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  • Writer's pictureJohn Tasci

10 Best Stocks Under $5 to Buy Now

Updated: Oct 2, 2022



If you want to invest in stocks that can multiply your gains you need to look for cheap stocks. With cheap stocks comes a low market cap and high risk but lots of growth potential. Every company at one point was small and the biggest gainers are the early investors. Then gains slow down as the company matures and ordinary investors can't make as much money.


Some big-name companies that used to be penny stocks include:


Apple - $0.14 (IPO Price after stock splits)

Amazon - $1.27 (IPO Price after stock splits)

Microsoft - $0.10 (IPO Price after stock splits)


Current prices


Apple - $162.50 (116,071% increase)

Amazon - $2,863.95 - (225,507% increase)

Microsoft - $305.98 - (305,980 %increase)


These stocks currently the highest market cap but were once small competitors. Now, this doesn't mean every small business turns into a huge mega-cap company. More than 90% of these stocks go bankrupt so it carries a lot of risks. Make sure to only put a small portion of your money into penny stocks.


Penny stocks don't necessarily mean the stock is trading below $1, but it refers to companies trading at $5 or below.


With all that being said here are the 10 best stocks under $5 with a lot of growth potential!


1) Kosmos Energy Ltd. (KOS)


Price - $4.33

Market Cap - $1.96 Billion


Kosmos Energy is a leader in deep-sea exploration and production focused on meeting the world's growing energy needs. They have diversified production, world-class gas development, and value creation opportunities from exploration in the proven basins where they operate.


Kosmos Energy operates in the oil and gas industry which has experienced strong support due to oil prices rising drastically. Crude Oil currently trading at $86.50 has almost quintupled from April 2020 to January 2021.


Crude oil was able to increase in 2021 due to loosened COVID-19 restrictions and a growing economy which led to demand rising faster than the available supply. Kosmos Energy will continue to benefit from this because they will be able to take advantage of the high prices of oil and continue producing to create better earnings. Crude oil prices also don't seem to be slowing down so Kosmos Energy should benefit from high oil prices.


Income Statement 2020

Revenue

​$896.20 Million (-40.65% Growth YoY - due to COVID-19)

Gross Profit

$557.72 Million

Operating Income

-$289.82 Million

Net Income

​-$411.59 Million

2020 was not the best year for Kosmos Energy as it was distressed due to the COVID-19 boom in oil prices which reduced demand and affected its business. Although 2020 was a bad year, Kosmos Energy was able to survive and increased from lows of $0.61 (2020) to $2.50 (Jan 1, 2021) and currently trading at $4.33 (up 13.35% year to date).


Kosmos Energy is a good buy as it will take full advantage of the spike in crude oil and continue to recover from COVID-19.



2) ContextLogic Inc. (WISH)


Price - $2.31

Market Cap - $1.49 Billion


ContextLogic Inc. is the parent company of Wish.com providing e-commerce services. In 2018, Wish was the most-downloaded e-commerce application worldwide. Wish like other e-commerce platforms offer express shipping (Wish Express), similar to Amazon Prime and Walmart Free 2-Day Shipping. Customers receive their items within 5-days, with no minimum spend or monthly membership.


E-commerce Industry Growth Projections


​Year

Ecommerce Site Sales (billions)

% Change

2021

$1,582.95

17.1%

2022

$1,772.91

12.0%

2023

$1,982.11

11.8%

2024

$2,212.03

11.6%

2025

​$2,444.30

10.5%

Statistics provided by eMarkerter, July 2021



E-commerce is a large industry and is still expected to grow by double digits until 2025. This opens up a large addressable market for Wish and the small market cap they currently have represents the potential for lots of growth.


Wish stock hasn't seen the light of day since its IPO. Wish IPO priced in at $24 on Dec 25, 2020, and has experienced a steep downhill drop of 90.19%.


The selling has been way overdone and Wish should be back on track, the only problem it needs to solve is to have a clear plan for profitability. With the current outlook, revenue is rising, but costs are also rising a lot causing it to be less profitable.


