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The best cheap stocks to buy now on Wall Street are never easy to identify. Should you invest in cheap stocks that once were $50 a share, and now trade for just a few bucks? That's risky because the company clearly isn't what it once was. Should you invest in cheap stocks that are growing but still struggling to turn a profit? Well, that has obvious risks, too.
The answer for investing in cheap stocks involves a mix of following the news and following your instincts. Penny stocks can often be incredibly volatile, so it also helps to have patience and a realistic outlook on the risks involved.
In the following nine cheap stocks to buy now, I've identified low-priced investment ideas with high potential based on current news and future trends. This involves an honest look at the fundamentals as well as honest projections of the future.
It should go without saying cheap stocks trading for only a few dollars a share often do not have a lot of room for error, so it's crucial to do your own research. But here are a few great ideas to start with, with a list of the best cheap stocks to buy now under $9.99 per share as of this writing.
Best Cheap Stocks to Buy Now: Jive (JIVE)
Industry: Social Media & Networking
Market Cap: $350M
Performance: 1.15% Year-to-date
Jive Software Inc (NASDAQ: JIVE ) went public in 2012 with very high hopes, hitting the market at $12 a share and more than doubling in short order. Then, the pain began and it has been a nearly constant slide down to current levels under $5 as of this writing.
So what went wrong? Well, Jive was one of many tech companies they went public with rapid revenue growth, but no profits. The hope was that eventually it would figure things out … but here we are, more than four years later, without a single fiscal year of profitability. Worse, the top line is now growing at just 4% compared to nearly 30% just a few years ago. But if you're an investor in cheap stocks, you shouldn't be too concerned with the flop from previous highs. Plenty of stocks find a second life that can deliver 50% or even 100% gains even if they never revisit prior highs - and that's the kind of potential I see in Jive across the rest of 2017.
Why? Well, the company has posted double the earnings Wall Street expected in each of the past three quarters. Sure, we are only talking about posting 7 cents in per-share earnings over 3-cent forecasts … but remember, profitability is the biggest challenge here, and JIVE is now on a firm path to not just breaking even, but actually finishing the year with a modest profit for the first time ever!
You may never see $20 again in this stock. But you can easily capture a double-digit gain - and maybe even triple-digits if this earnings momentum continues.
Best Cheap Stocks to Buy Now: Aegon (AEG)
Industry: Health Insurance
Market Cap: 11.3B
Performance: 0.4% YTD
Not many investors have ever heard of Netherlands-based Aegon N.V. (ADR) (NYSE: AEG ). That's one of the advantages of this mid-sized insurance and pension management firm, which is one of the best cheap stocks to buy now under $9.99.
Aegon is not just low profile, but low risk. It's a diversified global power, operating all over the world. It pays a 7.5% dividend at current pricing that is less than a third of this year's earnings. It has about $25 billion in gross deposits and roughly $13 billion in annual revenue. You simply aren't going to find this kind of stability in a stock under $10 anywhere.
There are growth challenges for Aegon, of course, considering the challenging environment in Europe and uncertainty around the Brexit vote. And there also have been some misinformed articles out there lately about its capital position after a recent "downgrade" on some of its debt, but Aegon remains highly rated by major credit agencies and is still soundly in investment-grade territory ; It's the equivalent of getting a B+ instead of an A, and not a sign of disaster.
All this means now is a great time to make a value play on AEG stock, which trades at an amazing forward price-earnings ratio of less than 8 and is valued at less than half book value. Those metrics make it one of the best cheap stocks to buy now by far.
Best Cheap Stocks to Buy Now: Harmony Gold (HMY)
Source: Karangahake Gorge Tunnel (New Zealand) via Flickr (Modified)
Industry: Gold Mining
Market Cap: $1B
Performance: 6.5% YTD
Let's be honest, with the bull market raging for the last few months, there aren't that many cheap stocks to buy anymore. But with the market starting to lose a little momentum, we may see some more buying opportunities - particularly in risk-off stocks like Harmony Gold Mining Co. (ADR) (NYSE: HMY ).
