Knowing your choices can help you make the right decisions when buying the best $20 stocks for April. According to Finviz.com, there are only three stocks in the Nasdaq 100 under $20 and 22 stocks in the S&P 500. It jumps to 1,055 in the Russell 2000, so let’s use that index to identify some winners.
Of course, a stock isn’t worth buying just because it’s under $20. It has to have growth prospects or something tangible that makes it worth owning for the long haul. I always like to spread my love around with sector diversification, so the three stocks will be from three sectors. They also should be profitable and possess a healthy balance sheet.
Ultimately, the long-term success of stocks has little to do with their price level. But a lower price point can help make it a more attractive investment option for some. With that being said, here are my three choices for the best $20 stocks to buy in April.
MasterBrand (MBC)
MasterBrand (NYSE:MBC) is the largest North American manufacturer of residential cabinets. In December 2022, it was spun off from Fortune Brands Innovations (NYSE:FBIN).
In 2023, it generated $2.7 billion in sales with $383 million in adjusted EBITDA, good for a 14% margin, up from 13% in 2022 and 11% in 2019. Approximately 61% of its revenue comes from its 4,400 dealer network, 27% from retailers and home centers and 12% from the builder channel.
The fourth quarter was a perfect example of what good management can do. Despite a 13.7% decline in revenue, it increased its gross margin by 550 basis points to 32.9%, leading to a 134% increase in net income.
In 2023, its free cash flow was 191% of its net income, another example of a strong management team. Based on an enterprise value of $2.77 billion and a free cash flow of $348.3 million, it has a free cash flow yield of 12.5%. Anything above 8% is value territory.
Nature’s Sunshine Products (NATR)
Nature’s Sunshine Products (NASDAQ:NATR) is a Utah-based manufacturer of supplements and vitamins.
The company’s financial performance in 2023 was considerably better than in 2022. Net sales increased 5.5% to $445.3 million, operating income rose 15.3% to $18.7 million and earnings per share jumped 3,950% to 77 cents. More importantly, it finished 2023 with no debt and $82.4 million in cash on its balance sheet.
Except for Europe, sales grew across the rest of its geographic regions in 2023, and operating income rose everywhere except Latin America. In 2023, the company repurchased $6.4 million of its shares at an average price of $15.09. As I write this, it’s trading at $19.42, a return on investment of 29%.
In 2024, it expects revenue of $468 million and adjusted EBITDA of $45 million. Trading at 0.8x sales, it’s a value play in April and beyond.
RXO (RXO)
RXO (NYSE:RXO) operates an asset-light trucking brokerage business that includes managed transportation, last mile and freight forwarding. XPO (NYSE:XPO) spun it off in November 2022.
I’ve been a fan of Brad Jacobs for a long time. I think I first recommended XPO to InvestorPlace readers in November 2016. Jacobs and his partners have made a lot of money from the trucking industry. His newest business is in the building products distribution industry. QXO will look to capture a large share of the $800 billion in annual revenue in North America and Europe.
The QXO website states, “QXO plans to create a tech-forward leader in the building products distribution industry through significant, accretive acquisitions and organic growth, with the goal of generating outsized stockholder value.” Jacobs and the rest of his management team expect to generate $5 billion in revenue within three years.
As for RXO, it is taking market share where it can while patiently waiting for the freight business to improve. In the meantime, it continues to cut costs, putting itself in a position to deliver healthy profits when the industry resumes its growth.
On the date of publication, Will Ashworth 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.