Income Statement 2020

Revenue

$2.514 Billion (33.67% Growth YoY)

Gross Profit

$1.594 Billion

Operating Income

(-$631) Million

Net Income

(-$743) Million

Growth remained strong, and with Wish expecting 2022 to be its final year of loss, before turning a profit of $56 million in 2023 (projections), it remains a cheap option for the long term. Even being unprofitable at the moment, the stock is too oversold to not be considered a great penny stock.


ContextLogic Inc. is a great buy and when the company becomes profitable it will be able to surpass past highs.



3) Skillz Inc. (SKLZ)


Price - $4.32

Market Cap - $1.76 Billion


Skillz is a competition-based online mobile multiplayer video game platform integrated into both iOS and Android. Skillz is great for developers as they can earn more using this platform.


Important Developer Stats (provided by Skillz)

  • 63+ minutes - average time players spend daily on Skillz is TWICE the industry average

  • 4x Revenue - Partnered creators see up to 4X growth in revenue after joining the Skillz platform

  • 24% Retention - Skillz games have 24% more users playing at least 30 days than the industry average

Skillz makes money by users paying entry fees to play games for a chance to win cash and Skillz generates revenue by taking a cut. Developers of games receive a 50% share of revenue and Skillz earns the remaining 50% for being the host. The margins are high for Skillz and with the 90% downfall since February Skillz will be looking to make a bounce back.


Income Statement 2020

Revenue

$230.12 Million (91.97% Growth YoY)

Gross Profit

$217.83 Million

Operating Income

(-$99.62) Million

​Net Income

(-$145.51) Million

Revenue growth is very strong and gross profit is very high for Skill, meaning that it doesn't cost much to generate tons of revenue. As the platform continues to grow with monthly active users increasing each quarter, the stock will rebound and revive itself to become a stronger company.


Skillz is a buy because of accelerated growth and high-profit margins while offering great services. The stock is also clearly way undervalued making it even a better buy.



4) Paysafe Ltd. (PSFE)


Price - $3.42

Market Cap - $2.48 Billion


Paysafe is a merchant service provider that provides businesses and individuals with the tools and requirements to accept credit, debit, and other electronic payments for transactions made. presently.


Paysafe is mostly used for businesses with high transaction volume as it is not ideal for small businesses. Paysafe does the behind-the-scenes action to ensure that credit card transactions are successful. Paysafe charges transaction fees for payment processing services online, in-person, and mobile transactions for a business.


What makes Paysafe a great stock to buy now is the valuation is very reasonable. This has been an ongoing theme in this article, all the penny stocks mentioned are undervalued which makes them good investments.


Paysafe reached $19.57 back in January 2021 then tumbled 80% to $3.42. This stock represents a lot of opportunities as they operate their services in multiple foreign countries.

Roughly 75% of online gambling operators use Paysafe for processing payments including Draftkings, William Hill, Betfair, Bet365, Golden Nugget Online Gaming, PokerStars, and more.


Paysafe revenue by segment includes:

  • Integrated Processing

  • Digital Wallet

  • eCash Solutions

  • Intersegment

The strongest segment for revenue is integrated processing, with $176.9 million in revenue in Q1, while the inter-segment produced negative revenue, and eCash Solutions had the highest revenue growth rate.


Income Statement 2020

Revenue

$1,426.49 Million (0.59% Growth YoY)

Gross Profit

$891.67 Million

Operating Income

$19.68 Million

Net Income

(-$126.72) Million

2020 wasn't the best growth year for Paysafe due to Covid-19 slowing business, but Paysafe trading at a 1.63 PS Ratio puts it in an extremely undervalued position which makes it a great buy.



5) Tilray Inc. (TLRY)


Price - $5.48

Market Cap - $2.56 Billion


Tilray is a Canadian pharmaceutical and hashish employer included withinside the United States with number one operations founded in Toronto, Ontario. The employer additionally sells leisure marijuana in Canada, which changed into legalized in 2018, and sells clinical marijuana globally.


Tilray currently can't sell cannabis in the U.S. because it remains illegal under federal law. Although it's currently illegal, states have been pushing to legalize marijuana. 18 states have legalized marijuana for recreational use, as of January 2021.


