Stocks were mixed in morning trading on Tuesday after the market fell to start the week following a solid Thanksgiving-shortened trading stretch. The selling to start the week came on the back of Chinese lockdown protest fears and comments made by New York Fed President John Williams.
The world’s second-largest economy has already been stuck in a seemingly never-ending loop of stop-and-start zero-covid lockdowns. The ongoing lockdowns continue to weigh on global supply chains and cripple consumer demand in the country.
Investors were perhaps more downbeat that New York Fed President John Williams said on Monday there is “still more work to do” on the interest rate front. That said, traders see the Fed lifting its core rate by 0.50% to between 4.25% to 4.50% at its December FOMC meeting. And Wall Street seems to think it’s properly priced in the Fed’s rate hike efforts, with the 2-year yield at 4.46%.
The fact that Treasury yields remain below their late October/early November highs can be viewed as a positive sign for investors. Plus, Wall Street has a far clearer view of the 2023 earnings outlook.
This backdrop is part of the reason why stocks have surged so far in the fourth quarter. Wall Street is increasingly confident that it has priced in a ton of the earnings and interest rate downside.
Taking this all into account, we used one of our Zacks screens to show investors how to find strong, highly-ranked stocks that are trading for under $10 per share to consider buying heading into December and beyond.
One dollar or less used to be the common threshold for what we call “penny stocks.” Today, the SEC has expanded penny stocks to securities that trade for less than $5 a share. Many investors avoid these stocks because they are speculative in nature.
Meanwhile, penny stocks often trade infrequently and hold wide bid/ask spreads. These stocks also carry many other traits that, in many cases, cause excessive volatility. With that said, some penny stocks perform incredibly well, which helps them remain attractive.
Stocks Under $10
Moving on, let’s briefly discuss the next class of cheap stocks. Stocks that trade in the $5 to $10 range are generally less risky than their penny stock counterparts. Investors might be more likely to have heard of these companies or seen the tickers. They are, however, still inherently more speculative than many other higher-priced stocks.
Investors can obviously find winning stocks for under $10 if they are extremely selective. So today, we narrowed the list of thousands of these more speculative stocks down to a more manageable group of $10 and under stocks that might help boost your portfolio.
• Price less than or equal to $10
• Volume greater than or equal to 1,000,000
• Zacks Rank less than or equal to 2
(No Holds, Sells or Strong Sells.)
• Average Broker Rating less than or equal to 3.5
(Average Broker Rating of a Hold or Better.)
• # of Analysts in Rating greater than or equal to 2
(Minimum of at least two analysts covering the stock.)
• % Change F1 Earnings Estimate Revisions -- 12 Weeks greater than or equal to 0
(Preferably upward earnings estimate revisions, but definitely no downward revisions.)
Here are two stocks out of 50 highly-ranked names trading under $10 a share that made it through the screen today…
Nine Energy Service, Inc. NINE
Nine Energy Service, which lands a Zacks Rank #1 (Strong Buy), is a Houston, Texas-headquartered oil and gas field services company. Nine Energy focuses on onshore completion and production services, targeting unconventional oil and gas resource development. The firm operates across major onshore basins throughout the U.S. and Canada. Nine Energy’s core operations are designing and deploying downhole solutions and technology to prepare horizontal, multistage wells for production.
Nine Energy’s Oil and Gas – Field Services segment ranks in the top 12% of over 250 Zacks industries right now. NINE’s crucial oil segment has continued to gain steam as companies slowly boost drilling and production. Zacks estimates call for its revenue to climb 69% in 2022 and another 25% in FY23. This is projected to see it swing from an adjusted loss of -$2.66 per share to +$0.57 per share this year and then soar 300% to $2.29 a share in 2023. NINE shares have soared over 800% in 2022 and 250% in Q4.
MacroGenics, Inc. MGNX
MacroGenics is a clinical-stage biopharmaceutical company focused on discovering and developing innovative monoclonal antibody-based therapeutics for the treatment of cancer. MacroGenics’ pipeline of product candidates are generated from its proprietary suite of next-gen antibody-based technology platforms. MacroGenics has several promising product candidates and it has entered various strategic collaborations with global pharmaceutical and biotechnology firms.
MacroGenics has topped our adjusted earnings estimates in the last two quarters and it is projected to report a smaller-than-expected loss in FY22. Wall Street is high on MacroGenics for the long-term upside of its monoclonal antibody-based therapeutics designed for the treatment of cancer. MGNX has soared 100% since the start of Q4 and it still trades 85% below its current average Zacks price target.
Both stocks offer solid growth potential. Yet, it isn’t wise to pack your portfolio full of cheap, $10 or less stocks. Still, these stocks are certainly worth further investigation because grabbing a few of the top names from this list might bolster your returns. And let’s not forget that picking a few cheap stocks can also be quite fun.
Get the rest of the stocks on this list and start screening for the best stocks under $10 for yourself. And don't forget to backtest your strategy so you'll know how successful it's been before you put any of your money at risk.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance/.
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