For many investors, it's just more fun to buy 'cheaper' stocks, i.e. stocks that are actually priced under $20 a share.
I get it. You can buy more shares. There's something about owning 100 shares of a company versus just a handful even if you're spending the same amount of money to get the shares.
But with most of the major stock indices hitting new all-time highs and stock splitting being out of favor with most companies, many of the hottest stocks like Google, Priceline and Tesla, all trade much higher than $20 a share. They're all trading above $200 a share.
Does that mean that an investor who wants to own a hot stock with good fundamentals but which trades under $20 is doomed to sit on the sidelines until a big correction comes?
There are plenty of good quality names still available but you have to dig a little deeper because they're not the well-known bigger cap names. And that's where the Zacks Rank can help.
Use the Zacks Rank to Find Stocks
I did a screen for companies with a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy), which means the earnings outlook is solid, and also looked for companies which traded under $20.
That search yielded 308 stocks but that list is far too unwieldly to be usable. I had to narrow it further.
From that list, I narrowed it down by looking for companies with double digit earnings growth and respectable P/Es.
The following 3 companies have strong earnings growth and solid fundamentals and they're also trading at or near their 52-week highs.
And you can buy each one of them at under $20.
Now that's HOT!
3 Sizzling Growth Stocks Under $20
1. The Dixie Group
2. Strategic Hotels & Resorts
3. Hawaiian Holdings
1. The Dixie Group, Inc. (DXYN)
The Dixie Group makes high-end carpets and rugs for residential and commercial customers through the brands Fabrica International, Masland Carpets, Dixie Home, Masland Contract and Avant.
High end products are booming thanks to a resurgence in home prices and new stock market highs. Rising asset prices are putting more money into consumers' pockets.
On Feb 19, Dixie reported fourth quarter results and beat the Zacks Consensus for the 4th quarter in a row. Sales soared 34.7% year over year even though the overall carpet market only saw mid-single digit gains. Residential was up 30.5% while commercial rose 45.5%.
But what about the weather? The company did see significant weather-related issues. January sales were up just 2.3% but February sales through Feb 19 had gained 16.2%.
Forward P/E = 21.8
Expected 2014 earnings growth = 16.1%
Expected 2015 earnings growth = 45.8%
Zacks Rank #1 (Strong Buy)
2. Strategic Hotels & Resorts, Inc. (BEE)
Strategic Hotels is a real estate investment trust (:REIT) which owns 18 high-end hotels and resorts in the United States, Mexico and Europe under such brands as the Four Seasons, Ritz and Fairmont. It has been trying to find a buyer for its Marriott Grosvenor Square Hotel and when it does it will exit the European market to focus solely on North America.
Strategic is a diverse combination of resorts and urban hotels. The resorts face little threat from new supply due to locations on the ocean or in the mountains where further growth is hindered. In the urban areas, Strategic has been facing the onslaught of new hotel properties, especially in Chicago.
In the fourth quarter, however, Strategic posted 9.6% RevPAR growth, far above the U.S. industrywide average for the quarter of just 5.1%. Occupancy rose as luxury travel continues to remain strong.
Forward P/E = 17.6
Expected 2014 earnings growth = 37.7%
Expected 2015 earnings growth = 15.3%
Zacks Rank #2 (Buy)
3. Hawaiian Holdings, Inc. (HA)
Hawaiian Holdings is the parent company of Hawaiian Airlines, which is the largest and longest-servicing airlines in Hawaii. It offers non-stop service from Hawaii to the U.S. mainland as well as Japan, South Korea, Taiwan, Australia, New Zealand, American Samoa and Tahiti.
It hopes to begin non-stop service to Beijing in April 2014.
2014 will be a year with less capacity growth as the company focuses mainly on existing routes and North America. But the company will be adding daily non-stops to Maui from Los Angeles starting in July 2014.
Consumers are traveling again, especially from Asia. Hawaiian is tapping into the demand.
Forward P/E = 11.7
Expected 2014 earnings growth = 27.3%
Expected 2015 earnings growth = 10.7%
Zacks Rank #2 (Buy)
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Strategic Hotels & Resorts, Inc. is a real estate investment trust (:REIT) which owns and provides value-enhancing asset management of high-end hotels and resorts in the United States, Mexico and Europe. The Company currently has ownership interests in 18 properties with an aggregate of 8,271 rooms and 851,600 square feet of meeting space.
DIXIE GRP INC (DXYN): Free Stock Analysis Report
HAWAIIAN HLDGS (HA): Free Stock Analysis Report
STRATEGIC HOTEL (BEE): Free Stock Analysis Report
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