One of the gut-wrenching factors of the terrible novel coronavirus outbreak is that millions of Americans, through no fault of their own, suddenly found themselves behind the eight-ball. Life was already tough for many pre-pandemic, with the shrinking middle class and all. But if the federal government comes through with another round of stimulus checks, you may want to consider loading up on cheap stocks.
I think I speak for most Americans that while our nation was definitely blindsided by Covid-19, the government response was less than ideal across the state and federal spectrum. However, the one bright spot in Washington’s mitigation efforts was the direct injection of cash to the public. Most spent the initial round of stimulus checks on core necessities. But a large segment of the population invested in cheap stocks.
As you may know through personal experience, the government has already begun sending out a second check. That might explain in part some of the buoyancy in the market. But if we have a third round, President Biden is thinking big, proposing $1,400 checks to each qualifying individual. If so, you may want to strategize the cheap stocks you’ll buy once you get the money.
While it might see reckless to put that stimulus in the capital markets, you’re actually incentivized to do it. With the benchmark interest rate still near all-time lows, money has never been cheaper. In other words, staying in cash will yield you very little, incentivizing a risk-on approach (so long as the equities sector is cooperating). Thus, cheap stocks have been flying over the trailing year as the smart money are always looking for some kind of growth.
However, the real interest rate — that is, interest with inflation backed out — is actually negative. Essentially, this means that you’re penalized for holding cash. This makes moving to equities or other capital growth asset classes attractive (within reason). Therefore, if you have your essentials taken care of, there is an incentive to consider these cheap stocks:
- Criteo (NASDAQ:CRTO)
- CAE Inc (NYSE:CAE)
- Ford (NYSE:F)
- Sportsman’s Warehouse (NASDAQ:SPWH)
- Luckin Coffee (OTCMKTS:LKNCY)
- Coeur Mining (NYSE:CDE)
- Marathon Oil (NYSE:MRO)
- Pilbara Minerals (OTCMKTS:PILBF)
Before we get into it, investors should be aware that there is opposition for the $1,400 checks — within the ranks of the Democrats. Some left-leaning politicians want more than $1,400, while others are questioning the wisdom of giving anyone but the hardest hit any money. Admittedly, then, there is a hypothetical element to these cheap stocks to buy.
Cheap Stocks to Buy: Criteo (CRTO)
Take a cursory look at the hottest cheap stocks in the market and you’ll find sectors from the usual suspects. We’re talking names related to fintech, video games, on-demand streaming services, businesses that have fortuitously found astounding relevance during Covid-19. But discretionary retailers? That segment took a beating, which explains the initial volatility in advertising firm Criteo when the pandemic first struck.
Nevertheless, CRTO stock has been an excellent idea since last year’s March doldrums. As we head into 2021, I believe January’s weakness is a buying opportunity. Criteo specializes in personalized online advertisements to consumers who have previously visited one of its clients’ websites, allowing for more meaningful marketing campaigns. From there, the idea is to drive improved and consistent consumer loyalty.
What makes this business significant is that millions of consumers are still hesitant in being around large crowds. Thus, online retail channels will be far more critical than they already were, bolstering demand for CRTO stock.
CAE Inc (CAE)
One of the contrarian sectors that I like moving forward under the administration of President Joe Biden is defense. While groupthink suggests that Biden will be a pushover versus our foreign adversaries, the reality is that he can earn respect from traditional Republicans by strengthening America’s image. But defense companies usually are not found among cheap stocks. Fortunately, CAE Inc is an exception.
Currently priced under $25, CAE stock is a name you should consider if we get a third stimulus check. Under its corporate umbrella, investors get exposure to three businesses: civil aviation, defense and security and healthcare. Granted, commercial aviation is under fire right now. However, training protocols remain crucial and that’s what CAE specializes in: simulators that keep both civilian and military personnel’s skills sharp.
Because we face uncertainties in the foreign policy arena, I believe CAE stock will be surprisingly relevant. Further, it’s important to note that the Biden family has close ties to the military. Likely, he won’t gut our defense as his critics assume.
Easily one of my favorite cheap stocks, I firmly believe Ford is going places. I’m not sure if I’d ever buy a Ford given that I’m not in the market for a truck and the Mustang (the real one) — don’t hate me — lacks the sophistication that I’m looking for in a performance vehicle. But F stock? In my opinion, it’s a no-brainer.
In large part, I say that because of the Ford Mustang Mach-E. Yes, I agree with the complaining enthusiasts: as an SUV, it’s not a “real” Mustang. But enthusiasts were crying bloody murder when Porsche came out with Cayenne. Brand dilution, they screamed. However, the main problem is that enthusiasts don’t pay the bills.
That’s why the manual transmission — oh, the glory days! — is practically finished. Nobody wants to freakin’ deal with three pedals when humans only have two legs.
