In this article we will take a look at the 10 best stocks for beginners with little money.
There are many questions and uncertainties that cross the mind of an individual who wants to start investing in stocks. For clarity and a reasonable chance of success, it is important to look at finances, set profit goals, and be wary of market bias when venturing into the world of stocks. According to billionaire Warren Buffett, the leading investment mind of the past century, one of the simplest strategies is betting on firms that one understands and factoring in the economic conditions. This is not as straightforward as it might seem, but it isn’t rocket science either.
Take the COVID-19 pandemic which has devastated the world over the past year and left businesses reeling. In late February 2020, the NASDAQ-100 and S&P 500 Index registered their sharpest falls since the 2008 financial crisis. They have still not recovered completely a year after the crash. An oil price war between Russia and Saudi Arabia in the same year further complicated matters and sent crude prices to new lows, clobbering even the most diverse investment portfolios around the world.
Nobody could have predicted these events, but smart investors who lived through them learned their lessons quickly. There was an immediate shift in the market towards value stocks from high growth stocks. Retail investors, however, still went for the technology stocks, creating a boom for the tech industry that led to new stock highs for the big technology firms. As the pandemic subsided towards the end of the year, the smart money started moving again, this time towards companies that were expected to benefit from an easing of COVID-19 restrictions.
Investing in the stock market with little money, if done smartly, could result in huge gains. After all, hydrogen fuel cell company Plug Power Inc (NASDAQ: PLUG) was trading at just around $3 in January 2020. Today, having gained over 550% in the last 12 months, it hovers around $29, with a lot of room to run. Morgan Stanley recently resumed covering Plug Power Inc (NASDAQ: PLUG) with an Equal Weight rating and a $35 price target. The firm expects a double-digit revenue growth and a “significant” margin expansion for the company through 2050.
Another notable company that you can invest in with little money is Ford Motor Company (NYSE: F). Even with a market cap of close to $50 billion, Ford shares trade at around $12, as of April 26. But that might not be the case for long. With major investments in electric cars and soaring deliveries in China, Ford is set to gain value in the coming months. Recently, Deutsche Bank pointed to the “robust” business model of Ford based on favorable vehicle mix/pricing. The bank said that Ford Motor Company (NYSE: F) is expected to post upbeat Q1 results.
For beginner investors, it is especially important to be aware of the market direction at any given point in time. For example, as the economy reopens, certain industries are almost certain to benefit from increased travel, social gatherings, and demand for consumer goods. The chain effect that follows a change in demand for goods is illustratable through a real-world example. According to news agency Reuters, electric car makers are competing with consumer electronic brands for the supply of semiconductor chips used by both industries.
This has led to a shortage of semiconductors in the market, driving up the prices of chip making firms like Himax Technologies, Inc. (NASDAQ: HIMX) and United Microelectronics Corporation (NYSE: UMC). Although both these firms are not the largest or most important players in the chip market, they have capitalized and increased production. Himax Technologies, Inc. (NASDAQ: HIMX) has presented a new screen design tech to a major electric car maker recently while United Microelectronics Corporation (NYSE: UMC) has raised product prices.
Similarly, as the demand for travel to tourist hotspots after a year in lockdown skyrockets, entertainment firms like MGM Resorts International (NYSE: MGM) have announced expansion of casino gaming operations and special offerings to attract more customers. In China alone, MGM Resorts International (NYSE: MGM) has posted a more than 300% gain in April from the lows of the pandemic this time last year. The firm expects to post $1 billion in net revenue from 2022 operations based on present momentum.
However, there is also reason to be cautious of blindly following the crowd. The post-pandemic economy is still in flux and even market experts have been baffled by the slow pace of the recovery. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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With this context in mind, here is our list of the 10 best stocks for beginners with little money.
Best Stocks for Beginners with Little Money
10. Zynga Inc. (NASDAQ: ZNGA)
Number of hedge fund holders: 52
Zynga Inc. (NASDAQ: ZNGA) is a San Francisco-based game developer that markets video games as social experiences. Zynga games such as Zynga Poker are popular on social networking platforms like Facebook. The firm provides businesses the opportunity to advertise the game experience as well. The firm was founded in 2007 and ranks tenth on our list of 10 best stocks for beginners with little money. As mobile games increase in significance, Zynga is uniquely placed to benefit from the rise in ad revenue that the increase in users would bring..
