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.
11. QUALCOMM Incorporated (NASDAQ:QCOM)
Forward P/E: 12.92
Number of Hedge Fund Holders: 79
QUALCOMM Incorporated (NASDAQ:QCOM) develops and commercializes foundational technologies for the wireless industry, including 3G, 4G, and 5G wireless connectivity and high-performance and low-power computing, including on-device AI.
The company takes the 11th spot on our list of the best cheap stocks to buy now for beginners. On May 1, Bernstein analyst Stacy Rasgon maintained a Buy rating on QUALCOMM Incorporated (NASDAQ:QCOM) and set a price target of $185.00 amid robust performance and optimistic future prospects. The rating came after the company’s strong fiscal Q2 2025 results, with EPS and revenue exceeding market expectations. The results were supported by robust performance in the company’s QCT segment across various sectors, including automotive, handsets, and IoT.
Although the company experienced some minor underperformance in QTL revenues, the analyst believes that its overall financial health remains strong. QUALCOMM Incorporated (NASDAQ:QCOM) has also given optimistic guidance for fiscal Q3 2025, anticipating significant year-over-year growth in automotive revenues and continued strength in IoT and handsets.
The analyst also highlighted QUALCOMM Incorporated’s (NASDAQ:QCOM) resilience against potential headwinds and the potential of its product portfolio, supporting the optimistic rating.
10. AT&T Inc. (NYSE:T)
Forward P/E: 13.01
Number of Hedge Fund Holders: 80
AT&T Inc. (NYSE:T) provides telecommunications and technology services and operates through the Communications and Latin America segments. Its Communications segment offers wireline telecom, wireless, and broadband services in the US and globally, while the Latin America segment manages services in Mexico. The company takes the tenth spot on our list of the top cheap stocks to invest in for beginners.
Analysts are bullish on AT&T Inc. (NYSE:T) following strong fiscal Q1 2025 results. On April 29, Tigress Financial analyst Ivan Feinseth reiterated a Buy rating on AT&T Inc. (NYSE:T) and set a price target of $34.00, highlighting its strong growth potential. The analyst said that the company’s convergence growth strategy is a significant driver, as it is strengthening both the fixed wireline and wireless segments, resulting in solid cash flow and revenue surges. This financial strength supports AT&T Inc. (NYSE:T) in enhancing shareholder value, including key share repurchase plans.
The analyst also reasoned that the company’s investments in fiber networks and high-speed 5G wireless are anticipated to drive strong momentum in business performance and sustain its service enhancements. AT&T Inc.’s (NYSE:T) strategic focus on leveraging these networks is expected to support subscriber growth through diverse connectivity solutions, further supporting the buy rating.
9. PDD Holdings Inc. (NASDAQ:PDD)
Forward P/E: 9.48
Number of Hedge Fund Holders: 85
PDD Holdings Inc. (NASDAQ:PDD) is a Chinese multinational online commerce group and retailer that owns and operates diverse businesses. It also has strong logistics, sourcing, and fulfillment capabilities that support its operations.
The company owns Pinduoduo, a popular online commerce platform in China, and also runs the fast-growing e-commerce marketplace Temu. Temu now operates in more than 50 countries worldwide.
PDD Holdings Inc. (NASDAQ:PDD) is the ninth-best cheap stock to buy for beginners. On May 12, Citi upgraded the company to Buy from Neutral, setting a $165 price target. Analyst sentiment for the stock is thawing after the de-escalation in the US and China trade war, with the two countries suspending tariffs on each other’s products for 90 days. The development has sparked interest among investors, contributing to positive market sentiment surrounding PDD Holdings Inc. (NASDAQ:PDD).
PDD Holdings Inc. (NASDAQ:PDD) also has solid operations and is focusing on a high-quality development strategy. It has been actively optimizing its platform ecosystem to deliver impactful results over the long run, and this strategy has helped the company report impressive financial results. It reported a 24% year-over-year revenue growth in fiscal Q4 2024, reaching RMB 110.6 billion.
8. Merck & Co., Inc. (NYSE:MRK)
Forward P/E: 9.02
Number of Hedge Fund Holders: 91
Merck & Co., Inc. (NYSE:MRK) is a biopharmaceutical company that delivers health solutions to advance the treatment and prevention of diseases in animals and people.
Its Pharmaceutical segment offers vaccines and human health pharmaceutical products, typically therapeutic and preventive agents. Its Animal Health segment develops, discovers, manufactures, and markets a range of vaccines and veterinary pharmaceutical products.
On May 14, Leerink Partners analyst Daina Graybosch maintained a Buy rating on Merck & Co., Inc. (NYSE:MRK), raising the associated price target to $115.00. Although the risks related to CMS’s draft guidance for Medicare Drug Price Negotiation could potentially affect Merck & Co., Inc.’s (NYSE:MRK) strategy to maintain Keytruda’s value, the analyst believes in the company’s positive outlook.
