Low-priced stocks can present immense opportunities if purchased at the right time. Several factors affect stock prices, including broader market disruption, negative news, bad quarters, or temporary product failures. Even slight delays in product launches can knock down stock prices, as can technical trading run amok, presenting a great opportunity for buyers who know when to pounce on declines.
Low-priced stocks do not necessarily equate to low-market cap companies and greater risk, as the stock price is a combination of number of shares in circulation and market cap. Nonetheless, low-priced stocks may also have an undeserved reputation among inexperienced investors as being too volatile to invest in.
In this article we will share 5 of the best under-$5 stocks which you can buy now. These stocks have huge potential for growth in the future, which is why they’re extremely popular among the collection of top hedge funds in our database, which includes many of the 140 Biggest and Most Famous Activist Hedge Funds in the world. Read on to find out what stocks made the list.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).
5. Genworth Financial Inc (NYSE:GNW)
Genworth Financial Inc (NYSE:GNW) is a Fortune 500 insurance company. Back in October, China Oceanwide Holdings Group Co. agreed to buy Genworth Financial Inc for $2.7 billion in cash. China Oceanwide pledged to help Genworth tackle its debt and strengthen its life insurance operations. The deal is expected to be completed by mid-2017. Genworth’s stock is presenting a very nice spread from its proposed purchase price and its current price, as shares have actually declined substantially since the deal was announced. 25 hedge funds in our database reported ownership of Genworth Financial Inc(NYSE:GNW) as of the end of the fourth quarter, up from 18 funds a quarter earlier, as multiple hedge funds appear to like the deal’s chances (or the stock price in general, which is also well below the company’s expected value now).
4. Zynga Inc (NASDAQ:ZNGA)
California-based mobile and social game developer Zynga Inc (NASDAQ:ZNGA) has been on a decline for years, but analysts expect better times ahead. In the fourth quarter, the company’s revenue came in at $190.5 million, a 3% increase on a year-over-year basis, and above the high-end of its guidance. Operating expenses decreased by 9% year-over-year, while operating cash flow totaled $27.7 million, up by $24.3 million year-over-year. Zynga’s games like Words With Friends, Dawn of Titans and Zynga Poker have achieved a lot of success, though the company has struggled to build out a more robust stable of successful titles. Of the 742 hedge funds tracked by Insider Monkey which filed 13Fs for the December quarter, 27 held long positions in Zynga Inc (NASDAQ:ZNGA) at the end of 2016. Last month, Wedbush reiterated an ‘Outperform’ rating on Zynga shares, with a price target of $4.25.
On the next page we will reveal our top three stocks which you can buy for under $5 right now.