Zynga has a market cap of $11.5 billion and posted an annual revenue of close to $2 billion in 2020. Investment advisory BMO Capital Markets earlier this month rated Zynga Outperform with a price target of $15. BMO Capital was of the view that Zynga was the best bet on the mobile game market that was growing in importance in the gaming industry globally.
At the end of the fourth quarter of 2020, 52 hedge funds in the database of Insider Monkey held stakes worth $1 billion in the firm, up from 48 in the preceding quarter worth $995 million.
Artisan Small Cap Fund, in their Q4 2020 investor letter, mentioned Zynga Inc. (NASDAQ: ZNGA). Here is what Artisan Small Cap Fund has to say about Zynga Inc. in their Q4 2020 investor letter:
“We also added to our position in Zynga. Our multiyear investment campaign in Zynga has been based on a new management team’s ability to drive steady growth in the company’s base portfolio of games, expand margins, reinvigorate the new game development pipeline and use its strong balance sheet to acquire complementary games and studios. Shares have been pressured in recent quarters, presumably because of investor concerns about the company’s moderating growth rate and Apple’s pending new privacy policy which will make it more difficult for Zynga to both efficiently acquire new players and sell advertising in its games. We believe the company has multiple growth levers it can pull in the periods ahead, including the rollout of new games, acquisitions, further penetration into international markets and entry into new gaming categories, to name a few. Furthermore, our research suggests the Apple privacy policy change is manageable for larger mobile game developers such as Zynga. Given our strong conviction in the profit cycle, we used recent weakness to add to our position.”
9. FAT Brands Inc. (NASDAQ: FAT)
Number of hedge fund holders: 3
FAT Brands Inc. (NASDAQ: FAT) is a Beverly Hills-based firm that owns and runs several restaurant franchises worldwide. Some of the recognized names it manages include Fatburger, Buffalo’s Cafe, Johnny Rockets, Hurricane Grill & Wings, Elevation Burger, Yalla Mediterranean, Buffalo’s Express, and the Ponderosa & Bonanza Steakhouse. The company was founded in 2017 and is placed ninth on our list of 10 best stocks for beginners with little money. FAT operates more than 700 restaurants around the world.
The company stands to gain as the economy reopens slowly and people start frequenting the dine-in facilities at restaurants with the rollout of the coronavirus vaccine globally. On April 22, the company announced that it had raised its quarterly dividend by 8% to $0.13 per share, an 8.3% increase from the previous value of $0.12 per share.
Last month, FAT Brands announced that it had signed an agreement with media solution provider Stingray Business and digital media collective Space Factory Media for custom music, insights, and systems solutions. As part of the deal, the music firms would offer custom music and artificial intelligence-powered insights at Fatburger and Johnny Rockets.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm ADW Capital held the most shares in the company – 739,323 – worth more than $4.3 million.
8. Voyager Therapeutics, Inc. (NASDAQ: VYGR)
Number of hedge fund holders: 7
Voyager Therapeutics, Inc. (NASDAQ: VYGR) is a Cambridge-based biotechnology firm that concentrates on the development of gene therapy treatments for neurological diseases. The firm is working on many revolutionary new products and could benefit if one of these is successful in clinical trials and gets regulatory approval. These include drugs for treatment of Huntington’s disease, Alzheimer’s disease, and others. The firm was founded in 2013 and is placed eighth on our list of 10 best stocks for beginners with little money.
Voyager Therapeutics, Inc. (NASDAQ: VYGR) has a market cap of more than $176 million and posted an annual revenue of more than $171 million in December 2020, up from $101 million posted in the previous year. On April 26, the share price of the firm surged more than 10% after the Food and Drug Administration lifted a clinical hold on the Investigational New Drug (IND) application, one of the drugs being developed by Voyager for treatment of Huntington’s disease.
