For January and beyond, find cheap stocks under $10
Wall Street tried to interpret the earnings data that was coming in from large banks and other financial institutions on Tuesday morning. The heartbeat of fourth quarter earnings season is beginning to beat.
The bulls finally pushed the S&P 500 back above its 200-day moving average late last week after December’s CPI data showcased cooling inflation. The benchmark index still hasn’t hit the 4000 level that many traders are looking to as a bullish sign for the market as earnings and, more importantly, guidance roll in for 2023.
U.S. inflation fell to 6.5% in December to match Wall Street expectations and come in below November’s 7.1%. CPI’s latest reading was the sixth consecutive month of deceleration since June, when inflation reached 9.1%. Wall Street responded by betting that the Fed would raise its core interest rate only 0.25 percent at its next FOMC meeting at January’s end, from 77% before the CPI release to 96% Tuesday.
Wall Street is feeling a little more confident that the Fed can ease off the gas pedal and lower rates sooner than expected. The next major catalyst will be how the broader S&P 500 earnings outlook shapes up for 2023 because earnings and interest rates are the two largest factors that impact stock prices.
Investors looking to buy stocks in January and throughout 2023 should consider focusing on stocks that have been able to improve their bottom-line outlooks amid the wider market and economic pullback that’s seen the broader S&P 500 earnings outlook fade.
This all being said, we used one our Zacks screens for investors to show them how to identify Zacks stocks with improving earnings outlooks that trade at under $10 per shares to purchase in January.
Penny Stocks
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. These stocks are highly speculative and many investors steer clear of them.
Penny stocks are also known for their infrequent trading and wide bid/ask spreads. These stocks can also have other characteristics that can lead to excessive volatility. Some penny stocks are still attractive because they perform exceptionally well.
Stocks Below $10
Moving on, let’s briefly discuss the next class of cheap stocks. Stocks trading in the $5-10 range are generally safer than penny stocks. Investors may be more likely have heard of these companies and seen the tickers. However, they are still more speculative that many higher-priced stock options.
If they’re very selective, investors can easily find winning stocks under $10. Today, we have reduced the number of speculative stocks to a manageable list of 10 and under stocks that could help you boost your portfolio.
Screen Parameters
• 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 Sales.
• Average Broker Rating less than or equal to 3.5
(Average Broker Rating for a Hold or Higher.
• # of Analysts in Rating greater than or equal to 2
(Minimum of two analysts should cover the stock.
• % Change F1 Earnings Estimate Revisions — 12 Weeks greater than or equal to 0
(Preferably, upward earnings estimate revisions. But definitely not downward revisions.
Here are some examples Two Stocks from the Near 60 highly-ranked names trading under $10 a share that made it through the screen today…
ADT
ADT (ADT) is a home and business security solutions provider. ADT claims that it protects more than 6 million customers, which includes over 160 Fortune 1000 companies. ADT is also active in smart home and rooftop solar installation.
ADT, which currently trades for just under $10 per share, lands a Zacks Rank #2 (Buy) at the moment and an overall “A” VGM grade in our Zacks Style Scores system. ADT’s 2022 revenue is projected to climb 20% to $6.34 billion to help it swing from an adjusted loss of -$0.25 per share to +$0.51 a share. ADT’s 2023 revenue growth is expected to continue.
ADT’s dividend yields 1.4% at the moment. ADT shares have increased 23% and 40% respectively in the past year to top the industry and blow away the market. ADT shares are trading at a significant discount to its own highs as well as its industry’s at 13.6X forward 12-month earnings.
Robinhood Markets
Robinhood MarketsHOOD) Robinhood is an online trading platform that was founded in 2021. Robinhood, a mobile-first platform that allows users to trade and invest on the go, has no minimum account requirements. Robinhood’s stock price fell as traders returned to normal life following the pandemic.
Robinhood is actively expanding its financial-investing service offerings. It currently has more than 12 million active monthly users. Zacks estimates for HOOD call for a reduction in its adjusted loss of -$7.49 per shares to -$1.12 ashare in FY22. The firm’s FY23 loss is projected to be -$0.25 per Share. Fiscal 2023 revenue is expected to rebound to exceed its FY21 total.
HOOD’s bottom-line outlook keeps improving to help it grab a Zacks Rank #2 (Buy) right now. Robinhood also belongs to the Financial – Investment Bank section, which currently ranks in the top 17% among all Zacks sectors. HOOD currently trades 20% lower than its Zacks average price target. Robinhood shares are up 16% so far in 2023.
Both stocks have solid growth potential. Yet, it isn’t wise to pack your portfolio full of cheap, $10 or less stocks. These stocks are still worth investigating as you might be able to grab some of the most popular names on this list. And let’s not forget that picking a few cheap stocks can also be quite fun.
Take the rest of this stock list and start looking for the best stocks for under $10. Don’t forget about backtesting your strategy before you risk any money.
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Disclosure: Zacks Investment Research officers, directors and employees may have sold or bought short securities. They also might own long and/or short positions in the options mentioned in this material. A related investment advisory firm might own or have sold short securities, and/or may hold long or short positions in options mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance/.
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ADT Inc. (ADT) : Free Stock Analysis Report
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