rises and falls on local lending trends instead of crazy derivatives or prop trading.
FBP is seeing improving earnings, though 2014’s $695 million in revenues — while significantly higher year-over-year — were just a couple percent better than 2012. But the hopes of better net-interest-rate margins in the next year or two as the Fed tightens monetary policy could lift profitability and shares.
There’s also the ever-present chance of a buyout from a larger player, and given the relatively modest size of this institution, there are plenty of bigger fish out there looking to add accounts and roll up a smaller bank’s operations.
Financial consolidation has been the name of the game in the sector since 2008, and players like First Bancorp could see a decent pop on a buyout premium — presuming regulators sign off, of course.
Cheap Stocks to Buy Now – Merge Healthcare Inc. (MRGE)
YTD Performance: +56%
Earnings Outlook: Projected EPS of 21 cents in FY2015, up 5% from 20 cents last year
Market Cap: $543 million
Merge Healthcare Inc. (NASDAQ:MRGE) is a small but exciting company that develops software to help share medical images. Given the rise of digital medical imaging, the ability for doctors to collaborate on the cloud and the need for secure storage in light of hacking and personal information concerns, a company like Merge is in the right place at the right time.
And judging by the 55% jump since Jan. 1, investors look like they agree.
MRGE stock has recently attained steady profitability, and has put together a string of strong earnings reports that have regularly met or topped expectations. Revenue is growing at a double-digit clip annually, and profits continue to edge higher as well.
This is risky small cap, to be sure, but one of the best cheap stocks to buy now based on its unique focus and recent momentum. Q1 earnings for MRGE stock hit at the end of April, and shares seem to be trending higher in anticipation … so don’t wait too long to pull the trigger if you research this stock and like what you see.
Cheap Stocks to Buy Now – Dot Hill Systems Corp. (HILL)
YTD Performance: +43%
Earnings Outlook: Projected EPS of 29 cents in FY2015, up 45% from 20 cents last year
Market Cap: $380 million
Dot Hill Systems Corp. (NASDAQ:HILL) is a storage-focused tech stock that has really come into its own lately given the focus on Big Data. In addition to storage array hardware, HILL also provides software for virtualizing, backing up and optimizing data on its servers.
Shares have exploded in 2015 thanks to a strong earnings report in March that showed strong revenue growth, significant margin expansion and EPS for the fourth quarter that quadrupled year-over-year.
As Big Data continues to be the big buzzword in tech, you can bet that players like Dot Hill will get even more attention in the months ahead — either in the form of buying pressure from investors, or in the form of buyout bids from larger technology players looking to share in the success.
Cheap Stocks to Buy Now – Monster Worldwide, Inc. (MWW)
YTD Performance: +40%
Earnings Outlook: Projected EPS of 38 cents in FY2015, up 35% from 28 cents last year
Market Cap: $590 million
Monster Worldwide, Inc. (NYSE:MWW) is another cheap stock that has seen big-time momentum in the last several weeks after strong fourth-quarter and year-end results. After strong North American bookings from a recovering labor market resulted in brisk business for the staffing and job ads company, MWW beat on both earnings and revenue.
And looking forward to its next earnings report in May, investors seem to be betting on another strong performance given the roughly 50% gains since its February lows before that blockbuster Q4 report.
With the unemployment rate steadily dropping and businesses getting more optimistic on the hiring front, that will result in a cyclical recovery for Monster after what has admittedly been a rough few years.
Just prepare for plenty of volatility, given that the stock has bounced around between about $3.50 and $7 over the last year. Volume of about a million shares daily lends to liquidity, but as with other cheap stocks, you should expect a bumpy ride nevertheless.
Cheap Stocks to Buy Now – CNinsure Inc. (ADR) (CISG)
YTD Performance: +36%
Earnings Outlook: Projected EPS of 60 cents in FY2015, up 18% from 51 cents last year
Market Cap: $450 million
I know what you’re thinking: CNinsure Inc. (ADR) (NASDAQ:CISG) is a small company in China, and with all the gloom and doom about the slowing economy there, only a fool would bargain hunt in Asia.
Well for starters, this is a classic case of “bad news is good news,” where continued declines in macro indicators mean that help is most certainly on the way from Beijing — particularly to financial-related companies like CNinsure. In fact, many China stocks are up against 52-week highs on similar optimism of governmental intervention.