At the end of the fourth quarter of 2020, 7 hedge funds in the database of Insider Monkey held stakes worth $38 million in Voyager Therapeutics, Inc. (NASDAQ: VYGR), down from 10 in the preceding quarter worth $49 million.
7. Nokia Corporation (NYSE: NOK)
Number of hedge fund holders: 19
Nokia Corporation (NYSE: NOK) is a Finland-based multinational telecommunications, information technology, and consumer electronics firm. Although the firm is famous for being a leading mobile manufacturing brand, it has branched out in the previous decade and now has significant stakes in the network infrastructure and cloud services business. Nokia is one of the few firms marketing 5G technology equipment to governments around the world. The firm was founded in 1865 and is seventh on our list of 10 best stocks for beginners with little money.
On April 20, China’s leading telecom firm Chunghwa Telecom selected Nokia to expand 5G network coverage in China. The agreement mentions the deployment of the AirScale line from Nokia, including AirScale base stations and AirScale radio access products. Just a day before that announcement, Nokia also told the media that it would be expanding 5G network coverage in South Korea.
Out of the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in the firm with 21.8 million shares worth more than $85 million.
6. VerifyMe, Inc. (NASDAQ: VRME)
Number of hedge fund holders: 1
VerifyMe, Inc. (NASDAQ: VRME) is a New York-based technology firm primarily in the cyber security business. The company offers solutions for counterfeit prevention, authentication, serialization, consumer engagement, and track and trace features for labels, packaging, and products. One of the more famous products of the firm is RainbowSecure, a new technology that uses invisible ink and a proprietary tuned laser to enable counterfeit products to be exposed. The firm is placed sixth on our list of 10 best stocks for beginners with little money.
It has a market cap of more than $30 million and posted an annual revenue of more than 343,000 in December 2020, up from 245,000 posted the year before. On March 9, the share price of VerifyMe surged almost 19% after it announced that it had signed an agreement with software firm Syntax to sell its products in the Chinese market.
At the end of the fourth quarter of 2020, 1 hedge fund in the database of Insider Monkey held stakes worth $40,000 in the firm, up from none in the preceding quarter.
5. MGM Resorts International (NYSE: MGM)
Number of hedge fund holders: 44
MGM Resorts International (NYSE: MGM) is a Las Vegas-based hospitality and entertainment firm. The company runs resorts in Las Vegas, Massachusetts, Detroit, Mississippi, Maryland, and New Jersey. It also runs casinos and hotels in several different countries. The firm presently has 29 hotel and destination gaming offerings under its command. It was founded in 1986 and was formerly known as MGM MIRAGE. It is placed fifth on our list of 10 best stocks for beginners with little money.
On April 22, leading investment bank Union Gaming gave MGM Resorts a high price target of $52, a 20% upside from the $45 assigned before, on the back of the sports betting potential for the casino operator. John DeCree, an analyst at the firm, said that the company had emerged as a market leader in sports betting and electronic gaming and would benefit from the reopening of resorts as the pandemic subsided.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Corvex Capital is a leading shareholder in the firm with 22.5 million shares worth more than $710 million.
In their Q1 2021 investor letter, Longleaf Partners Fund highlighted a few stocks and MGM Resorts International (NYSE:MGM) is one of them. Here is what the fund said:
“MGM (21%, 1.44%), the casino and online gaming company, also contributed to the Fund’s strong returns. MGM’s Las Vegas properties performed particularly well during the fourth quarter, with October marking the best month since pre-COVID February, positive quarterly EBITDA and strong 2021 bookings. MGM’s online gaming and sportsbetting app, BetMGM, is one of the leaders in US online gaming, with a better market share in the more profitable iGaming than in the higher profile but lower margin sports gaming. MGM has demonstrated high conversion rates of its hotel guests and we believe that, with Barry Diller’s help, they will build a competitive long-term advantage with lower customer acquisition costs. MGM’s Macau subsidiary, MGM China, also appreciated as the Macau market partially reopened. We believe there is significant additional upside for the Macau business over the medium-to-long term.”
