The best cheap stocks to buy now are not necessarily just the ones lowest in price. After all, a low per-share price for cheap stocks can signal obvious flaws in a business, with a company that has fallen on hard times.
And for the record, nominal share price is one of the least important data points on Wall Street. After all, plenty of high-priced stocks like Priceline (PCLN), Chipotle (CMG) and Apple (AAPL) before its split had no problem soaring despite being the polar opposite of cheap stocks, with price tags tallying hundreds of dollars for a single share.
But if looking for the best cheap stocks to buy is important to you, there are a few names worth looking at. Some are sleepy companies with a lot of value, others are fast-growing small-caps you haven’t heard of, and a few are actually battered picks that could be turning around.
But whatever their sector or history, the best cheap stocks to buy now share two simple characteristics: All trade for under $10 a share, and all of them have bullish outlooks for the rest of 2015.
Take Merge Healthcare (MRGE), a medical imaging company I highlighted in July as one of the best cheap stocks to buy now … and which recently popped by about 30% thanks to a big buyout offer from IBM (IBM).
Volatility is the norm in cheap stocks, but as Merge shows, the volatility can result in big profits when it’s in your favor.
So what names am I watching now? Here are seven:
Cheap Stocks to Buy Now: Genesis Healthcare (GEN)
Price Per Share: $7.30
YTD Performance: -15%
Genesis Healthcare (GEN) is a pick from one of my previous screens for the best cheap stocks to buy. While it’s still in the red year-to-date, my recommendation back in July was well-timed. Shares are up about 10% since then, thanks in part to encouraging earnings.
Genesis did operate at a slight loss, but the shortfall was narrower than expected, hinting that GEN stock is back on track after a rough patch.
If you’re unfamiliar with GEN stock, the medical center operator focuses on “post-acute care,” also known as long-term care for older patients or those that need lots of rehab and TLC. The company operates some 500 facilities around the nation, including roughly 100 post-acute care facilities with more than 10,000 licensed beds.
I am a huge believer in the demographic shift (and investing opportunity) creating by aging baby boomers. As this group of Americans get older, they will naturally require more medical attention, including the long-term care that GEN provides.
GEN stock still is in the red in 2015, so this company isn’t out of the woods yet. But as I mentioned in my last write-up, momentum is turning around. Across July and August, Genesis fought to get above its 20-, 50- and 100-day moving averages — and after a big run in the last two weeks or so, it’s now safely in bullish territory above both the short-term and medium-term trends in share price.
Genesis Healthcare is still digesting a massive merger with Skilled Healthcare Group, and the numbers are a bit hard to decipher. But the long-term growth for healthcare, the focus on senior citizens as a stable “customer” base and the shifting sentiment regarding GEN stock are all big bullish signs.
Cheap Stocks to Buy Now: Vertex Energy (VTNR)
Price Per Share: $2.40
Industry: Waste Management
YTD Performance: -42%
Vertex Energy (VTNR) is certainly a falling knife, with shares trading around $2.40 after hitting a 52-week high of about $9.50 in mid-2014. However, look at a longer-term chart and you’ll see that the big pop in VRTX stock was an outlier and that the company actually had been trading in a range of between $2 and $4 before that spike.
Thus, this is one of the best cheap stocks to buy now both because of recently finding a floor … and the hopes of a high ceiling going forward.
Vertex is a hybrid waste management and alternative energy company, specialized in recycling hydrocarbons and petroleum products. The story is powerful, with the Texas company recovering old energy sources like used motor oil and turning them into new sources of energy — a great business to be in during the age of conservation and a focus on greenhouse gasses. The growth story is also real, too, with revenue surging from $161 million in fiscal 2014 to $259 million last year for a 61% jump in the top line.
However, the crashing of oil prices means less demand for alternatives since the original sources are cheap and abundant, and the re-refining of hydrocarbons adds cost. But long-term, Vertex has huge potential thanks to its innovative processes and the 2014 acquisition of Omega Holdings’ re-refining facilities.
Things may be choppy in the short-term, but Vertex has fallen back into the bottom of its long-term trading range, and the acquisition will help the company going forward with both output and margins. VTNR is already about back to breakeven, and has lots of future upside if and when oil prices rise once more.
Cheap Stocks to Buy Now: Sirius XM (SIRI)
Price Per Share: $3.90
YTD Performance: +12%
Satellite radio provider Sirius XM (SIRI) always seems to get onto these lists of cheap stocks, since it has been trading in the single digits for many years. But recently, SIRI put up strong earnings that show it’s a pretty good bet regardless of what the nominal share price is.
Profits of 3 cents per share and sales of $1.12 billion were both in line with Wall Street expectations, and the company boosted its full-year guidance on both subscriber additions and revenue. Specifically, SIRI expected to get 1.2 million subscriber additions in 2015, and now that number is closer to 1.8 million thanks to robust vehicle sales; Sirius radio setups in new cars a big driver of new subs.
SIRI stock is up by double digits in 2015 thanks to this uptrend. And as John Divine of InvestorPlace recently pointed out, the company’s churn rate was the best in history in the recent quarter. Churn rate is the percentage of subscribers who cancel their service quickly, so a super-low churn rate is a reflection of strong retention and (potentially) strong revenue for future quarters as those customers stick.
As one of the highest-profile cheap stocks on Wall Street, expect sentiment to oscillate and volatility to reign for Sirius XM regardless of the headlines or the market environment. But over time, SIRI stock should certainly be trending higher based on this stellar report.
