In this article, we will look at the 13 Best Cheap Stocks to Invest in for Beginners.
Are New Highs Possible for the Stock Market?
The last time the S&P erased a 15% decline in under six weeks was 1982, which tells a lot about the current market dynamics we are currently in. On May 14, Dan Greenhaus, Solus Alternative Asset Management strategist, appeared on CNBC’s ‘Closing Bell’ to talk about the recent market action and what really matters about the recent market rally, amid other things.
Greenhaus was of the view that this trend tells us more about the drop than the rebound because, as many market practitioners know, there is a symmetry here. Often, the speed or rapidity with which you experience declines says something about how fast you can come back.
While there is something to be said about how fast we have come back, the sell-off was 20%, basically top to bottom, on worst-case outcomes that were really unlikely to come to pass and have since proven unlikely to come to pass.
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Investors were really concerned about the likelihood of 150% tariffs on China, $440 billion of imported goods, and so, the market acted according to the headlines in some respects. However, Greenhaus opined that the headlines could have been interpreted more rationally for what they were: “a publicly based negotiating strategy”, which in itself poses a semantic debate.
He said that the biggest issue in the short term, keeping the rapidity of the decline aside, is the importance of how the market is above where it was on Liberation Day and, more importantly, above the 200-day moving average. It would be appropriate, according to him, to put aside the whys and hows, solely focusing on holding that 200-day moving average.
However, this could be more of a debate of fundamentals than semantics, as the fundamentals last week were deemed to be deteriorating at a reasonably quick pace. While the job report was better than expected, recession expectations were looming everywhere, and a tremendously dense fog was looming over corporate America, muddying the situation for what was going to lie ahead. The market now seems to have a wholly different narrative, even when tariffs exist on China.
Talking about these trends, Greenhaus pushed back on the notion that things were deteriorating last week, calling it a sentiment and expectation deterioration only, as people were apprehensive. According to him, companies around the world are thriving, and he supported this statement with the optimistic earnings reports, commentaries, April updates by companies like Mastercard and Visa, and sales by big box retailers. He acknowledged that while investors are still apprehensive about what the future holds, things look “pretty darn good,” at least right now.
With these trends in mind, let’s examine the 13 best cheap stocks for beginners to invest in.
Our Methodology
We sifted through stock screeners and financial media reports to compile a list of the best cheap stocks for beginners with forward P/E ratios under 15. We chose the top 13 with the highest number of hedge fund holders as of Q4 2024, sourcing the hedge fund sentiment data from Insider Monkey’s database. The list is ordered in ascending order of hedge fund sentiment.
Note: The data was recorded on May 14.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 363.5% since May 2014, beating its benchmark by 208 percentage points (see more details here).
13 Best Cheap Stocks to Invest in for Beginners
13. Shell plc (NYSE:SHEL)
Forward P/E: 10.52
Number of Hedge Fund Holders: 54
Headquartered in London, Shell plc (NYSE:SHEL) produces oil and natural gas. The company’s operations are divided into the following segments: Integrated Gas, Upstream, Marketing, Chemicals and Products, Renewables and Energy Solutions, and Corporate. It takes the 13th spot on our list of the best cheap stocks for beginners to buy now.
On May 13, Piper Sandler raised the firm’s price target on Shell plc (NYSE:SHEL) to $80 from $72, keeping an Overweight rating on the shares. The analyst reasoned that Shell plc (NYSE:SHEL) slashed its 2025/2026 commodity price outlook and raised its mid-cycle natural gas to $3.50/mmbtu compared to the prior $3.25.
The firm expects the IOCs to maintain a level of momentum that benefits the company through potential weakness, supported by visible growth, its balance sheet, and resource depth.
The rating update came after Shell plc’s (NYSE:SHEL) solid fiscal Q1 2025 results, supported by strategic divestments in Singapore and Nigeria and the acquisition of Pavilion Energy. These initiatives streamlined the company’s portfolio and bolstered its LNG capabilities.
Shell plc (NYSE:SHEL) also announced a $3.5 billion share buyback program, making fiscal Q1 2025 the 14th consecutive quarter of such distributions. The company’s resilient balance sheet supports Piper’s rating upgrade, with a gearing of 19% and disciplined capital allocation that reflects its financial strength.
12. Verizon Communications Inc. (NYSE:VZ)
Forward P/E: 9.17
Number of Hedge Fund Holders: 74
Verizon Communications Inc. (NYSE:VZ) provides communications, information, and entertainment services and products. Its operations are divided into the Consumer and Business segments.
The Consumer segment manages consumer-focused wireline and wireless communication products and services. In contrast, the Business segment focuses on services and products such as data, FWA broadband, video and conference services, corporate networking solutions, and more.
On April 28, analyst Ivan Feinseth from Tigress Financial reiterated a Buy rating on Verizon Communications Inc. (NYSE:VZ) and raised the price target to $56.00 from $55.00, supported by the company’s growth potential and strong market position.
The analyst reasoned that Verizon Communications Inc. (NYSE:VZ) holds a diversified communications services portfolio further enhanced through AI-driven mobile edge computing and a strategic customer segmentation approach. These improvements position the company well for future growth.
The company also has an attractive dividend yield and a solid financial standing, which, according to the analyst, makes it a lucrative investment. In addition, Verizon Communications Inc. (NYSE:VZ) is continually investing in both wireline and wireless infrastructure and focusing on AI-driven network optimization, factors that the analyst expects will drive business performance and boost operational efficiency for the company.
The company’s positive outlook also prompted Evercore ISI analyst Kutgun Maral to maintain a Buy rating on Verizon Communications Inc. (NYSE:VZ) on May 13 and set a price target of $48.00.