Gold bullion prices have outperformed in 2017, up 8% versus about 5% for the broader stock market, but gold miners have done even better. Even more importantly, it's the smaller gold miners that have been leading the way. Consider the Market Vectors Junior Gold Miners ETF (NYSEARCA: GDXJ ), made up only of the smaller gold stocks, is up almost 15%-plus this year.
Harmony has slightly underperformed that basket of junior miners, up "only" 11%. That's because HMY stock is actually very late to the party - with a 12 month return that is -35% versus a +30% return for the GDXJ ETF. There's good reason for that, since as recently Q2 2016, Harmony was barely breaking even.
But now, HMY is profitable once more - and just in time to ride the rise in gold. It's a win-win for investors, and this cheap stock offers big promise for those who don't overlook it and crowd into the same old gold stocks as everyone else. Particularly if you fear uncertainty in the months ahead, Harmony Gold is one of the best cheap stocks to buy now.
Best Cheap Stocks to Buy Now: Pulmatrix (PULM)
Market Cap: $64.5M
Performance: 506% YTD
Pulmatrix Inc (NASDAQ: PULM ) is one of the best cheap stocks to buy now in my book. It's a clinical stage biotech company that is a classic high-risk, high-reward play. Shares have run up roughly 500% since the announcement that its drug candidate to fight fungal infections just received the favorable "Qualified Infectious Disease Product" designation from the U.S. Food & Drug Administration.
It's the first step among many. The company admittedly doesn't make a penny in profits and has next to zero revenue as it chases drug approval. However, the QIDP designation will help streamline that process and could result in big success for Pulmatrix if its clinical trials validate the company's research.
And bigger picture, there's always hope of a Big Pharma buyout as the biotech industry continues to consolidate. There was a record $1.7 trillion in M&A last year , according to data provider PitchBook, and 80% of that involved strategic deals by competitors or peers - the perfect scenario for smaller biotech companies.
There's a lot of nonsense going on right now in Washington regarding healthcare reforms, but one thing is sure: The stage is set for more acquisitions in 2017, and a Republican Congress is highly unlikely to ever enact price restrictions or slow the approval process for a company like Pulmatrix. That all points to a favorable environment in the months to come.
Best Cheap Stocks to Buy Now: Kratos Defense (KTOS)
Market Cap: $ 585M
Performance: 9% YTD
Kratos Defense & Security Solutions, Inc (NASDAQ: KTOS ) is, as the name implies, a contractor that offers defense and security solutions for the government and private companies. This includes everything from cybersecurity and video surveillance to guided munitions and drones.
I shouldn't have to tell you that the current Republican administration favors a company like Kratos. Whether it's talk about a travel ban or increased defense spending to combat terror, security and defense companies like KTOS will see plenty of policies that offer opportunities for growth.
Kratos is a smaller company, but one that's at the center of those trends - and thus has the most to gain with just a few small contracts. SunTrust Robinson Humphrey in January initiated coverage with a "buy" rating and a $9 price target that implied double-digit upside in shares. That could be only the beginning if the chips fall right this year.
Like Donald Trump or hate Trump, his policies matter. That makes KTOS one of the best cheap stocks to buy now.
Best Cheap Stocks to Buy Now: Clear Channel Outdoor (CCO)
Industry: Outdoor Advertising
Market Cap: $2.1B
Performance: 16.5% YTD
In February, Clear Channel Outdoor Holdings, Inc. (NYSE: CCO ) has struggled in recent years as the billboard and advertising company tries to plot a way forward in a digital age. While it may sound like an old-school company without much promise, investors in cheap stocks should remember that battered names like this can still offer a lot of value at the right price. And CCO is definitely at the right price now.
Clear Channel Outdoor is still seeing pressure, and posted yet another decline in revenue when its Q4 numbers hit in February. However, it also saw its operating income more than double! In fact, Wall Street was expecting a meager 6 cents in EPS and the company instead posted 28 cents in earnings.
