Prior to the novel coronavirus disaster, you would have thought the market would have imploded if I had told you that a pandemic would temporarily shutter major economies throughout the world and kill more than 325,000 as of Christmas day. Yet it has been a brilliant time to invest. What’s more, many cheap stocks have benefitted tremendously from the enthusiasm. But can it continue moving higher?
I’m going to give a caveat that I’ve provided in my recent stories: I’m not 100% sure if the enthusiasm is sustainable. While assessing the reasons why is a dissertation onto itself, one of the biggest cautionary factors is the erosion of M2 money stock velocity. In a nutshell, money velocity indicates the rate of circulation of each unit of currency in the economy. And right now, this circulation rate is at all-time lows.
Therefore, I don’t believe it matters in the long run whether President Trump signed the second stimulus bill. If money velocity is low, the extra money that’s pumped in will more likely hit people’s savings accounts rather than be circulated in the economy. But I could be wrong about this, which is why you may want to consider cheap stocks to buy.
In addition, there’s an argument to be made that if you’re going to bet on equities making another run higher, you should look at low-priced names with high-powered potential. That’s because publicly traded companies that have already enjoyed massive returns — you know, the usual suspects — may be due for a sharp pullback as early investors cash out.
Further, cheap stocks tend to be contrarian bets. As a result, many people are not considering them, putting these securities relatively under the radar. Thus, with the right catalysts, you can potentially enjoy robust upside with these cheap stocks to buy.
- Ford (NYSE:F)
- ADT (NYSE:ADT)
- Ambev (NYSE:ABEV)
- Accuray (NASDAQ:ARAY)
- China Distance Education (NYSE:DL)
- Apartment Income REIT (NYSE:AIV)
- Teekay Corporation (NYSE:TK)
- HIVE Blockchain Technologies (OTCMKTS:HVBTF)
On a final note before we dive into the details, I think it pays to be more on the cautious approach no matter your investing methodology. We’ve got many variables heading our way and simply assuming that we’ll enjoy gravity-defying returns would probably not be wise. However, if you’ve got the speculative itch, these cheap stocks may give you the best chance for success.
For the longest time, I’ve been a harsh critic of American automakers like Ford. Although I’m proud to be a naturalized American citizen — because unlike immutable characteristics like race or gender, I had a choice in the matter — I’ve never liked American cars. They’re too … American. Surely, some of you know what I mean.
Recently, though, I’ve changed my mind. No, I don’t think I’ll ever buy an American car — that would probably involve a significant amount of inebriation. But I do believe in F stock. You see, Americans don’t know how to make sedans, but we know how to manufacture appealing trucks and SUVs. In my opinion, Ford’s foray into electric vehicles with the Mach-E is the perfect move for the company.
For starters, it breaks up the consumer market hegemony of Tesla (NASDAQ:TSLA). Now, we’ll really see how the EV dominator responds with some friendly (or not so friendly) competition. Further, the Mach-E’s gorgeous good looks wrapped around the svelte frame of a modern SUV will likely attract new customers.
Sure, the criticism that Ford branded the Mach-E a Mustang is somewhat distracting for F stock. But I think most consumers will come around to it. At the end of the day, it’s just business. And finally, Ford is making good business sense, making it one of the better cheap stocks to buy.
Among the cheap stocks on this list, security specialist ADT is both an obvious and contrarian play. As you know, months after the novel coronavirus breached our borders, social unrest became the next epidemic. Of course, we can debate the validity of the unrest and the events leading up to the violence. But for most normal folks that just want to live their lives, the collective outbursts certainly helped the case for ADT stock.
Indeed, its technical chart doesn’t lie. Following Memorial Day weekend, ADT stock conspicuously jumped higher. Later in August, shares were up briefly in double digits. But since then, ADT has steadily calmed down as tensions cooled. There was a noticeable uptick as we headed toward a contentious election day, but this enthusiasm likewise gradually waned.
A major reason for the decline is that overall, crime has gone down nationally during the Covid-19 crisis. With fewer people out and about, less opportunity for trouble existed. Additionally, more people were working from home, which meant a decrease in residential burglaries.
But the contrarian case for ADT comes up in that this work-from-home narrative may not last forever. Plus, during the Great Recession, crime increased due presumably to financial desperation. Therefore, don’t be too quick to ignore ADT on your wish list of cheap stocks to buy.
For alcoholic-beverage firms, the Covid-19 crisis represented a double-edged sword. On one hand, the pandemic destroyed personal incentive to go out to restaurants and bars, thus killing lucrative revenue channels. Even if those few brave souls didn’t give a rat’s rear end about the coronavirus, many jurisdictions imposed severe lockdown measures.
On the other hand, grocery sales of alcoholic beverages increased significantly as in-home entertainment became the only feasible (and safest) solution for imbibing. Further, companies like Boston Beer Company (NYSE:SAM) pivoted to hard seltzer, a drink category increasingly becoming the millennial’s preferred choice. But SAM shares are priced in four-digit territory.
However, competitor Ambev is technically one of the cheapest among cheap stocks.
Priced at a little over $3 a pop, ABEV stock is ideal for discount divers looking for a cynical play off the global coronavirus surge. Primarily operating in the Latin American region, Ambev doesn’t have the underlying stability of a Boston Beer. Of course, a higher risk profile suggests a higher reward potential, which should attract speculators.
Better yet, ABEV stock has been steadily moving higher since late October. This might be due to the assumed resumption of normal diplomatic relations under the incoming administration of President-elect Joe Biden.
