Roughly 11 years into the longest bull market in U.S. history, investors may need to hunt a little harder than usual to find cheap stocks.
While the fact that a given share trades for less than $10 by no means implies it's a steal, the rise of free trading apps like Robinhood has made investing accessible to millions of previously excluded Americans.
Whether you don’t have much to invest or you just enjoy the psychological allure of a low-priced stock, here are 10 of the best cheap stocks to buy under $10. Fair warning: some (but not all) of these nominally cheaper stocks come with higher-than-average risk.
Sirius XM Holdings
Since Sirius and XM Radio merged in 2008, the combined Sirius XM Holdings has enjoyed a near-monopoly on satellite radio. Sirius built on that with the 2018 acquisition of Pandora, helping reignite rapid revenue growth; its audio products now reach more than 100 million people. Although Netflix (NFLX) gets all the Wall Street love for its growing stream of recurring revenue, Sirius’ situation is pretty rosy too – late in the year, SIRI was on track to add nearly 1 million subscribers in 2019 alone, bringing its total paying subscribers to roughly 30 million. The company’s savvy strategy of partnering with auto manufacturers to pre-install Sirius XM in new models should help steadily grow the business.
The fact that shares of home-security company ADT haven’t been considered safe by Wall Street since their 2018 initial public offering isn’t mere irony to ADT’s IPO investors. Although shares are up 90% from 52-week lows, the stock, now trading in the $7 range, is down nearly 50% from its $14 offering. But ADT wouldn’t be one of the best cheap stocks to buy today if it didn’t have a silver lining. First, analysts expect recent losses to turn to profits, but the stock still trades for just 7 times expected 2020 earnings. Also, ADT is refinancing debt at more favorable rates, while focusing on growing areas like automation, the smart home, and mobile security; it’s rolling out a pilot “mobile safety solution” with Lyft (LYFT) early this year, with a potential national rollout to follow.
In sharp contrast to ADT, which, as one of the more contrarian names on this list, is coming off a lousy 2019, ZNGA shares rallied last year, adding more than 50%. Shares still trade comfortably below double-digits though, and Zynga’s portfolio of popular games, combined with some truly impressive recent growth, make it one of the best cheap stocks to buy under $10. Last quarter the social gaming developer behind franchises like Words With Friends, Zynga Poker, CSR Racing and FarmVille set new company revenue records (up 48% overall) and quarterly bookings (surging 59%). While growth is likely to decelerate quickly from such unsustainable levels, analysts still expect double-digit revenue growth in 2020. If ZNGA keeps leveraging impressive growth in its live services, shares could surprise again.
The next of the best cheap stocks to buy below $10 is the second smallest publicly-traded resort and casino company on Wall Street. Century Casinos, a $230 million Colorado Springs-based gaming company, owns and operates racetracks and casinos in the U.S., Canada and Poland, operating five ship-based casinos to boot. CNTY has several bullish factors in its favor: impressive expected growth fueled by recent acquisitions, a low forward price-earnings ratio of nine and a $12 price target that implies 50% upside. A December acquisition of three casinos for $107 million – or roughly half the company's market cap – makes CNTY's revenue and earnings prospects all the greater; analysts see revenue doubling and the company becoming about 10 times more profitable in 2020.
Another of the rare contrarian companies on this list, Nokia isn't a stock for everyone – the brand itself is a bit culturally antiquated, and no one really expects revenue growth to top 3% to 4% in the next few years. That said, Nokia's expected earnings growth is impressive, with Wall Street looking for a 20% bump in 2020 and over 30% profit growth in 2021. Cheap stocks to buy, especially stocks to buy for under $10, don’t often come in the form of well-established global companies worth upwards of $20 billion. But Nokia, the Finnish communication equipment giant, is one of the rare exceptions. Sales have grown 14% annually for the last five years. NOK may end up one of the 5G stocks to watch in the coming years, benefiting by helping telecoms upgrade their networks. Nokia pays a hefty 5.7% dividend as well.
Japanese investment brokerage Nomura Holdings offers many of the same products and services that a Goldman Sachs (GS) would. That means asset management, underwriting, structured products, trading – the whole nine yards. While shares trade in the $5 range, the fact that Nomura made the cut as one of Wall Street's best cheap stocks to buy doesn't mean it runs a rinky-dink business – NMR is an $18 billion behemoth, Japan's fourth-largest publicly traded financial institution available on mainstream U.S. exchanges. What makes NMR stock a buy is its attractive valuation (12x forward earnings), high dividend (5.2%), and momentum (up 44% in 2019).
One company that's been one of the 10 best cheap stocks to buy under $10 for a while now is mortgage REIT MFA Financial. First off, there’s no denying that the quality of MFA’s mortgage-backed securities portfolio isn’t the easiest thing to interpret – the 2008 crisis taught investors how tricky those could be. But for investors willing to hold and monitor the general health of the mortgage industry, MFA has tended to be a low-volatility, extremely high dividend stock for years. Having traded between $6 and $9 a share since 2008, MFA’s leverage-centric business model allows shares to yield 10.4%.
One of the smallest companies named as one of the best cheap stocks to buy under $10 is Celsius Holdings, a $320 million Florida company that makes health drinks under the Celsius brand. It currently offers 14 flavors, some sparkling and some carbonated, across two different products. Checking all the boxes for the consumer trend toward more health-conscious living, Celsius-brand drinks are gluten-free, soy-free, kosher, non-GMO, and free of preservatives and high fructose corn syrup. Sales have soared from $14.6 million in 2014 to an expected $72 million in 2019, and shares have also run up from under $1 to over $4 in that time. Analysts expect this high risk/reward play to grow revenue by over 50% in 2020, and its $10 price target implies over 100% upside. That's a bit optimistic, but CELH could indeed evolve into an M&A target.
SmileDirectClub, a direct-to-consumer provider of clear aligners, went public in fall 2019. Unfortunately, the $23 IPO was simply too aggressive and shares quickly corrected, falling all the way to the $7.50 range before halting their slide. It seems likely that selloff could've found bottom though, as SDC just announced a major, exclusive partnership with Walmart (WMT) to sell a line of oral care products like electric toothbrushes, teeth whitening kits, flossers and a UV-powered product cleaner for things like aligners, mouthguards, retainers and more. Analysts expect explosive sales growth to continue, although the company is likely a year or two from profitability. This stock may be worth the stretch for aggressive investors; the company claims its aligners can work in just six months and compete with braces. A price target above $19 implies nearly 100% upside.
FS KKR Capital Corp.
The last and arguably most complex name on this list is a business development company (BDC): FS KKR Capital. BDCs were created by Congress in the 1980s to increase business investment and boost liquidity. Like most BDCs, FSK relies on a degree of leverage, which allows it to then invest in more income-producing debt securities in small- and medium-sized U.S. businesses. This is great for income investors, and they probably won't mind FSK's 12.2% dividend. FSK's debt is quite reasonable at just 0.78 times equity, and shares still trade for just 0.8 times its last reported net asset value. A string of insider buys in recent months shows that those running the company believe in it enough to put their own money behind it.