The Best Cheap Stocks To Buy Now

Sunlight shines on the historic buildings of the financial district in lower Manhattan, New York City near Wall Street.
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After tumbling sharply in the early months of the COVID-19 pandemic, stocks rallied hard through the bulk of 2020, and they’re continuing to rise through the first few weeks of 2021. Even in the midst of rising COVID-19 infections and an ongoing impeachment trial of former President Trump, nothing seems to be holding this market back.

Even though the market appears to be overvalued by some metrics, stocks can often stretch the rubber band much further than expected before coming back down to Earth. At these times, some investors look towards low-dollar stocks for additional investment ideas rather than chasing all the high-dollar market winners that make headlines every night.

Here’s a look at some lower-priced stocks that may still have room to run in this bull market. Before buying any individual names, be sure to do your due diligence and consult with a financial advisor. The names on this list are quite a mixed bag. Some have already significantly jumped in price, even though they still trade below $20, while others are household names that are trying to recover their prior glory. Still others are quite speculative, so make sure that any names you pick are in line with your investment objectives and risk tolerance before you make any moves.

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Cheap Stocks Projected To Increase In Value

Here are 25 stocks under $20 with the potential to grow.

Best Cheap Stocks
Company Name and Symbol Stock YTD% Change Sector Price
American Airlines (AAL) -1.20% Airlines $15.58
ADTRAN (ADTN) +18.48% Communication Equipment $17.50
Apache Corporation (APA) +7.82% Oil & Gas E&P $15.30
Ares Capital (ARCC) +4.14% Asset Management $17.59
Brightcove (BCOV) -6.68% Software — Application $17.17
Carnival Cruise Lines (CCL) -13.85% Travel Services $18.66
Donnelley Financial Solutions (DFIN) +6.78% Capital Markets $18.12
DouYu International Holdings (DOYU) +21.79% Internet Content & Information $13.47
Flex (FLEX) +3.06% Electronic Components $18.53
Ford Motor Company (F) +26.91% Auto Manufacturers $11.16
General Electric (GE) +4.81% Specialty Industrial Machinery $11.32
H&R Block (HRB) +16.27% Personal Services $18.44
Hawaiian Air Holdings (HA) +13.11% Airlines $20.02
Huntington Bancshares Incorporated (HBAN) +7.52% Banks — Regional $13.58
KeyCorp (KEY) +6.34% Banks — Regional $17.45
Kinder Morgan (KMI) +11.34% Oil & Gas Midstream $15.22
LG Display (LPL) +23.58% Consumer Electronics $10.43
Macy’s (M) +43.73% Department Stores $16.17
Myomo (MYO) +83.21% Medical Devices $12.33
Nokia (NOK) +24.30% Communication Equipment $4.86
Teva Pharmaceuticals (TEVA) +27.62% Drug Manufacturers — Specialty & Generic $12.32 (PRTS) +66.34% Internet Retail $20.61
Sirius XM Holdings (SIRI) +2.83% Broadcasting $6.55
Veeco Instruments (VECO) +14.80% Semiconductor Equipment & Materials $19.93
Zynga (ZNGA) +5.07% Electronic Gaming & Multimedia $10.37

What Factors Affect Returns?

With any investment, there is a degree of risk as well as return. When deciding which cheap stocks to buy, here are key factors to keep in mind: P/E ratio, price-to-book value, cash flow and earnings reports.

Read more about how each of these factors works when it comes to low-priced stocks.

P/E Ratio

To calculate a P/E ratio, simply take a company’s stock price and divide it by the company’s net earnings. In a general sense, stocks with a high P/E are considered expensive, and those with a lower P/E are considered cheap.

Price-to-Book Value

Book value is essentially a company’s net worth, as it equals a company’s assets minus its liabilities. Theoretically, if you had to liquidate a company, the company’s book value would be what remains. Stocks trading below book value could be good cheap stocks.

Cash Flow

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Net cash flows, cash from operations and free cash flow are just a few of the cash flow metrics used to analyze a company’s value. A company with a low price relative to cash-flow measures is less expensive than one with a higher ratio.

Earnings Reports

Earnings reports offer a wealth of information on companies, including their profits and losses. They also note whether a company performed as expected for a given period. Digging into past earnings reports can help you anticipate future performance and decide whether cheap dividend stocks are a good buy.

Is There a Downside To Investing In Cheap Stocks?

There’s no such thing as a crystal ball on Wall Street. Even stocks that appear undervalued with high growth prospects might not go up in value for any number of reasons.

Some companies simply fail to live up to projections. And others are destined to remain undervalued for years, simply due to investor sentiment.

Potential for Loss

While your investment in cheap stocks is limited, there is the potential for loss. As with any investment, the best approach is diversification. Don’t put all your funds into one stock. Spread out your risk by investing in a variety of stocks and other investment vehicles like mutual funds.

Choosing the Top Brokers for Cheap Stocks

Here are the best brokers when it comes to cheap stocks.

  • Charles Schwab: This brokerage offers both personalized advice and online access for purchasing stocks on your own, with $0 commission on stocks and many ETFs and mutual funds.
  • Merrill Edge: Merrill Edge offers $0 commission online trades and tools to help you manage your portfolio and decide what stocks to buy.
  • E-Trade: This company has an excellent mobile app and $0 commission trades.
  • Fidelity: Fidelity offers a high level of service with low fees and no account minimums.
  • TD Ameritrade: TD Ameritrade offers multiple trading platforms to help you make informed investment decisions, along with $0 commission.

Choose a user-friendly platform with low or no fees and excellent customer service. Research your stock choices and buy when you’re ready.

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Last updated: Jan. 29, 2021

This article has been updated with additional reporting since its original publication. All information is accurate as of January 29, 2021. Stock numbers and prices are subject to change.

About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

The Best Cheap Stocks To Buy Now
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