With the Covid-19 crisis obviously being a health threat unprecedented in modern times (at least from our perspective), the broader pharmaceutical and biotechnology sectors experienced substantial interest. Further, when the federal government greenlit Operation Warp Speed, many organizations, some of which were on the brink of complete collapse, became hot commodities on Wall Street.
But there’s another side to this tale. Due to the pandemic placing enormous pressure on our healthcare infrastructure, services for those with long-term conditions — such as cancer — faced massive disruption. Specializing in advanced radiation therapy that covers even the toughest cases, ARAY stock had an auspicious start to the year. Of course, that came crashing down once the coronavirus outbreak rippled throughout the world.
Since the March doldrums, though, ARAY stock has been moving steadily higher. Shares further got another lift when it became apparent — well, to most media outlets — that Joe Biden will be the next President. Presumably, sentiment for Accuray improved under the assumption that normal diplomacy will return to the White House.
Still, the sharp rise in Covid-19 cases have somewhat dampened this rally. But if you’re willing to ride out some volatility, this is one of the cheap stocks that could fly once we return to normal or some semblance of it.
China Distance Education (DL)
It might be a commonly cited stereotype but that still doesn’t take away from the fact that China takes its education system very seriously. More impressively, the Asian juggernaut has the performance stats to back up its investment dollars (or I should say yuans).
According to the 2018 results of the Program for International Student Assessment, Chinese students “far outperformed their international peers in a test of reading, math, and science skills.” On the flip side, American students are performing poorly in math. As well, only an alarming 14% “were able to reliably distinguish fact from opinion in reading tests.”
Because of this culture of innovation, I’d take a look at China Distance Education. Billed as a “leading provider of online education in China focusing on professional education, helping professionals who aim to obtain professional licenses, satisfy continuing education requirements to maintain their licenses and enhance their practical job skills,” DL stock will probably become more relevant as generation after generation of highly educated Chinese students enter the workforce.
As well, DL stock enjoys a fortuitous tailwind from the coronavirus pandemic, with everyone pivoting to work-from-home platforms. Granted, there’s a karma effect associated with China Distance Education. But if you can get over that, DL is a worthwhile idea among cheap stocks to buy.
Apartment Income REIT (AIV)
As a real-estate investment trust focused on the development and redevelopment of apartment complexes, Apartment Income REIT is a mixed bag in terms of risk and reward. Therefore, I would classify AIV stock as one of the riskiest ideas among cheap stocks to buy. Given the broader economic circumstances, it’s extremely difficult to determine where we’re headed next.
On a quick note, AIV stock appears to have lost roughly 87% of its market value. However, this is a technicality involving the original firm Apartment and Investment Management (AIMCO) splitting into two businesses. The other unit, Apartment Income REIT (NYSE:AIR), will run apartment assets that were part of AIMCO’s portfolio.
Okay, so AIV isn’t cratering as it appears, but is there a viable business in this space? Clearly, two sides of the argument exist. On one hand, there’s a looming eviction crisis that could see 40 million Americans homeless if the government doesn’t find a feasible long-term solution. That could send a deflationary impact to the broader residential market, which would not be great for AIV.
On the other hand, Apartment Income REIT focuses on highly popular areas such as Boston, Miami and San Diego. If you’re in the optimistic camp, you may want to give AIV a shot, but only with “dumb” money.
Teekay Corporation (TK)
If you’ve followed my work throughout this year, you’ll know that I don’t have much faith in the fossil fuel industry. Sure, most of the impacted companies now feature incredibly deflated valuations, which on paper make them discounted cheap stocks. However, it’s fair to wonder how long the pandemic will last.
But it’s not just about the health crisis. Instead, U.S. transportation statistics have been gutted. For instance, more people have decided to stay at home this year relative to 2019. As well, the number of trips that are 25 miles in distance or less have declined dramatically year over year. With people working from home and the pandemic frankly scaring them into their living rooms, there doesn’t seem to be much upside for Teekay Corporation and similar companies.
Nevertheless, at some point, this nightmare must end. If you believe that day will come sooner than the experts believe, TK stock could be a standout opportunity. Of course, it’s also outrageously risky, especially with the new strain of the virus spreading throughout the world. Potentially, this could spark another round of extended global lockdowns, which might kill demand for the petroleum-based products that Teekay ships.
However, we’ve all got to get around somehow. If you can stomach volatility, TK stock could reward you handsomely following this mess.
HIVE Blockchain Technologies (HVBTF)
As you know, one of the hottest topics on Wall Street doesn’t involve cheap stocks but rather cryptocurrencies. This digital market is breaking all kinds of records, and with its ease of participation — particularly its 24/7/365 open access — I’m confident that the sector will continue to astound. However, I’ll freely admit that because of virtual currencies’ Wild West nature, it’s not for everyone.
However, if you don’t mind volatility but prefer your red ink on a traditional trading platform, you might want to explore HIVE Blockchain Technologies. Rather than focusing on a particular digital coin, HIVE specializes in crypto mining. Basically, this is the process where crypto transactions are verified on the underlying blockchain system. For the extensive computing power necessary for verification, miners receive cryptocurrencies as a reward.
The above very briefly summarizes the mining process. There is a mountain of literature that goes into greater detail if you want to explore the minutia. But what’s interesting about HVBTF stock is that the underlying company operates mining facilities in Iceland and Sweden.
Naturally, these are cold parts of the world, which is perfect for crypto miners. Indeed, mining generates so much heat that you can technically use your equipment to heat your home. Bravo! That’s brilliant capitalism.
Nevertheless, you don’t want to go too crazy with HVBTF stock. This is an over-the-counter name after all. But if you’ve got some speculation money lying around, this is one of those dirt-cheap stocks that can really pay off.
On the date of publication, Josh Enomoto held a long position in F stock.
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.