Buying stocks that are inexpensive is not the same thing as buying cheap stocks, though individual investors often conflate the two.
Cheap means a stock is selling at a price that’s lower than its actual value. It’s like finding a name-brand coat accidentally mismarked to a bargain price.
Getting in on the ground floor means there’s a company with great growth potential that hasn’t been bid up by the broader market yet, although all indications are it’s going to have some success.
Inexpensive stocks are stocks that trade at low prices. That doesn’t say anything about their quality or potential. It’s just an indicator of price and while it may be low, that doesn’t mean it’s worth your money.
Here are 10 cheap stocks to sell under $10 that don’t deserve your time or money:
- Amarin (NASDAQ:AMRN)
- Frontline (NYSE:FRO)
- DHT Holdings (NYSE:DHT)
- Colony Credit Real Estate (NYSE:CLNC)
- CoreCivic (NYSE:CXW)
- SiruisXM (NASDAQ:SIRI)
- Arcos Dorados (NYSE:ARCO)
- Itau Unobanco (NYSE:ITUB)
- Centrais Electricas Brasileiras (NYSE:EBR)
- Companhia de Saneamento Basico (NYSE:SBS)
Penny-wise and pound-foolish is never the way to go. Whether it’s ten shares in a $100 stock or 100 shares in a $10 stock, a $1,000 investment is only as good as the company you’re investing in.
Cheap Stocks Under $10 to Sell: Amarin (AMRN)
A biotech that hasn’t soared in the past 12 months? The perfect cheap stocks play, this isn’t.
AMRN specializes in treatments for cardiovascular disease. Its more prominent drug is Vascepa, a prescription strength fish oil.
That certainly sounds like good business, and it has been. The problem is, Vascepa is coming off patent soon. That means generics and others can start to grab market share. Amarin doesn’t have much of a pipeline either, so there’s nowhere to pivot.
It should be clear now why the stock is off 40% in the past 12 months, even after a 30% rally year to date.
Shipping companies typically boast eye-bulging dividend yields when they’re in slow seasons. These companies are cyclical in nature, especially companies like FRO that ship oil, drybulk, petroleum products and the like.
Its dividend now sits above 20% and it trades at a P/E ratio just below 4, up 22% in the past 12 months. A bargain, right?
In February, FRO announced Q4 sales dropped 48% on weak tanker demand. Good times may be coming, but they’re not nearly here. And that dividend will certainly be cut if FRO reports another quarter like the last one.
DHT Holdings (DHT)
The same story for FRO applies to DHT, except DHT is about half the size and only owns tankers, so its business is less diversified. Of course, it has a 17% dividend as an attractive lure, but that’s on the end of big hook.
Again, the dividend isn’t guaranteed and the energy markets aren’t what they used to be. Plus volatility is very high in this competitive sector.
Bottom line: Shipping companies are cheap stocks for a reason and that reason isn’t optimism. The dividends might be attractive, but that’s about it.
Colony Credit Real Estate (CLNC)
This real estate investment trust (REIT) doesn’t own a great deal of properties. CLNC is a commercial real estate financing company.
Unfortunately, that’s not a great sector to be in when office buildings and store fronts are barely occupied.
Certainly, there will be a rebound as vaccines get distributed. But at this point, there will likely be a significant rethinking of how and where business is conducted in this digital age. If companies don’t need to lease or own big buildings for all their employees, that helps their bottom line. Same for satellite offices and shopping malls.
That’s not good for CLNC, although its stock doesn’t reflect the risk. CLNC stock is up 216% in the past 12 months and still has a 4.4% dividend, but it just isn’t worth the risk.
CXW is a correctional facility REIT. It works with state and local governments in building and managing correctional facilities.
Privatization of these facilities used to be a very popular idea but over time, issues have come up that have shown it to be a challenging profit center. CXW also has no dividend currently, so it isn’t particularly attractive to dividend investors.
What’s more, decriminalization and legalization of marijuana in numerous states has also come with expunging criminal records and releasing inmates that were in on minor drug-related crimes. That suggests CXW isn’t in a growth market any longer.
CXW has hit the cheap stocks list for some analysts, but not this one.
This satellite-based radio company has had quite the journey. When its ambitious project started out, mobile phones were in their infancy and the iPod was just a twinkle in Steve Jobs’ eye.
Satellite-based radio made a lot of sense then. Channels were portable and broadcasting could be done in a central studio or remotely. You could operate numerous stations commercial-free for a subscription.
But deploying the technology was tricky and more expensive than anticipated. That said, SIRI did attract automakers and others to offer its services on their new vehicles, which was a big deal.
In the age of 5G telecom and playlists, SIRI is yet another subscription with less flexibility than newer iterations of entertainment. It started ahead of the curve but ended up behind the times.
Arcos Dorados (ARCO)
Generally Uruguay-based restaurant management companies don’t pop up on most people’s cheap stocks radar. But this company owns franchises of the “golden arches” across all Latin America and the Caribbean. That’s lucrative business
The trouble is, the islands have lost most of their tourism and most of the countries ARCO serves are still dealing with the pandemic as well as cratered economies without access to big treasuries like the U.S., Europe or China.
Bill Gates’ investment company sold its 8.5 million shares of ARCO in late 2019. His foundation sold another 3 million. That’s not a vote of confidence.
Itau Unibanco (ITAU)
With roots stretching back to 1945, ITAU has been a leading Brazilian bank for decades. The company has expanded its reach across South America and even into Portugal.
In 2008, it merged with the third-largest bank in Brazil, Unibanco, to solidify its position as a major bank in the Americas.
Unfortunately, the pandemic has hit Brazil especially hard, and that has wreaked havoc on the economy and its financial system. As the old saying goes, the bigger they are, the harder they fall.
The bank will survive, but there are better places to bottom fish than a major bank in a developing economy during a pandemic. This is one of those cheap stocks that’s best avoided right now.
Centrais Electricas Brasileiras (EBR)
One of the biggest challenges with investing in utilities in developing nations is the fact that most of their energy projects were funded by the World Bank. That means they weren’t exactly practical on a day to day basis. They were projects that were set up to provide maximum electricity for the long term.
What this boils down to is a large range of hydroelectric projects given South America’s access to major rivers. Nuclear power was also popular.
EBR is a leading electric utility in Brazil that has significant hydroelectric and nuclear energy resources. The problem is, hydro is weather dependent. And old nuclear technologies are expensive today.
EBR certainly ticks the cheap stock boxes, but there’s far too much risk right now to be clear on its direction.
Companhia de Saneamento Basico (SBS)
As a state-owned water and waste management company in one of the worst-hit nations by the pandemic, there’s not a lot of flashing “buy” lights here.
Brazil hasn’t really locked down, but business is hardly going on as usual and SBS is at the mercy of one of the hardest hit states in the country for its funding.
Certainly SBS has ridden the boom and bust roller coaster of the nation’s economy for decades and survived. But we’re not interested in survivors right now. It’s about finding stocks that have real growth prospects and for utilities, a reliable dividend. SBS doesn’t fit the bill.
Disclosure: On the date of publication, Louis Navellier has no positions in any of the stocks in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.