With Democrats controlling Congress in 2021, some sort of action was expected to legalize marijuana federally. Marijuana remained in the spotlight with lawmakers making multiple attempts to push forward legalization but no changes were taken into effect.


Although legalization of marijuana is not in the near term, when it does become legal Tilray will take full advantage and become a top-performing stock. The early investors will be the ones benefiting from the gains since they took the risk early.


Income Statement 2021

​Revenue

$513.09 Million (26.59% Growth YoY)

​Gross Profit

$123.18 Million

Operating Income

​(-$132.17) Million

​Net Income

(-$367.42) Million

Even without the legalization of marijuana in the United States, Tilray is still growing and is one step away from entering the U.S. market which will increase the stock drastically.



6) Invesco Mortgage Capital Inc. (IVR)


Price - $2.59

Market Cap - $807.41 Million

Dividend Yield - 13.90%

P/E Ratio - 8.01


Invesco Mortgage Capital Inc. is a real estate investment trust(REIT). REITs are companies that own or finance real estate that generates income in a variety of real estate sectors. Invesco Mortgage Capital acquires, funds, and manages residential and commercial mortgage-backed securities and mortgage loans.


This stock offers a dividend of a whopping 13.90% meaning you will earn 13.90% cash just by holding the stock. Dividends are paid every quarter, so this could be side income for you while holding your equity.


The company is also undervalued currently trading at a P/E ratio of 8.01 and looks to recover from a sudden loss from COVID-19. After steadily holding the price between $15-17 for 5 years, the stock fell to $1.95 in one month. Invesco Mortgage Capital is currently holding a price range between $2-4.


Income Statement 2019

​Revenue

$410.28 Million

​Gross Profit

$410.28 Million

Operating Income

$364.1 Million

Net Income

$319.68 Million

The income statement provided is 2019 because 2020 annual reports have incorrect information and it was a fluke year due to the pandemic, but they are rebounding as they posted a profit last quarter. If they return to the same levels as before this stock will be ready to take off and you'll enjoy a very high dividend in the meantime!



7) FuelCell Energy Inc. (FCEL)


Price - $3.68

Market Cap - 1.35 Billion


FuelCell Energy, Inc. is a global leader in the design, manufacture, operation, and maintenance of ultra-clean, efficient and reliable fuel cell power plants.


Fuel cells are a clean way to generate energy and as the world continues to move forward with clean energy, fuel cells are a great choice. Compared to conventional gasoline vehicles, fuel cell vehicles can even reduce the amount of hydrogen generated from natural gas by up to half and by 90% if hydrogen is generated from renewable energies, such as renewable energy sources. such as wind and sun.


FuelCell Energy has had a long history in the stock market as it had its IPO in 1992 pricing at $216.00. The current price is much lower due to stock splits so it's hard to tell what the true price is compared to the past.


Income Statement 2021

Revenue

$69.59 Million (-1.81% Revenue Growth (YoY)

Gross Profit

(-$15.64) Million

Operating Income

(-$64.9) Million

Net Income

​(-$101.06) Million

Revenue has decreased steadily in the past years, but FuelCell has managed to pop after major crashes. October 2019 it was trading at around $0.30 and has increased up to $26.20 on February 2021, then downslope to the current price of $3.68.


The stock currently doesn't show any signs of support so I wouldn't advise buying it at the current price, but if it were to dip under $1 then Fuel Cell could be a great buy because the company provides service which benefits the world with cleaner energy.



8) UP Fintech Holding Ltd (TIGR)


Price - $3.85

Market Cap - 582.45 Million

P/E Ratio - 21.73


UP Fintech Holding, known as "Tiger Brokers" in Asia, is a leading online brokerage firm focusing on global investors. Tiger Brokers allows you to trade stocks from Singapore, the United States, Hong Kong, Australia, and China.


Tiger Brokers has over 1.7 million customers worldwide with trading volume exceeding $92.6 billion in Q3 2021.