Secondly, it’s important to note the old cliché of it being a market of stocks and not just a stock market. While it’s true that some indicators remain ugly in China, keep in mind that this insurer is set to grow revenue by more than 30% this year and another 20% in 2016. Furthermore, profits continue to tick up handily — as evidenced by four straight earnings surprises where CISG trounced expectations by 50% or better!
It’s risky to bet on small caps. It’s risky to bet on China now. And it’s risky to bet on cheap stocks in any market.
But hey, if you’re gonna be a bear … be a grizzly. After all, the 37% run since January shows that plenty of other investors see the opportunity in this pick.
Cheap Stocks to Buy Now – ClickSoftware Technologies Ltd. (CKSW)
YTD Performance: +36%
Earnings Outlook: Projected EPS of 12 cents in FY2015, up 200% from 4 cents last year
Market Cap: $325 million
ClickSoftware Technologies Ltd. (NASDAQ:CKSW) is a software company that focuses on workforce management tools, allowing small- and medium-sized businesses to schedule service calls, manage shifts and measure performance of employees.
In an economic downturn, when companies are cutting back and getting less business, it’s not as pressing to ensure your workforce is humming on all cylinders. But when there’s plenty of work and your field teams are running around like mad? Well, it’s actually better to invest in good workforce management software than to simply staff up or say no to more business.
As a result of this kind of mindset among smaller companies, ClickSoftware has been gathering momentum after a rough couple of years. In fact, its February earnings report blew the doors off with record revenue for Q4 that jumped 12% year-over-year, and a return to profitability and positive cash flow.
CKSW gapped up on this news, but is still relatively cheap and has continued upside if it can continue to build on previous successes across 2015.
Cheap Stocks to Buy Now – Teekay Tankers Ltd. (TNK)
YTD Performance: +21%
Earnings Outlook: Projected EPS of 85 cents in FY2015, up 118% from 39 cents last year
Market Cap: $685 million
Teekay Tankers Ltd. (NYSE:TNK) has broken plenty of hearts over the years. After the commodity crash of the financial crisis coupled with a glut of excess supply in the tanker biz, shares crashed hard from highs around $24 in 2008 to about $8 in a year or so. Then, things got even worse as crude oil supply grew and the strong dollar held back commodity prices, pushing TNK stock as low as the mid $2 in 2013.
But things have been relatively improved in the last year or so, with the tanker company showing a smattering of quarterly profits and actually finishing fiscal 2014 in the black.
And now, with most of the negativity baked in and the absurd demand for oil tankers as refiners look for any place to stow excess supply amid weak pricing, TNK stock has bounced back handily.
The company has even dipped its toe back in the dividend arena with a small 3-cent payout each quarter. But thanks to the low share price, that’s actually good for a roughly 2% yield!
Expect volatility with TNK stock, as with any commodity-dependent investment. However, as Teekay approaches earnings in May it continues to see upwards revisions to estimates — which is a good hint that negativity still remains overdone even after the recent rise off the mat.
If you want energy exposure and a little yield but still don’t trust Big Oil in this environment, Teekay is an aggressive alternative.
Cheap Stocks to Buy Now – Standard Pacific Corp. (SPF)
YTD Performance: +19%
Earnings Outlook: Projected EPS of 62 cents in FY2015, up 15% from 54 cents last year
Market Cap: $2.4 billion
When you think of homebuilders, big name stocks like Toll Brothers Inc (NYSE:TOL) and PulteGroup, Inc. (NYSE:PHM) naturally spring to mind. But midcap Standard Pacific Corp. (NYSE:SPF) is also a good bet for those who are bullish on housing in 2015 and beyond.
Focused on single-family homes, Standard Pacific is a smaller builder that focuses its work mainly in the Southeast, California and the Southwest to cover about 25 different markets.
While it may sound risky to bet on a housing recovery continuing from here given the crash and burn for home values caused by the financial crisis, there are many reasons to believe housing will keep going strong in 2015 and beyond. In addition to improvement in wages and employment, there remains a good tailwind for home values even if the pace of property value increases has cooled a bit. Furthermore, many reluctant homebuyers have been lured back into the market as costs to rent exceed the cost to buy in many regions.
