Nine Promising Stocks You Can Buy for Under $5

As of the first week of October 2023, there were 1968 securities listed on major U.S. exchanges trading at or below $5 per share. It can seem overwhelming to sift through such a mountain of low-priced securities to find the proverbial needle in a haystack. That's why US News collected 9 best cheap stocks.

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Most companies that find themselves in penny stock territory have seen something go horribly wrong. It often happens that the business model has collapsed, management has made serious mistakes, or the balance sheet has deteriorated. In the context of a falling stock market and the possible beginning of the formation of another “bear” market, caution is justified.

However, even in these uncertain times, there may be good, reasonable deals among cheap securities. These nine penny stocks have the potential to deliver strong returns in 2024:

• Banco Santander SA (SAN)
• Ambev SA (ABEV)
• Enel Chile SA (ENIC)
• B2gold Corp. (BTG)
• Rocket Lab USA Inc. (RKLB)
• JetBlue Airways Corp. (JBLU)
• Olaplex Holdings Inc. (OLPX)
• Grupo Aval Acciones y Valores SA (AVAL)
• Perimeter Solutions SA (PRM)

Banco Santander SA (SAN)

Banco Santander is a large banking company based in Spain. In addition to its Spanish operations, Banco Santander has a significant presence in Latin America. This makes Santander an ideal portfolio addition for investors looking to gain exposure to Latin America's diverse and dynamic economies. Investors are punishing Santander in terms of its valuation due to its previous poor performance. The 2008 financial crisis hit Spanish banks when Spain's housing market collapsed. Continued economic weakness in Europe throughout the 2010s did not help the situation.

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While the European economy continues to face serious structural challenges, Santander's other divisions are performing better. One striking example is Santander Mexico. The Mexican economy is experiencing a manufacturing boom as multinational companies such as Tesla Inc. (TSLA), are building new Mexican factories. SAN shares are up 25,8% this year through Oct. 5, but their valuation remains very high at just 5,3 times forward earnings.

Ambev SA (ABEV)

Ambev is the South American division of global brewing giant Anheuser-Busch InBev SA/NV (BUD). AB-InBev had a challenging 2023 due to excessive debt and various marketing issues with the Bud Light brand. Fortunately, these problems do not bother its South American subsidiary Ambev. In fact, Ambev has a net cash position and has avoided the same competitive pitfalls that crippled its parent company.

Argentina, Ambev's key market, holds presidential elections on October 22 and polls show the current socialist leader is likely to be replaced by a pro-business candidate. This could lead to both a higher valuation and an improvement in Ambev's business prospects. Additionally, the company's shares are very cheap for such a stable company, trading at 12,6 times forward earnings. Additionally, Ambev offers a dividend yield of 5,8%. This should be a great entry and valuation point for this powerhouse beer company.

Enel Chile SA (ENIC)

Enel Chile is a major Chilean electricity producer and distributor. Over the past few years, the company's stock has been hit by a "perfect storm": drought, an economic downturn and unfavorable policies in Chile have sent shares down sharply. However, this year the situation is changing for the better. With improved weather and political conditions in Chile, ENIC shares rose to $2,84 on October 5th. However, the company's stock still has room to grow, as it trades at 7,7 times current earnings estimates.

It's not just current earnings that make Enel Chile attractive. More broadly, Chile is a world leader in green energy thanks to its large hydropower sector and favorable geography. Northern Chile has some of the highest levels of solar radiation in the world, meaning solar power plants are extremely efficient and cost-effective. On the demand side, Chile is set to see an economic boom thanks to huge reserves of copper and lithium, which are used in the batteries needed for the electric vehicle revolution.

B2gold Corp. (BTG)

For a while, it seemed like gold was gaining momentum. The price topped $2000 an ounce as investors flocked to gold for a safe haven amid geopolitical tensions and a bleak macroeconomic backdrop. However, recently the gold market has been affected by rising interest rates. With risk-free interest rates above 5%, holding gold becomes less profitable and some investors appear to be moving out of precious metals and into fixed income securities. After falling sharply in September, gold fell to around $200 an ounce.