But the mass market wants what it wants. And with the Mach-E potentially attracting market share away from Tesla (NASDAQ:TSLA), while serving its core base with combustion and hybrid cars, the future is surprisingly bright for F stock.
Sportsman’s Warehouse (SPWH)
Let’s dive into some controversy with our cheap stocks with Sportsman’s Warehouse. If you’re not familiar with SPWH stock, you may assume that this is an outdoor sporting goods retailer. Well, you’re somewhere in the ballpark. But rather than footballs and golf clubs, this company specializes in a different kind of sports: the shooting kind.
For the uninitiated, a Sportsman’s Warehouse store is truly a sight to behold. Have you seen the movie The Matrix where the main characters can instantaneously materialize row upon endless row of firearms? That’s basically Sportsman’s Warehouse in a nutshell: guns and ammunition galore.
Of course, because the Second Amendment is a contentious issue, the underlying business is not for everyone. However, SPWH stock is something a broad audience may want to consider. Set aside the “ickiness” factor and what you have is a supremely relevant company providing a legitimate service.
Bottom line, people are scared out of their minds about what’s coming next. Also, because many conservatives don’t trust the Biden administration, you can expect SPWH to have strong sentiment over the next few months.
Luckin Coffee (LKNCY)
As I explained in greater depth recently, Luckin Coffee is a strange animal. In my view, LKNCY stock is a great example where your biases can prevent you from seeing upside opportunities. My bias is that I think Luckin is a garbage company. No, I don’t mean a competitor to Waste Management (NYSE:WM). Rather, the brand lacks a much-needed x-factor.
But what if someone told you that there is demand lackluster companies like this? You might think it’s insane that anyone would have that mindset. But if they do and if they’re willing to pay money for it, you would be crazy not to advantage the situation.
That’s how I learned to stop worrying and love LKNCY stock. Well, I don’t love it, but you get the idea. Today, lying and cheating doesn’t resonate as much to the contemporary, relevant generations. Therefore, based on technical dynamics, I believe Luckin shares could hit anywhere between $10 to $20.
So, if you’re looking for cheap stocks, this might be it. However, you’ll probably have to plug your nose.
Coeur Mining (CDE)
Although I like to assume that our Washington overlords know what they’re doing, I’m simultaneously skeptical. Look, I get the whole argument about a V-shaped recovery and why people are piling into real estate and all that jazz. But if we could engineer economic recovery through destruction, why are underdeveloped countries a thing?
My InvestorPlace colleague Will Ashworth once stated “never look a gift horse in the mouth.” I had to look up what that meant, but now I get it. In this case, you should take what the market is giving you: incredible bullishness, even if it doesn’t make sense. However, you also may want exposure to the fear trade, which is where Coeur Mining and CDE stock comes into the picture.
A precious metals mining firm, Coeur specializes in silver. As the No. 2 to gold, silver enjoyed safe-haven demand last year. Currently, silver’s spot price is in consolidation, which may be an ideal opportunity to get onboard CDE stock. Increase skepticism should drive up the metals, which will be helpful to mining companies.
Marathon Oil (MRO)
Is it time to think about oil companies again? Based on resurgent demand for domestic and international oil indices, it very well might be. Speculators aren’t waiting around, either, moving into the majors like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX). However, if you’re specifically looking for cheap stocks to buy, independent oil and gas plays like Marathon Oil might be your ticket.
As one of the riskiest choices on this list, I’m not going to be overly enthusiastic about its contrarian appeal. You should be careful because we’re not out of the woods in terms of the coronavirus pandemic. But at some point, the crisis must fade. Even if it doesn’t, I’m not sure how long certain state governors can keep their economies locked down. Invariably, the desperation helps the case for MRO stock.
Look at California: most of the Golden State went into lockdown in December due to sharply rising Covid-19 infections. Many businesses are on life support because of the draconian response. At this point, I think it’s inevitable that California reopens because it’s too valuable to the U.S. economy. And that could be the catalyst for MRO stock to continue moving higher.
Pilbara Minerals (PILBF)
With the electric vehicle craze taking over the market, lithium miners have received tremendous enthusiasm. However, many of them are no longer classified as cheap stocks. Fortunately, there are some opportunities out there like Pilbara Minerals. At time of writing, PILBF stock is priced under $1, having incurred significant volatility recently.
Obviously, you want to be extra careful when the entry point is this cheap. However, PILBF stock is compelling because of its lithium and tantalum mining operations. Frankly, it’s tough to pick out which EV companies will do well moving forward. In my opinion, Tesla seems poised for a correction. But with so many EV choices, they can’t all be winners.
With Pilbara, you don’t have to worry about the intricacies of specific EV manufacturers. Instead, you’re buying the commodity that all EVs need. That doesn’t take away all the risk from PILBF, but it should give you a measure of confidence.
On the date of publication, Josh Enomoto held a long position in F, silver, and gold.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.