Novice and green investors usually look at the price of a stock and judge its growth potential through that; a stock priced at $100 seems a lot more expensive than a stock priced at $5. In percentage terms, one can double his or her money if a $10-stock jumps to a value of $20, but can only gain 10% if a $100-stock reaches a value of $110.
Most stock market participants tend to think that a stock priced below $5 per share has nowhere to go but up. This erroneous thinking might point to attractive investment opportunities on some occasions, but more often than not this thinking will yield disappointing results. In fact, companies with $5-stocks tend to be risky. These companies might have heavy debt loads or might have other risk factors associated with them. But that doesn’t imply that there aren’t any good or even safe low-priced stocks out there in the market.
For that reason, Insider Monkey decided to compile a list of five under $10-stocks favored by the billionaire hedge fund managers followed by our team. Multi-billion-dollar hedge fund vehicles spend a great deal of money on the search for and research of investment opportunities in the small-cap space, which makes us believe that the pool of low-priced stocks included in their portfolios hold great potential.
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details).
#5. Huntington Bancshares Incorporated (NASDAQ:HBAN)
– Billionaires With Long Positions (as of June 30): 6
– Aggregate Value of Billionaires’ Holdings (as of June 30): $133.34 Million
There were six billionaire hedge fund managers in our system with long positions in Huntington Bancshares Incorporated (NASDAQ:HBAN) at the end of the April-to-June period, compared to seven recorded at the end of the March quarter. The overall value of those long positions decreased by 26% quarter-over-quarter to $133.34 million, partly reflecting a 5% drop in the value of Huntington’s shares. The multi-state diversified regional bank holding company has seen the value of its shares plunge by 10% since the beginning of 2016. In mid-August, Huntington Bancshares completed the $3.4 billion cash-and-stock acquisition of Ohio-based diversified financial services company FirstMerit Corp. Under the terms of the deal, first announced in January, each shareholder of FirstMerit received 1.72 shares of Huntington and $5.00 in cash for each share of FirstMerit. The freshly-acquired company had around 366 banking offices and 400 ATM locations in Ohio, Michigan, Wisconsin, Illinois, and Pennsylvania at the time of the announcement of the acquisition. David Harding’s Winton Capital Management cut its stake in Huntington Bancshares Incorporated (NASDAQ:HBAN) by 27% during the second quarter to 3.75 million shares.
On the following two pages of this article, we’ll look at four other low-cost stocks favored by billionaire investors.