According to the draft guidelines, the subcutaneous Keytruda could be categorised with the infusion version for price negotiations, affecting its market share. However, the analyst opined that the stock’s price target remains higher than its current level even under the more conservative scenario of the subcutaneous version capturing a smaller market share, which suggests meaningful upside for Merck & Co., Inc. (NYSE:MRK).
7. Pfizer Inc. (NYSE:PFE)
Forward P/E: 7.68
Number of Hedge Fund Holders: 92
Pfizer Inc. (NYSE:PFE) is a global biopharmaceutical company that manufactures, develops, markets, and sells biopharmaceutical products worldwide. It advances wellness, prevention, treatment, and cures in developing and emerging markets.
Pfizer Inc. (NYSE:PFE) reported an 8% decrease in revenue in fiscal Q1 2025, attributed to a drop in Paxlovid revenues. However, due to financial discipline and operational efficiency, it attained a 12% improvement in its adjusted EPS compared to last year, reaching $0.92. The company is on track to deliver around $4.5 billion in net cost savings by the end of 2025, and management expects additional savings through 2027.
Supported by these positive results released on April 29, BMO Capital analyst Evan Seigerman maintained their bullish stance on Pfizer Inc. (NYSE:PFE) the next day, giving it a buy rating. The analyst said that the company’s fiscal Q1 2025 financial performance reflects strong operational efficiency that has the potential to lead to improved profitability. This mainly includes Pfizer Inc.’s (NYSE:PFE) ability to surpass expectations on cost savings. The company is seventh on our list of the best cheap stocks for beginners now.
6. Johnson & Johnson (NYSE:JNJ)
Forward P/E: 14.53
Number of Hedge Fund Holders: 98
Johnson & Johnson (NYSE:JNJ) is the sixth-best cheap stock to buy now for beginners. It develops, manufactures, and sells products in the healthcare field. The company operates through two segments: Innovative Medicine and MedTech. The MedTech segment includes various medical devices and products used in cardiovascular intervention, orthopedics, interventional solutions, surgery, and vision fields.
On May 14, Goldman Sachs analyst Asad Haider maintained a Buy rating on Johnson & Johnson (NYSE:JNJ), with the associated price target of $176.00 remaining the same. The analyst highlighted the company’s growth potential and strong market position, reasoning that the recent Digestive Disease Week reflected strong advancements, especially with Tremfya.
Tremfya is rapidly growing in ulcerative colitis and gaining force in the Inflammatory Bowel Disease (IBD) market. Key opinion leaders (KOLs) are giving the product a favorable reception, which reflects its commercial success.
The analyst also sees Tremfya’s subcutaneous administration as a key advantage for Johnson & Johnson (NYSE:JNJ), as it streamlines office workflows and facilitates expedited patient onboarding. The company’s strong fiscal Q1 2025 results also surpassed consensus expectations, further bolstering the optimistic outlook for Johnson & Johnson’s (NYSE:JNJ) pharmaceutical franchise.
5. Citigroup Inc. (NYSE:C)
Forward P/E: 10.21
Number of Hedge Fund Holders: 101
Headquartered in New York, Citigroup Inc. (NYSE:C) provides financial products and services. Its operations are divided into the following segments: Services, Markets, Banking, Wealth, US Personal Banking (USPB), and All Other.
On May 8, Reuters reported that the company is facing a newly reinstated $1 billion lawsuit for allegedly providing $3.3 billion to Mexican Oceanografia, an oil drilling company, between 2008 and 2014, and duping investors despite knowing the company had huge debt and forged signatures.
However, despite the lawsuit, Barclays analyst Jason Goldberg maintained a Buy rating on Citigroup Inc. (NYSE:C) on May 12, setting a price target of $95.00. The company has solid operations, reporting a net income of $4.1 billion and earnings per share of $1.96 in fiscal Q1 2025. Total revenue rose by 3%, driven by growth across all business segments.
This positive performance reflects Citigroup Inc.’s (NYSE:C) potential to maintain a healthy financial standing and generate substantial income. Fiscal Q1 2025 marked the third consecutive quarter of positive operating leverage across each of the company’s five lines of business, and the fourth for the firm overall. This consistent performance suggests efficient cost control and management across its operations, and is attracting investor interest.
4. Alibaba Group Holding Limited (NYSE:BABA)
Forward P/E: 14.62
Number of Hedge Fund Holders: 107
Alibaba Group Holding Limited (NYSE:BABA) manages and provides technology infrastructure and marketing platforms. It operates through seven segments: China Commerce, International Commerce, Local Consumer Services, Cainiao, Cloud, Digital Media and Entertainment, and Innovation Initiatives and Others segments. The company ranks fourth on our list of the best cheap stocks to buy now for beginners.
Alibaba Group Holding Limited (NYSE:BABA) will announce its fiscal Q4 2025 results on May 15, and analysts expect EPS of $1.78 on revenues of $33.32 billion. Ahead of the earnings release, Morgan Stanley analyst Gary Yu gave the company a Buy rating, setting a price target of $180 per share that implies a notable 36.7% upside potential from current levels.
