7 Under-$10 Stocks to Buy for 5-Bagger Returns in 5 Years


  • These are the under-$10 stocks for 5-bagger returns as they represent companies with strong fundamentals and healthy growth outlook.
  • Kinross Gold (KGC): As gold nears $2,300 an ounce, Kinross is positioned to deliver robust cash flows.
  • Archer Aviation (ACHR): Commercialization of eVTOL in 2025 will set stage for robust growth with focus on multiple countries.
  • Canopy Growth Corporation (CGC): Likely to be a key beneficiary of legalization of cannabis in Germany
  • Keep reading for more under-$10 stocks to buy for 5-bagger returns.
Under-$10 Stocks for 5-Bagger returns - 7 Under-$10 Stocks to Buy for 5-Bagger Returns in 5 Years

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For small investors, low-price stocks are a good option to create a diversified portfolio. Of course, most of these stocks represent emerging companies and overall portfolio exposure should be limited. However, if these stocks fire, multibagger returns are delivered in quick time. The focus of this column is on seven under-$10 stocks to buy for 5-bagger returns.

An important point to note is that emerging companies have stocks with a relatively high-beta. However, it does not imply that fundamentals are weak. I have screened ideas that represent companies with strong fundamentals or quality assets.

The under-$10 stocks are therefore not speculative and worth holding for the next few years. Further, five years is a relatively conservative time horizon. If the catalysts play-out well, the target returns are likely sooner.

Let’s discuss the specific business factors that make these ideas attractive.

Kinross Gold (KGC)

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With gold trading at $2,230 an ounce, I am bullish on gold miners surging higher. Kinross Gold (NYSE:KGC) is a quality name to consider for multibagger returns. KGC stock trades at an attractive forward price-earnings ratio of 18.4 and offers a dividend yield of 1.96%. Besides capital gains, I expect robust growth in dividends in the coming years.

An important point to note is that multiple rate cuts might be due in the next 12 to 18 months. Gold is likely to remain in an uptrend and Kinross will benefit on the back of higher realized gold prices.

Specific to the Company, an investment grade balance sheet will allow for aggressive investments. As of Q4 2023, Kinross reported a liquidity buffer of $1.9 billion. Further, the operating cash flow for 2023 was $1.7 billion. With gold trending higher, it’s likely that OCF will be more than $2 billion. This adds to the flexibility for capital investments and healthy dividend growth.

I am also of the view that Kinross is likely to pursue acquisitions to boost production growth. That’s another potential catalyst for a big rally. This makes it one of those under-$10 stocks to buy for 5-bagger returns.

Archer Aviation (ACHR)

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Archer Aviation (NYSE:ACHR) has seen a strong rally of 84% in the last 12 months. ACHR stock has however been sideways in the last six months. This is a good opportunity to accumulate before the flying car stock takes-off.

The first catalyst for Archer is potential completion of certifications from the U.S. Federal Aviation Authority. This will set stage for commercialization in 2025 and healthy growth. Another catalyst is the completion of eVTOL aircraft manufacturing capacity this year.

The production from the facility is expected at 650 aircraft per year and will support servicing of a swelling order book. As of December 2023, Archer reported an order book of $3.5 billion from the Untied States, UAE, and India.

I also believe that Archer is likely to make inroads into additional markets in the coming quarters. This will support the order book and position Archer for stellar growth in the next five years. Overall, as an early-mover in the flying car industry, Archer is positioned to create massive value.

Canopy Growth Corporation (CGC)

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In my view, multiple cannabis stocks are likely to deliver 5x or 10x returns in the next five years. Of course, the key assumption is the regulatory headwinds wane in the United States and Europe. The recent legalization of cannabis in Germany is big news for the industry.

Further, I am expecting the rescheduling of cannabis from Schedule I to Schedule III drug in the U.S. With elections round the corner, there are renewed hopes on federal level legalization.

An important point to note is that Canopy Growth (NASDAQ:CGC) is among the top three players in the German cannabis industry. The recognition of cannabis as non-narcotic in Germany is likely to help the Company accelerate growth significantly. This is a key growth catalyst for the next few years. With all things considered, it’s one of those under-$10 stocks to buy for 5-bagger returns.