Gold's fall has seen shares of mining company B2gold fall by about 30% recently. However, given the instability of the global economy, it is not difficult to assume that gold will soon regain its popularity. At the same time, B2gold provides investors with the opportunity to diversify their investments in this metal, as it has mines in Mali, Namibia and the Philippines. The company's shares trade at 9,9 times forward earnings and have a dividend yield of 5,5%.

Rocket Lab USA Inc. (RKLB)

Rocket Lab operates in the rapidly growing field of launch services and solutions for space systems. When industrial companies or defense agencies need to launch objects such as satellites into space, they can hire Rocket Lab to design and plan the mission to deliver the payload into orbit or to its destination. Although the industry is speculative and in the early stages of commercialization, Rocket has already proven that its Electron launch vehicles and Photon satellite platforms are in significant demand. Thus, this year the Rocket company plans to receive more than $250 million. And in 2025, according to analysts, this figure will exceed $600 million, and in the same year the company will reach profitability.

JetBlue Airways Corp. (JBLU)

The tourism industry has seen a huge boom over the past 18 months as the global economy recovers from the pandemic. However, in the last few months, airlines in particular have been faced with a large pot of turbulence. A rebound in oil prices will mean airlines will have to spend much more on jet fuel. Labor tensions are forcing airlines to sharply increase wages. And inflation and weakening consumer purchasing power are likely to slow traffic growth. However, airline stocks like JetBlue now fully reflect these problems. What's more, with JBLU stock down 32% over the last six months and a strong short interest in the stock, it may be poised for a major rally.

Olaplex Holdings Inc. (OLPX)

Olaplex is a company specializing in the production of beauty and hair care products. Its innovation was that it sold products directly to consumers rather than relying solely on low-margin third-party distribution channels. As direct-to-consumer retail boomed during the pandemic, so did companies like Olaplex. However, the situation quickly changed direction. The reopening of the global economy has made it harder for digital brands to maintain their growth rates, and Olaplex has made a number of mistakes in its latest marketing efforts. However, with the company's shares down about 80% over the past year, the situation has gotten out of control. The company remains profitable and trades at just 10,3 times forward earnings. Barclays analyst Lauren Lieberman upgraded the company's stock rating in early October, citing business stabilization.

Grupo Aval Acciones y Valores SA (AVAL)

Grupo Aval is one of the largest financial groups in Colombia. Aval, along with two other Colombian banks, account for about 70% of the domestic market. This concentration means that competition is limited and the industry is highly profitable. Aval's founder and main shareholder, Luis Carlos Sarmiento, has a net worth of about $7 billion and has become one of the richest people in Colombia, primarily due to Aval's success.

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Last year, Colombian stocks in general and Aval in particular fell amid a leftist shift in government and a difficult macroeconomic environment. However, political risks have diminished as the president has seen his position quickly lose steam in Congress. From an economic point of view, things are looking better. Colombia's main export, oil, has recovered. And as inflation declines, Colombia's central bank should begin a massive cycle of rate cuts. Investors haven't put all this good news together just yet, and Aval shares are still trading below their March 2020 lows. This discount represents a great opportunity.

Perimeter Solutions SA (PRM)

Perimeter Solutions is a company with a unique operating niche. It is a leader in selling products used in firefighting, such as fire extinguishing agents and firefighting foams. The company is also engaged in the production of lubricants. Perimeter went public through a merger with a special purpose acquisition company (SPAC) and was initially popular because deal insiders such as William Thorndike and Nicholas Hawley are respected figures in the value investing community.

However, like many other SPACs, Perimeter got off to a rocky start. For example, a wet spring season significantly reduced fire activity this year, resulting in reduced sales of Perimeter products. However, investors should view the company on a multi-year basis as weather patterns should even out between favorable and more destructive fire seasons over time. Perimeter has a large market share across most of its core products, so it will only be a matter of time before the company recovers from its current lows.

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