Joe R. Biden was inaugurated as the 46th President of the United States yesterday. While there are concerns about riskier assets, including stocks under $20, it’s clear markets are at peace with the idea of a Biden presidency.
Since Election Day, broader equity benchmarks are performing well. Additionally, the S&P 500 and Nasdaq-100 Index notched new highs in the wake of the Democrats winning the Georgia Senate runoff elections earlier this month. That says markets are not only at peace with but expecting a massive wave of government spending.
Biden appears to be obliging. Sort of. He recently pitched a $1.9 trillion stimulus package, including $1,400 in direct assistance to Americans in select income brackets. That latter number probably isn’t enough and markets will have their say on the matter.
In the meantime, there are plenty of stocks under $20 that could be post-Inauguration Day winners. Here are some to consider.
- Rocket Companies (NYSE:RKT)
- Century Casinos (NASDAQ:CNTY)
- Melco Resorts & Entertainment (NASDAQ:MLCO)
- Clover Health (NASDAQ:CLOV)
- Canoo (NASDAQ:GOEV)
- International Game Technology (NYSE:IGT)
- Social Capital Hedosophia Holdings Corp. VI (NYSE:IPOF)
Rocket Companies (RKT)
Rocket Companies is the newly public mortgage lender formerly known as Quicken Loans. The firm went public last August and almost immediately doubled in value only to give up 43% from its September highs. Rocket is barely a stock under $20 and it’s down 8% for the month ending Jan. 21, confirming there is some risk here.
On the brighter side, there are factors to like with RKT stock, including the company’s dominant share of domestic mortgage lending, which is close to 10%. There are additional tailwinds for Rocket following Inauguration Day. It’s a matter of the company being able to adequately tap into those opportunities.
For example, homebuilder equities are shining, indicating strong demand residential real estate buyers. Second, interest rates will remain low this year, which should bring more new home buyers into the market, assuming the economy improves.
Potential stock-specific catalysts include the fact that RKT stock is inexpensive. So much so that management already approved a $1 billion buyback. And it’s heavily shorted. Short interest in the name was around 27% a month ago, indicating any material rally in this stock could force a wave of short covering, providing more upside in the process.
Century Casinos (CNTY)
With a market capitalization of just $215.93 million as of Jan. 15, Century Casinos is one of the smallest publicly traded casino stocks in the U.S. But investors shouldn’t be put off by that diminutive status, because CNTY stock fits the bill as an attractively valued reopening play that should benefit from broader distribution of novel coronavirus vaccines.
Consider the following about Century. The stock is up almost 15% over the past month, a period in which the company was forced to again temporarily close its Canada and Poland casinos. The Poland operations, which the company owns two-thirds of, accounted for 4% of earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter.
Bottom line: The company said its financial results will be pinched by the pandemic in the first half of 2021 and the stock is still soaring.
In the U.S., Century operates five casinos, all of which are in drive-in markets. That better positions the company for recovery than Las Vegas-dependent rivals. Some analysts believe Century will be an active buyer of smaller regional gaming assets later this year.
Melco Resorts & Entertainment (MLCO)
Melco Resorts & Entertainment is another casino name, but it has no operations in the U.S. Rather, this sub-$20 stock is an international reopening idea. The company has some Europe exposure, but the bulk of its revenue and EBITDA are derived in the Asia-Pacific region, including the world’s largest gambling hub of Macau.
That’s attractive because the Chinese economy grew last year and travelers from the mainland can access Macau today without lengthy Covid-19 quarantines. Still, MLCO stock may be beckoning more risk takers than conservative investors, as highlighted by a decline of 11.24% last week on the back of concerns the operator’s debt burden is rising.
Melco’s near-term weakness isn’t ideal, but there are legitimate catalysts for the name further out this year. First, Macau will recover faster than Las Vegas, particularly as China more rapidly approves tourist visas. Second, the conversation around renewing gaming licenses in the Chinese territory will start later this year and there’s no risk to Melco because it’s an Asia-based company. That’s an important trait that should not be overlooked.
Clover Health (CLOV)
Clover Health is one of the newest companies to gain publicly traded status through a reverse merger with a special purpose acquisition company (SPAC). The Medicare Advantage health insurance provider completed a combination with Chamath Palihapitiya’s Social Capital Hedosophia Holdings (NYSE:IPOC) earlier this month.
Clover is what’s known as an insuretech company. It’s software-based platform serves 57,000 seniors on Medicare Advantage plans. So at its core, Clover is a sexier version of an old school health insurance provider with the potential to disrupt an industry in need of some refreshing.
Admittedly, CLOV stock isn’t off to a great start. It slumped almost 17% last week, but that slide could eventually prove to be a buying opportunity. By way of the SPAC transaction, Clover gained $400 million public investment in private equity, or PIPE, and $828 million held in Social Capital Hedosophia Holdings Corp. III trust. That’s a nice amount of cash that can be used for future acquisitions or to bolster the company’s technology platform.
Speaking of SPACs, there’s Canoo, one of many electric vehicle (EV) companies born out of mergers with blank-check firms. In a short time frame, this stock under $20 is proving volatile, but for investors that can handle the turbulence, Canoo could be worth a flier.
Canoo also has significant disruptive potential via its subscription-based business model. Look at Canoo this way. Traditional auto buying means a consumer gets one car. That’s it and when the buyer wants a new car, the old is traded in and he or she gets a new one. Again, just one. With Canoo, customers pay a single monthly payment and can access to a service bundle and multiple, sleek models.
There are some things for investors to like about that subscription model. First, it taps into a methodology used elsewhere in the technology universe. Think cloud computing and cybersecurity. Second, it taps into consumers’ desire to always have something new. Finally and perhaps most importantly, a subscription model can steady Canoo’s revenue, making it easier to forecast. That final trait is a rarity among emerging EV makers.
International Game Technology (IGT)
Even if you’re not a gambler, chances are in 2020 you heard something about online casinos and sports betting. That theme is extending into 2021 and will likely hold true over the course of this year. Usually, investors hear about and focus more on the consumer-facing companies in these industries, meaning the operators themselves.
However, those platforms need technology and plenty of it comes from International Game Technology. IGT’s suite of services includes solutions for sportsbook operators and iGaming companies.
From an investor’s point of view, what makes IGT relevant is that the company isn’t levered to a client’s sports betting handle or online casinos gross gaming revenue. Those factors are the responsibility of the client. Like a cloud computing company providing software to a corporate client, IGT provides its services and the clients pay regardless of its ability to drum up new business.
IGT also manufacturers gaming devices and runs lotteries for states and countries, confirming a relatively diverse business model. Still, many roads in the investable gaming universe lead back to iGaming and sports wagering these days. As much is reflected in the 12% runup for IGT stock over the month.
Social Capital Hedosophia Holdings Corp. VI (IPOF)
Another Palihapitiya SPAC, Social Capital Hedosophia Holdings Corp. VI is perhaps the riskiest name on this list. The reason for that sentiment is easy to explain. IPOF is a blank-check company without a target as of yet and its shares are up almost 32% over the past month.
Typically, SPACs trade flat following initial public offerings (IPOs) until a deal announcement comes to fruition. That’s the standard. However, IPOF is being bid up for a simple reason: Palihapitiya. The aforementioned Clover Health was the fifth company to go public through one of his SPACs.
Translation: Palihapitiya SPACs get deals done and markets are clearing pricing in that reputation with IPOF stock.
On the date of publication, Todd Shriber did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Todd Shriber has been an InvestorPlace contributor since 2014.