Bigger picture, the company is running at roughly breakeven this year as it continues to restructure, but after cost-cutting and related expenses drop the skies will get much clearer. Also, revenue is projected to stabilize and remain flat - or at worst, suffer a low single-digit year-over-year decline.
The icing on the cake: Just several weeks ago, CCO offered an amazing special dividend for a roughly 15% yield at the time! Periodically, special dividends like that have been paid in recent years, and if you buy-and-hold you could very well see modest share appreciation and then a big-time pay day in the next 12 to 18 months via another special payout as conditions improve.
Best Cheap Stocks to Buy Now: VimpelCom (VIP)
Market Cap: $7.1B
Performance: 6% YTD
VimpelCom Ltd (ADR) (NASDAQ: VIP ) is a telecom company serving a host of markets, from Italy and the Ukraine all the way to Kazakhstan and Pakistan. The company hasn't exactly been sitting well with U.S. investors, however, since this cheap stock does more than $4 billion in revenue in Russia - and all the talk about the Kremlin's ties to the Trump Administration, there are obvious risks here.
But real risks often create the biggest rewards.
Back when Russia invaded part of Ukraine and annexed Crimea in 2014, there was international outrage and turmoil in the markets. That resulted in harsh rhetoric from the West, including escalating sanctions from nearby European nations. Around that time, VimpelCom crashed and burned from a peak of $14 in late 2013 to lows near $3 at the end of 2016, as revenues were cut in half.
But now, VimpelCom is eyeing a return to growth in the next year or so. While fiscal 2017 still could finish in the red, next year analysts forecast revenue to grow 6% and earnings to shoot up to 35 cents per share.
But VimpelCom has already added 6% in the past three months or so to track the broader stock market, and offers a juicy 4.8% dividend yield to boot. There is risk here in this cheap stock, but also a lot of potential.
Best Cheap Stocks to Buy Now: SunOpta (STKL)
Industry: Food Processing
Market Cap: $600M
Performance: -0.7% YTD
SunOpta, Inc. (NASDAQ: STKL ) is a specialty foods company that focuses on packaged foods as well as "field-to-table" raw materials, including organic and non-GMO grains for other consumer staples companies to use in their finished product.
If you've taken a stroll down the grocery aisle recently, surely you've seen the focus on things like gluten-free foods and organic edibles. That means SunOpta is in the perfect position to capitalize on healthier eating habits among American consumers.
This cheap stock is one of the smallest ones on the list, with barely $600 million in market capitalization, so there is assuredly risk in this aggressive play. But investors should be encouraged by earnings that should surge from a projected 11 cents per share this year to 32 cents in FY2017 if projections hold.
SunOpta might not be a pick to hold forever, since there is a lot of competition in the space. But this is one of the best cheap stocks to buy right now thanks to its medium-term growth prospects and the potential of a buyout from one of the bigger players.
Best Cheap Stocks to Buy Now: Advanced Semiconductor Engineering (ASX)
Market Cap: $10.9B
Performance: 29.3% YTD
Advanced Semiconductor Engineering Inc (ADR) (NYSE: ASX ) is an old favorite of mine on these lists of the best cheap stocks to buy. It's quite volatile, moving between as little as $4 and about $8 since 2013, but it is once again a good opportunity now that it's in the middle of that range.
Consolidation in the semiconductor space over the past few years is very noteworthy, including last year's $32 billion purchase of ARM Holdings by SoftBank Group Corp (OTCMKTS: SFTBF ) and the $47 billion buyout of NXP Semiconductors by Qualcomm, Inc. (NASDAQ: QCOM ). While ASX stock might not be the biggest or most attractive player remaining the space, it's a foregone conclusion that this sector is only going to continue this buyout trend as the big dogs get bigger and the little guys get acquired.
It's not just a buyout hope you're buying, of course. Revenue is growing at a modest rate and ASX is comfortably profitable and looking to record another good year in 2017. Plus, with a bargain forward price-earnings ratio of about 12, you can be sure you're not overpaying - and that a nice buyout premium is realistic if and when a deal happens.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor's Guide to Finding Great Stocks. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
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