Tiger Broker's main source of revenue is trading fees:


Fees for Singapore stocks: 0.04% per trade

Fees for US stocks: USD $0.005 per share, with min. $0.99 per trade

Fees for HK stocks: $0.03% per trade, with min. of HK $7

Fees for AU stocks: $0.03% per trade, with min. of AU $2

Fees for China A-shares: 0.03% per trade, with min. of CNH $7


Tiger Broker is in a tight spot as it has many competitors including Robinhood, Ameritrade, E*Trade, and many more.


Although there is lots of competition, the company has proved to be great by posting very strong earnings.


Income Statement 2020

Revenue

$128.39 Million (135.32% Revenue Growth (YoY)

Gross Profit

$65.71 Million

Operating Income

$21.03 Million

Net Income

$16.06 Million

While posting significant revenue growth Tiger Broker has also accomplished profit which is rare for growth stocks and makes it a great buy as the company is severely undervalued and crushed from its highs of $37 to now falling 90%.



9) Ambev ADR Representing One Ord Shs (ABEV)


Price - $2.77

Market Cap - 43.79 Billion

P/E Ratio - 14.72

Dividend Yield - 1.37%


Ambev is a Brazilian company engaged in the beer production sector. The company manufactures, distributes, and sells beer, soft drinks (CSD), and non-alcoholic and non-carbonated beverages(NANC) throughout the Americas


Ambev is the largest brewer in Latin America and the fourth-largest brewer in the world by volume. The company manufactures, distributes, and markets beer and PepsiCo products in Brazil and other Latin American countries. They also own Quinsa, the largest brewery in Argentina.


Being the large market cap that it is, earnings look to be growing faster than average in 2020.


Income Statement 2020

Revenue

$10.876 Billion (12.26% Revenue Growth (YoY))

Gross Profit

$5.831 Billion

Operating Income

​$2.976 Billion

Net Income

​$1.12 Billion

Strong profit for the company and quarterly results for 2021 have been sharply increasing compared to 2020 making Ambev a great long-term penny stock.



10) Smile Direct Club Inc (SDC)


Price - $2.41

Market Cap - 935.99 Million


Smile Direct Club is a teledentistry company that provides safe and effective doctor-prescribed and monitored clear aligners. Patients can have peace of mind with professional treatment without having to check in to the office.


SDC offers affordable doctor-directed teeth straightening with aligners sent directly to you.


Teeth straighteners cost 60% less than Invisalign and are guaranteed for life. Invisalign costs $5200 while SmileDirectClub offers a total end-to-end teledentistry for $1950 - or less than $89/month.


You can get a doctor-directed smile you love in as little as 4-6 months, not years, and the results you want backed by Lifetime Smile Guarantee.


In short, SDC offers great service, but do the numbers match up?


Income Statement 2020

​Revenue

​$656.78 Million (-12.48% Revenue Growth (YoY))

Gross Profit

$449.93 Million

​Operating Income

(-$217.46) Million

​Net Income

​(-$78.37) Million

Growth slowed in 2020 due to COVID, but it should've been the time to boom as all their services are provided online. Nonetheless, SDC is now striving to pursue profit and then continue its growth. Valued at 950 million makes SDC a very attractive buy.


 

10 best cheap stocks to buy now under $5:

  • Kosmos Energy Ltd. (KOS)

  • ContextLogic Inc. (WISH)

  • Skillz Inc. (SKLZ)

  • Paysafe Ltd. (PSFE)

  • Tilray Inc. (TLRY)

  • Invesco Mortgage Capital Inc. (IVR)

  • FuelCell Energy Inc. (FCEL)

  • UP Fintech Holding Ltd (TIGR)

  • Ambev ADR Representing One Ord Shs (ABEV)

  • Smile Direct Club Inc (SDC)


The price shouldn't be what you're worried about when buying a stock, but rather look for the valuation. A $5 stock can trade at a 100 billion market cap while a $1000 stock can trade at a 1 billion market cap.


Keep in mind the risk you endure when you invest in penny stocks as these stocks are very volatile and you have a very high chance of losing money, so only invest what you are willing to lose.



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