Cheap Stocks to Buy Now: Amarin (AMRN)
Price Per Share: $2.17
YTD Performance: +121%
Amarin (AMRN) is one of those high-flying development-stage biotechnology stocks that delivers either a big boom or a big bust to investors.
Thankfully for those who have been betting on AMRN, it appears that this stock is a boomer. Shares of the small-cap biopharmaceutical company have more than doubled in 2015, and its focus on cardiovascular treatments puts it in a very lucrative segment of the drug market.
What’s really interesting about Amarin is that the company has been aggressively promoting some drugs for other uses — so called “off-label” marketing. The company has recently argued — successfully, too — that such marketing is a free-speech issue and cannot be stopped by the FDA.
This is a huge coup, and could unlock even bigger future sales for Amarin.
AMRN has admittedly been stuck in a rut for a few months as investors digest things. But keep in mind that H.C. Wainwright followed in March with its own “buy” recommendation — and a whopping $10 price target! Considering Amarin is still trading around $2.25 right now (it still was trading under $3 when Wainwright made the call), that would be an amazing move higher.
I’ll admit that $10 is a bit optimistic for a short-term target. But as any buyer of cheap stocks knows, even a few dollars more per share will mean big profits for investors who buy at these low prices.
Just keep in mind the risky nature of biotech stocks like Amarin. Sure, AMRN could sprint ahead and develop the next cardiovascular blockbuster in the coming years. But it could also see troublesome studies and failure, adding up to big setbacks for a small-cap drug company that is not yet profitable.
Cheap Stocks to Buy Now: First Busey (BUSE)
Price Per Share: $6.50
Industry: Regional banking
YTD Performance: -1%
First Busey Corporation (BUSE) is a strange stock on this list in that it’s a pretty robust dividend payer with a 3.1% yield. The regional bank can easily support its 5-cent quarterly dividends on north of 40 cents in annual EPS, too, so this isn’t one of those cheap stocks paying a dividend now but at risk of reducing or cancelling payouts later.
The challenge is that First Busey isn’t growing — at least not its top line. Revenue has stalled out for this regional bank and has actually been in modest decline across the last few years. Located mainly in the Midwest, the bank simply hasn’t seen the business that better-connected financial companies in better markets have.
But 3% annually is nice, especially in a choppy market, and the stock is trading for a pretty reasonable valuation at about 1.5 times book value and 13 times forward revenue.
BUSE stock is riskier than the big, connected mega-banks that will (sadly) get bailed out if it ever gets into trouble. But regional banks are ripe for consolidation, and First Busey could be a big buyout target. Furthermore, the company has seen significant improvement in earnings simply on efficiencies and a refocusing of its lending business. A better interest rate environment could juice earnings, too.
Any cheap stock is risky, and BUSE is not any different. But the dividend helps, and the recovery we’ve seen in business and consumer lending hints at a tailwind that could lift Busey nicely in 2015 and into 2016.
Cheap Stocks to Buy Now: Boulder Brands (BDBD)
Price Per Share: $8.80
Industry: Food retail and distribution
YTD Performance: -20%
Boulder Brands (BDBD) is a cheap stock to buy now if you want to play the recent consumer trend of shopping for healthy, natural foods.
Boulder’s brands include butter substitute Smart Balance and Earth Balance, which use plant-based oils to avoid meats and dairy, as well as EVOL frozen foods that cater to busy but health-conscious customers. Also important is its emerging Glutino Food Group, serving the increasing group of consumers that is concerned about gluten-free eating.
The small-cap stock is down more than 20% year-to-date and is off roughly 50% from a mid-2014 peak. However, a lot of the run-up last year came from investors piling into the stock for its fad potential … and after BDBD became overbought, they abandoned ship and moved on to the next fashionable trade.
Oh yeah, and it hasn’t helped either that Q2 earnings showed the first year-over-year drop in revenue for many years and the CEO resigned in disgrace.
But the leadership change could ultimately be a good thing for the company, considering that now is the moment for it to capitalize. And the selloff after the revenue dip has actually created some big opportunity for longer-term investors who are willing to snap up Boulder Brands now.
Consider the stock is already up about 40% from its 2015 lows after value investors realized the negativity was overblown and bought in.
After all, this is not a recent IPO, but a stock that has been trading for roughly a decade and proving itself with vetted financial reports. Boulder has shown that it is a going concern.
Capitalize on the tailwind of healthier eating with this cheap stock to buy now after the selloff.
Cheap Stocks to Buy Now: Standard Pacific (SPF)
Price Per Share: $8.87
YTD Performance: +27%
Mid-cap homebuilder Standard Pacific (SPF) is a good bet for those who are bullish on housing in 2015 and beyond. And based on all the data, that’s a pretty good bet to make. Housing starts are healthy, near an eight-year high. Home prices also are in a sustained uptrend.
So if you’re looking for one of the best cheap stocks to buy now, why not give SPF a look?
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.
Since the company is smaller than other builders, Standard Pacific took it on the chin worse than peers during the crisis. But that small scale also has meant the ability to ramp up faster, and SPF stock has snapped back roughly 300% 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 started 2015 with a bang. Shares took a breather in spring, but are once again above their 20- and 50-day moving averages.
SPF is soundly profitable again and trades for less than 12 times forward earnings. So don’t expect this stock to stay in single digits for long. This is one of the best cheap stocks to buy now if you want to capitalize on the continued strength of housing.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” As of this writing, he did not hold a position in any of the aforementioned securities. Write him at [email protected] or follow him on Twitter via @JeffReevesIP.