This is good news for builders, and SPF stock has seen big gains as a result. Sure, the company took it on the chin worse than other builders, but it has snapped back roughly fourfold from its 2011 lows!
This is a stock that has improved its operations just in time to capitalize on a continued housing recovery. And after shares took a bit of a breather in 2014, they have started 2015 with a bang — so don’t delay if you want a piece of this housing pie while this stock is still cheap.
Cheap Stocks to Buy Now – Advanced Semiconductor Engineering (ADR) (ASX)
YTD Performance: +13%
Earnings Outlook: Projected EPS of 56 cents in FY2015, up 14% from 49 cents last year
Market Cap: $10.8 billion
Advanced Semiconductor Engineering (ADR) (NYSE:ASX) isn’t as sexy as some of the big-name tech stocks out there. But this integrated circuits and electronics company as one of your best investments amid lots of froth elsewhere in the sector.
The Taiwan-based company is close to many Asian electronics manufacturers. And regardless of whether those manufacturers crank out something as hot as the iPhone from Apple Inc. (NASDAQ:AAPL), ASX still will have a strong baseline simply because of how many high-tech devices exist in the world.
Moreover, ASX is not a chip designer, so it doesn’t have the same big margins as the companies who create the next hot chip … but it also doesn’t have the same risk. Advanced Semiconductor’s diverse business makes it a stable player for the long haul, and not as finicky as companies that rely heavily on laptops and desktops. That stability also is reflected in the form of a 3.0% dividend yield.
In a post-PC age, there are assuredly sexier tech plays out there. But ASX is up by double-digits year-to-date in the last year and boasts a decent dividend. You’d be hard pressed to find a cheap tech stock that packs the same punch.
Throw in improving earnings and there are many reasons to bargain hunt in Advanced Semiconductor instead of overpaying elsewhere in the technology sector.
Cheap Stocks to Buy Now – Cowen Group Inc (COWN)
YTD Performance: +18%
Earnings Outlook: Projected EPS of 46 cents in FY2015, up 24% from 37 cents last year
Market Cap: $630 million
Cowen Group Inc (NASDAQ:COWN) provides alternative investment advice via brokerage and money management services. It’s no surprise to investors that active management has been under pressure in recent years, and COWN stock really had taken it on the chin in the wake of the Great Recession.
But about a year ago, the company got squarely back on its feet with strong profits. And all the while, revenue has steadily been ticking higher from about $235 million in 2011 to almost $430 million last year.
Investing in an investment company is a risky bet, because you live and die based on their decisions. But the “smart money” at Cowen seems to have quite a hot hand as profits have soared and the stock has jumped 45% in the last 12 months and 18% year-to-date.
In a benignly higher market when you could have made 30% in an index fund across 2013, COWN stock would have been a bad bet. But in a choppy market where a wise hand at the helm pays off? Well, Cowen Group may be worth a look.
And besides, as more investors start to think this way, the more fees COWN gets to rack up as folks look for outperformance and beyond passive index funds.
Cheap Stocks to Buy Now – Sapiens International Corporation N.V. (SPNS)
YTD Performance: +16%
Earnings Outlook: Projected EPS of 39 cents in FY2015, up 18% from 33 cents last year
Market Cap: $406 million
Sapiens International Corporation N.V. (NASDAQ:SPNS) is a provider of software solutions for the insurance industry. If that seems very specialized, it is — with Sapiens offering record-keeping management as well as other services to cover a wide range of arcane insurance industry uses.
The good news about being such a niche product is that there aren’t a lot of other companies that do what Sapiens does — and that means decent margins, a decent moat and plenty of upside when insurers are staffing up and getting more business.
Thanks to the surge in annuities in this low interest rate environment and the general demographic shift towards aging baby boomers in the U.S., there has been plenty of business for insurers in the last few years — and Sapiens has marched steadily higher, jumping more than 300% since the end of 2010.
Revenue is admittedly pretty meager at just $150 million or so, and profits never seem to grow and an earth-scorching rate. But slow and steady wins the race for many financial companies, and you could do worse than this cheap stock if you’re looking for a low-priced way to play the aging Boomer population and the resulting increasing business for insurers.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.