4. United Microelectronics Corporation (NYSE: UMC)
Number of hedge fund holders: 12
United Microelectronics Corporation (NYSE: UMC) is a China-based microelectronics manufacturer. The firm runs as a semiconductor wafer foundry in several countries, including Taiwan, Singapore, China, Hong Kong, Japan, and the United States. The company provides semiconductor manufacturers with circuit design, mask tooling, and wafer fabrication, and assembly services. It also has stakes in the solar energy and LED industries. The firm was founded in 1980 and is placed fourth on our list of 10 best stocks for beginners with little money.
It has a market cap of more than $25 billion and posted an annual revenue of close to $6.3 billion in December 2020, up from $4.9 billion posted in the previous year. United microelectronics stands to benefit from a semiconductor shortage in the world amid an increase in the production of electronic devices as the economy reopens following the pandemic.
At the end of the fourth quarter of 2020, 12 hedge funds in the database of Insider Monkey held stakes worth $190 million in the firm, up from 11 in the preceding quarter worth $137 million.
3. Himax Technologies, Inc. (NASDAQ: HIMX)
Number of hedge fund holders: 12
Himax Technologies, Inc. (NASDAQ: HIMX) is a China-based semiconductor manufacturer. It also has stakes in the display imaging processing technologies. The company operates in the Philippines, Korea, Japan, Europe, and the United States. The products that the firm manufactures are used in electronic devices like televisions, laptops, and mobile phones. The firm also makes micro-displays for augmented reality devices. Himax was founded in 2001 and is placed third on our list of 10 best stocks for beginners with little money.
On April 19, the company announced that it had become the largest shareholder in the Chinese visual technology firm CM Visual Technology for an undisclosed fee. CM Visual makes microstructure optical films. The announcement came two weeks after Himax said that it had partnered with automotive display supplier BOE Varitronix for flexible AMOLED automotive displays and won accolades for an initial product design from a major electric vehicle company.
Out of the hedge funds being tracked by Insider Monkey, Beijing-based investment firm Yiheng Capital is a leading shareholder in the firm with 6.7 million shares worth more than $49.8 million.
2. Aviat Networks, Inc. (NASDAQ: AVNW)
Number of hedge fund holders: 15
Aviat Networks, Inc. (NASDAQ: AVNW) is a Texas-based company that develops and markets wireless networking products and services in North America, Africa, the Middle East, Europe, Russia, Latin America, and the Asia Pacific. Some of the products that the company sells include broadband wireless access base stations, customer premises equipment for mobile networks; and digital microwave radio systems. The company was founded in 2006 and is placed second on our list of 10 best stocks for beginners with little money.
Aviat Networks, Inc. (NASDAQ: AVNW) has a market cap of more than $350 million and posted an annual revenue of more than $238 million in July 2020, down slightly from $243 million reported the year before. On April 19, the share price of the firm jumped more than 5% after it announced that it had signed a multi-million dollar agreement with African mobile operator Africell to provide 5G transmission networks in several African countries.
At the end of the fourth quarter of 2020, 15 hedge funds in the database of Insider Monkey held stakes worth $49 million in the firm, up from 5 in the preceding quarter worth $27 million.
1. Northern Dynasty Minerals Ltd. (NYSE: NAK)
Number of hedge fund holders: 5
Northern Dynasty Minerals Ltd. (NYSE: NAK) is a Vancouver-based mining company. The most important mineral project being run by the firm is the Pebble project in Alaska. It is a copper-gold-molybdenum mine comprising 2,402 mineral claims that covers an area of almost 417 square miles. This area is often considered to house one of the world’s largest unexplored copper and gold deposits. The significance of these copper deposits, which also provide other rare earth metals used in different electronic devices, is not lost on the Canadian firm.
The company is hopeful that work on the project, currently in limbo, begins again. Northern Dynasty was founded in 1983 and is placed first on our list of 10 best stocks for beginners with little money. The company is presently in the process of filing an administrative appeal with the US Army Corp of Engineers to restart work on the Pebble mine.
Out of the hedge funds being tracked by Insider Monkey, Florida-based investment firm Kopernik Global Investors is a leading shareholder in the firm with 26 million shares worth more than $8.3 million.
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Disclosure: None. 10 Best Stocks for Beginners with Little Money is originally published on Insider Monkey.