Another key stock upside catalyst is that the management expects to achieve positive Adjusted EBITDA in each business unit exiting financial year 2024. With healthy growth, EBITDA margin expansion seems likely in the next few years.

Lithium Americas (LAC)

Lithium element on the periodic table. Top-rated lithium stocks
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Lithium Americas (NYSE:LAC) stock remains deeply undervalued even after a rally of 26% in the last one month. Once lithium reverses and trends higher, LAC stock is likely to skyrocket considering the asset potential.

As an overview, Lithium Americas is the owner of the Thacker Pass asset in the United States. The asset has the largest known lithium resource in the country. It’s estimated that Thacker Pass has a mine life of 40 years and an after-tax net present value of $5.7 billion.

Recently, the Company received commitment from the U.S. Department of Energy for a loan of $2.26 billion for project development. Lithium Americas has also received $650 million from General Motors (NYSE:GM) in two tranches. With commercialization in 2027, the asset promises to be a cash flow machine. During phase one, the asset is likely to deliver an average annual EBITDA of $1.1 billion.

Ring Energy (REI)

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Oil seems to be staging a comeback with multiple factors that are likely to support the rally. This includes potential rate cuts, geopolitical tensions, and production cut by the OPEC and allies. Ring Energy (NYSE:REI) is a massively undervalued oil stock with potential to breakout on the upside. It’s worth noting that REI stock has been sideways in the last 12 months.

Starting with the asset potential, Ring Energy commands a market valuation of $392 million. In comparison, the PV10 (present value of estimated future oil and gas revenues, net of forecasted expenses) of assets is $1.65 billion. Clearly, in a bull market, there will be ample scope for upside in REI stock.

Another important point to note is that since 2018, the Company has reported production growth at a CAGR of 26%. This growth has been supported by acquisitions. As oil trends higher, production growth coupled with higher realized price would imply robust free cash flows. This would provide flexibility for exploration and acquisition. All in all, it’s one of those under-$10 stocks to buy for 5-bagger returns.

Nio (NIO)

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In February 2021, Nio (NYSE:NIO) stock traded above $60. After a massive correction, NIO stock trades below $5. In my view, the stock is a steal at current levels and can deliver multibagger returns in the next few years.

Intense EV competition, macroeconomic headwinds, dilution, and margin compression, are some factors that have impacted Nio. Having said that, Chinese EV market is positioned for long term growth and the current depression is a buying opportunity.

For 2023, Nio reported revenue of $6.9 billion, which was higher by 8.2% on a year-on-year basis. However, vehicle margin declined by 420 basis points to 9.5% Further, Nio reported operating loss of $3.1 billion.

It’s worth noting that in December 2023, the Company received investment of $2.2 billion from CYVN Investments RSC. This provides liquidity buffer for operations. With Nio focusing on optimizing cost, it’s likely that margins will improve this year.

Another positive is that Nio plans to commence deliveries of ES7, ET7 and ET5 in Q2 2024. This is likely to have a positive impact on deliveries growth in the coming quarters. The launch of existing models with enhanced configuration and performance is also likely to increase market competitiveness.

Nordic American Tankers (NAT)

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Nordic American Tankers (NYSE:NAT) is a tanker company with a current fleet of 19 Suezmax crude oil tanker. At a forward price-earnings ratio of 6.8, NAT stock looks deeply undervalued. Further, the stock offers a generous dividend yield of 12%.

In my view, the time charter equivalent rate for Suezmax tankers is likely to remain firm in the coming years. This is a key reason to be bullish on Nordic American. Factors that are likely to support healthy TCE rates include geopolitical tensions and a relatively low Suezmax tanker orderbook.

For Q4 2023, Nordic reported average time charter equivalent rate of $39,170 per day per ship. For the same period, the operating cost per day per ship was $9,000. Clearly, if TCE rates remain around these levels, Nordic will be positioned to continue robust dividends and focus on deleveraging.

It’s worth noting that the Company’s net-debt per ship is low at $11.6 million. If the industry outlook remains positive, Nordic is also positioned for potential tanker acquisition. This will support revenue and cash flow upside.

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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

Article printed from InvestorPlace Media, https://investorplace.com/2024/04/7-under-10-stocks-to-buy-for-5-bagger-returns-in-5-years/.

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