The best cheap stocks to buy now.
When 2020 began, the stock market was nearly 11 years into the longest bull market in U.S. history, and investors had to hunt a little harder than usual to find cheap stocks. While the fact that a given share trades for less than $10 by no means implies it's a steal, the rise of free trading apps like Robinhood has made investing more accessible to millions of previously excluded Americans. Whether you don't have much to invest or you just enjoy the psychological allure of a low-priced stock, here are nine of the best cheap stocks to buy under $10. Fair warning: Some (but not all) of these nominally cheaper stocks come with higher-than-average risk.
Sirius XM Holdings (ticker: SIRI)
Since Sirius and XM Radio merged in 2008, the combined Sirius XM Holdings has enjoyed a near-monopoly on satellite radio. Sirius built on that with the 2018 acquisition of Pandora, helping to reignite rapid revenue growth; its audio products now reach more than 100 million people. Although Netflix (NFLX) gets all the Wall Street love for its growing stream of recurring revenue, Sirius' situation is pretty rosy, too -- SIRI added 1.1 million subscribers in 2019 alone, bringing its total paying subscribers to roughly 30 million. The company's savvy strategy of partnering with auto manufacturers to pre-install SiriusXM in new models should help steadily grow the business.
The fact that shares of home security company ADT haven't been considered safe by Wall Street since its 2018 initial public offering isn't mere irony to ADT's IPO investors. After the coronavirus-inspired stock market sell-off, shares are down about 75% from their $14 offering. That said, ADT wouldn't be one of the best cheap stocks to buy today if it didn't have a silver lining. First, analysts expect recent losses to turn to profits, and the stock now trades for under four times expected 2020 earnings. Also, ADT is refinancing debt at more favorable rates, while focusing on growing areas like automation, the smart home and mobile security.
In sharp contrast to ADT, which, as one of the more contrarian names on this list, is coming off a lousy 2019, ZNGA shares rallied last year, adding more than 50%. Shares still trade comfortably below double digits though, and Zynga's portfolio of popular games, combined with some truly impressive recent growth, make it one of the best cheap stocks to buy under $10. Last quarter, the social gaming developer behind franchises like Words With Friends, Zynga Poker, CSR Racing and FarmVille set new company revenue records (up 48% overall) and quarterly bookings (surging 59%). While growth is likely to decelerate quickly from such unsustainable levels, analysts still expect double-digit revenue growth in 2020. Still, ZNGA is standing up remarkably well, especially in the COVID-19 era, as people increasingly turn to mobile devices for entertainment.
Century Casinos (CNTY)
The next of the best cheap stocks to buy below $10 is the second-smallest publicly traded resort and casino company on Wall Street. Century Casinos, a sub-$50 million gaming company based in Colorado, owns and operates racetracks and casinos in the U.S., Canada and Poland, operating five ship-based casinos to boot. There's no way around one thing: The coronavirus pandemic has severely hurt CNTY's business and its stock price. That said, at current levels, the stock trades at slightly above 1 times forward earnings. Although analysts definitely need to revise those estimates lower, the fact remains that if CNTY can survive this unique period, the stock has enormous rallying potential. A December acquisition of three casinos, although not ideally timed, still makes CNTY's longer-term revenue and earnings prospects all the greater.
Nokia Corp. (NOK)
Another of the rare contrarian companies on this list, Nokia isn't a stock for everyone -- the brand itself is a bit culturally antiquated, and no one really expects revenue growth to top 3% to 4% over the next couple of years. That said, Nokia's expected earnings growth is impressive, with Wall Street looking for an 8% bump in 2020 and roughly 30% profit growth in 2021. Cheap stocks to buy, especially stocks to buy for under $10, don't often come in the form of well-established global companies worth about $15 billion. But Nokia, the Finnish communication equipment giant, is one of the rare exceptions. Sales have grown 14% annually for the last five years. NOK may end up one of the 5G stocks to watch in the coming years, benefiting by helping telecoms upgrade their networks. Nokia pays a hefty 8% dividend as well.
Nomura Holdings (NMR)
Japanese investment brokerage Nomura Holdings offers many of the same products and services that a Goldman Sachs (GS) would. That means asset management, underwriting, structured products and trading -- the whole nine yards. While shares currently trade for less than $4, the fact that Nomura made the cut as one of Wall Street's best cheap stocks to buy doesn't mean it runs a rinky-dink business -- NMR is a $12 billion behemoth, Japan's fourth-largest publicly traded financial institution available on mainstream U.S. exchanges. What makes NMR stock a buy is its attractive valuation (eight times forward earnings), high dividend (7%) and relative stability compared with the market (shares are roughly flat in the last year).
Celsius Holdings (CELH)
One of the smallest companies named as one of the best cheap stocks to buy under $10 is Celsius Holdings, a roughly $300 million Florida company that makes health drinks under the Celsius brand. The company currently offers 14 flavors, some sparkling and some carbonated, across two different products. Checking all the boxes for the consumer trend toward more health-conscious living, Celsius-brand drinks are gluten-free, soy-free, kosher, non-GMO and free of preservatives and high fructose corn syrup. Sales have soared from $14.6 million in 2014 to $75 million in the last year, and shares have also run up from under $1 to over $4 in that time. Analysts expect this high-risk, high-reward play to grow in revenue by about 50% in 2020, and its $10 price target implies over 100% upside. That's a bit optimistic, but CELH could indeed evolve into a mergers and acquisitions target.
SmileDirectClub, a direct-to-consumer provider of clear aligners, went public in fall 2019. Unfortunately, the $23 IPO was simply too aggressive and shares quickly corrected, falling all the way to the $7.50 range before halting their slide. Before the bottom fell out of the market, it seemed that level would be the nadir, as SDC recently announced a major, exclusive partnership with Walmart (WMT) to sell a line of oral care products like electric toothbrushes, teeth whitening kits, flossers and an ultraviolet-powered product cleaner for things like aligners, mouthguards, retainers and more. Analysts expect explosive sales growth to continue, although the company is likely a couple years from profitability. This stock may be worth the stretch for aggressive investors; the company claims its aligners can work in just six months and compete with traditional braces. A price target above $12 implies roughly 200% upside.
FS KKR Capital Corp. (FSK)
The last and arguably most complex name on this list is a business development company: FS KKR Capital. BDCs were created by the U.S. Congress in the 1980s to increase business investment and boost liquidity. Like most BDCs, FSK relies on a degree of leverage, which allows it to then invest in more income-producing debt securities in small and midsize U.S. businesses. This is great for income investors, and they probably won't mind FSK's 32% dividend. FSK's debt is quite reasonable at just 0.78 times equity, and shares still trade for just 0.3 times book value. A string of insider buys in March 2020 (as the market severely tanked) shows that those running the company believe in it enough to put their own money behind it.
The best stocks to buy that are less than $10:
-- Sirius XM Holdings (SIRI)
-- ADT (ADT)
-- Zynga (ZNGA)
-- Century Casinos (CNTY)
-- Nokia Corp. (NOK)
-- Nomura Holdings (NMR)
-- Celsius Holdings (CELH)
-- SmileDirectClub (SDC)
-- FS KKR Capital Corp. (FSK)
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