Everyone loves a comeback - especially if you’ve scooped up that stock for a bargain.Īnother way to spot a potential winner is by looking at companies that have major growth potential. Management can change, debt can be restructured or the market could shift in the company’s favor. Executive mismanagement, high debt, pricing pressures and increased competition are some of the factors that spook investors and send a company’s stock sinking.īut the company might be able to turn things around. Companies that have suffered a crisis might see stock prices dip into the low single digits. Huge payoffs for little upfront capital is what makes cheap stocks an attractive investment.Ī strategy for spotting potential in stocks under $5 is to look out for undervalued companies. If that stock price goes up by only $3, you will have made 100% in profit, or $300. Let’s say you invest $300 for 100 shares of a stock trading at $3. While this is an extreme example, it shows that terminology only paints a small part of the picture. Even so, it’s stock regularly trades for several hundred dollars per share and the company is one of the largest retailers in the world. When you do your research, a term like penny stock shouldn’t scare you.įor example, Costco (NASDAQ: COST) is a discount retailer that hosts customers in large warehouses. The Securities and Exchange Commission (SEC) considers stocks that trade under $5 to be penny stocks. Yes, these are often the best cheap stock to buy even if they’re called “penny stocks”. But unlike stocks under $10 or stocks under $20, stocks under $5 are in a separate category. Stocks that trade under $5 are considered cheap stocks. Features to Look for in Stocks Under $5.Best Online Brokers for Stocks Under $5.

Best stocks to buy for beginners 2017