The analyst called Alibaba Group Holding Limited (NYSE:BABA) a “Catalyst-Driven Idea,” telling investors that he thinks the company would benefit from “robust” China AI inference demand as both an “adopter” with its applications and an “AI enabler” with its cloud offerings.
The analyst expects AliCloud to be poised for growth due to the surging demand for AI inference, while other hyperscalers focus on internal demand. This signals AliCloud out as “a unique CSP with sizable allocation for external customers.” The analyst also expects Alibaba Group Holding Limited’s (NYSE:BABA) next share price catalyst to be the upcoming cloud revenue growth.
3. Bank of America Corporation (NYSE:BAC)
Forward P/E: 11.92
Number of Hedge Fund Holders: 113
Bank of America Corporation (NYSE:BAC) is a bank and financial holding company that operates in the Consumer Banking, Global Wealth and Investment Management (GWIM), Global Banking, and Global Markets segments. The company boasts a wide economic moat and reliable competitive market advantages that reduce its chances of operational disruption, ranking it among the best cheap stocks to invest in for beginners.
On May 13, Wells Fargo analyst Mike Mayo maintained a Buy rating on Bank of America Corporation (NYSE:BAC) with an associated price target of $56.00. The analyst supported his rating with the company’s growth potential and strong operational performance, saying that it is maintaining a steady course with its commercial and consumer operations.
Bank of America Corporation (NYSE:BAC) is also exhibiting resilience amid macroeconomic uncertainties such as tariffs, which can be seen in its ability to expand its loan demand and core client base. This is further supported by positive commercial borrowing trends and consumer spending. The analyst expects Bank of America Corporation (NYSE:BAC) to undergo significant EPS and net interest income growth over the coming years, supported by its growth initiatives and strategic investments. These initiatives include improving business banking opportunities, growing customer programs, and tapping into new markets.
2. JPMorgan Chase & Co. (NYSE:JPM)
Forward P/E: 14.16
Number of Hedge Fund Holders: 123
JPMorgan Chase & Co. (NYSE:JPM) is the second-best cheap stock for beginners to invest in. It is a financial holding company that provides financial and investment banking services. The company focuses on commercial banking, investment banking, financial transaction processing, asset management, and more. Its operations are divided into the following segments: Consumer and Community Banking (CCB), Commercial and Investment Bank (CIB), Asset and Wealth Management (AWM), and Corporate.
On May 8, Morgan Stanley analyst Betsy Graseck maintained their neutral stance on JPMorgan Chase & Co. (NYSE:JPM) and gave it a Hold rating. However, the analyst highlighted the stable outlook for the company amid economic volatility, claiming that she does not expect any changes in its financial guidance for 2025 despite the uncertainty surrounding tariff impacts and the current economic volatility. This includes expenses, net interest income, and card net charge-offs.
The analyst also noted that JPMorgan Chase & Co. (NYSE:JPM) will likely maintain its through-the-cycle return on tangible common equity (ROTCE) target of approximately 17%. However, she anticipates it surpassing this target in the coming years, supported by efficient capital management and a higher interest rate environment. The company also holds potential for accelerated share buybacks driven by excess capital, which could further improve ROTCE.
1. UnitedHealth Group Incorporated (NYSE:UNH)
Forward P/E: 14.45
Number of Hedge Fund Holders: 150
UnitedHealth Group Incorporated (NYSE:UNH) provides healthcare coverage, data consultancy, and software services. It operates through the OptumRx, OptumInsight, OptumHealth, and UnitedHealthCare segments. The company is one of the top cheap stocks to add to your portfolio if you are a beginner.
UnitedHealth Group Incorporated’s (NYSE:UNH) stock is facing troubles, primarily because of the sudden resignation of the company’s former CEO Andrew Witty, the immediate appointment of Stephen Hemsley in his place, and the suspension of the company’s financial outlook for 2025. Although the stock’s price fell, Wall Street remains bullish on UnitedHealth Group Incorporated (NYSE:UNH).
Despite the market sell-off amid the company’s CEO transition and financial uncertainty, analysts believe this is a “time to buy the dip”. On May 14, Piper Sandler analyst Jessica Tassan gave UnitedHealth Group Incorporated (NYSE:UNH) a buy rating, viewing Hemsley’s return as CEO as a positive factor and stating, “We believe Mr. Hemsley is the right person to turn around UNH.”
Tassan said that Hemsley can improve clinical outcomes, identify UnitedHealth Group Incorporated’s (NYSE:UNH) potential to control cost trends, and optimize the healthcare experience.
The same day, Cantor Fitzgerald analyst Sarah James lowered the price target on UnitedHealth Group Incorporated (NYSE:UNH) to $440 from $600 but kept a Buy rating. She said the notable stock drop “is likely the bottom” and presents a “buying opportunity for long-term returns.”
Overall, UNH ranks first among the best cheap stocks for beginners to invest in. While we acknowledge the potential of cheap stocks for beginners, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than UNH but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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