The best stocks under five dollars are a well-established way of investing in the United States, but perhaps not as well known as buying stocks more highly valued by the major market indices.
However, it is worth knowing how they work and which are the most interesting low-priced stocks on the market.
What are penny stocks?
Penny stocks are very low-value stocks, usually less than $5. They are traded on the over-the-counter market and have low market capitalization.
Penny Stocks are typically held by companies that are in development and have limited resources and cash.
In other words, a large majority of these assets will become high-risk stocks.
It is important to know that not all penny stocks are within regulated markets. The level of risk increases the less control there is, i.e., when there is no regulation.
For example, even assuming very high risks, penny stocks listed on the American Stock Exchange (AMEX) or NASDAQ will not be the same as those assets that are outside the main exchanges in over-the-counter markets.
The risk is enormous in the latter case, a threat to be added both to that of the penny stocks as an investment tool and to the investment itself, which always carries an inherent risk.
Having read the above, you will understand that penny stocks are considered suitable for investors with a very high-risk tolerance. We must realize that this is, after all, a complicated investment in which the value of the assets fluctuates a lot. Also, in this investment, additional risks are taken.
Therefore, a risk-averse person would not, or should not, be involved in investments containing these assets.
Best stocks under $5
Let’s take a look at five of the best cheap stocks on the market today. These are assets with a low price and growth potential. But, let’s not forget, also the high potential risk.
Sundial Growers Inc. SNDL
Sundial Growers Inc. SNDL is certainly a penny stock as its price is around $0.50 per share. This is a company with great potential focused on cannabis cultivation. Its focus on the retail market has opened many new doors and growth potential.
As a still illegal product at federal level, bank financing is scarce. Funding can be very attractive in this regard.
Trivago NV TRVG
This is an interesting share that reflects the titles of a travel agency with a strong focus on accommodation. Its business model is differentiated, and you should not forget that the majority shareholder of this company is EXPEDIA, which in turn is one of the recommended providers for Trivago.
In general, it is considered that the growth potential in 2022 is large for this company.
BRF SA BRFS
Some companies of Brazilian origin have had great growth potential in the food industry. This is the case here with a company specializing in packaged foods and, more specifically, poultry meat processing.
This is a potentially risky investment as the value of equities has almost halved by 2021. However, the performance of this asset is very different from others, as many stocks do not generate stable results, but in this case, it does.
The growth potential of the Brazilian economy and the company itself suggests that this is a wise investment within the risk involved.
UWM Holdings Corp. UWMC
Mortgage market movements in the United States have been very complicated in recent months. This company is one of the leading mortgage underwriters in the country.
The company went public at the beginning of 2021. Subsequently, the value of the shares plummeted from an initial offering of around $10 per share to about $4 per share.
However, according to many analysts, even in a deceleration scenario, the company’s earnings per share forecast is interesting. 2022 will not be a great year for this company, but a stock recovery should be a given when interest rates stop rising.
Republic First Bancorp Inc. FRBK
There is a genuine interest in small financial companies from the point of view of investing in cheap assets. Republic First Bancorp Inc. FRBK may be another example.
It is a small regional company that primarily operates in New Jersey and New York. It is considered a low-cost stock with the potential because its share price is less than 12 times their earnings. And it was even recently available at a discount of almost 20% to book value.
It is just one more example of many small financial company stocks that we could also consider for this type of investment.