When the market outlook is relatively challenging, it makes sense to rework on the investment strategy. In my opinion, I would remain overweight on blue-chip stocks. At the same time, some exposure to growth and penny stocks can be considered. However, the investment horizon needs to change. It would be unrealistic to expect multibagger returns in quick time. Patience is the keyword even with low-price stocks under $10 with high returns potential.
I wanted to emphasize on this point because data from June 2020 indicates that the average holding period of stocks was just 5.5 months. This is in comparison to an average holding period of eight years in the 1950s. The holding period in 2021 would have been significantly lower during the euphoric rally of penny and meme stocks.
Coming back to the present, there are several affordable stocks with potential. I expect these low-price stocks to deliver multibagger returns in the next two to three years. The rally is likely to be backed by positive industry news and accelerated growth.
Let’s discuss these stocks under $10 with high returns potential.
Kinross Gold (KGC)
As geopolitical tensions remain high globally, gold is likely to remain in demand. As a matter of fact, gold’s global investment demand increased by an average of 15% per year in the last 20 years. I believe that gold will be trading well above $2,000 an ounce in the next 24 months.
Kinross Gold (NYSE:KGC) is among the stocks under $10 with high returns potential. The gold mining stock seems significantly undervalued at a forward price-earnings ratio of 12.9. I would not be surprised if KGC stock delivers 3x to 4x returns by 2025.
For a penny stock, Kinross has among the best fundamentals. As of Q1 2023, the company reported a liquidity buffer of $1.7 billion. Additionally, based on Q1 numbers, the annual operating cash flow potential is in excess of $1 billion.
Kinross has guided for stable gold production through 2025. Assuming a scenario where gold trends higher, dividend growth is likely to be robust. Currently, KGC stock has an attractive dividend yield of 2.6%.
Nio (NIO)
Nio (NYSE:NIO) stock has witnessed a massive correction of 63% in the last 12 months. The reasons for the correction include relatively weak deliveries, cost inflation, and cash burn. However, it seems that the worst of the correction is over and NIO stock is poised for a sharp rally from oversold levels.
I believe that there are two reasons to be bullish. First, Nio recently received a capital injection of more than $700 million from a fund owned by the Abu Dhabi Government. The company had reported a cash buffer of $5.5 billion as of Q1 2023. Overall, there is financial flexibility to invest in research and product development.
Further, Nio expects to deliver higher sales volume and better margin in the second half of 2023. With the launch of new models, the guidance for volumes growth seems realistic. Additionally, vehicle margin witnessed a sharp drop in Q1 on a year-on-year basis. It’s likely that margin will improve from current levels backed by operating leverage and easing cost inflation.
With strong presence in China and expanding presence in Europe, Nio seems well positioned to benefit and create value.
Transocean (RIG)
Geopolitical tensions and production cuts are likely to ensure that oil trends higher from current levels. Transocean (NYSE:RIG) is an attractive stock under $10 with high returns potential from the energy sector.
As an overview, Transocean is a provider of deep and ultra-deepwater rigs. Currently, the company has a fleet of 39 floaters with an average age of 12 years. As of April 2023, the company’s fleet had an order backlog of $8.6 billion. The front-end loaded backlog provides clear revenue and cash flow visibility.
It’s also worth noting that as cash flows improve, Transocean is targeting deleveraging. The company has guided for $3 billion in debt reduction by 2025. As credit metrics improve, RIG stock is likely to trend higher. At the same time, the company’s financial flexibility is good for opportunistic rig acquisitions.
In the last 12 months, RIG stock has trended higher by 82%. With a healthy backlog, improving balance sheet, and the possibility of oil trending higher, the stock momentum is likely to remain bullish.
On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
