There’s a new occupant (officially) at 1600 Pennsylvania Avenue and the stock market is doing its part to promote unity. The Dow shot to a record high on Inauguration Day. We don’t imagine the honeymoon will last long. However it serves as a reminder that investors are more interested in the “what” more than “what party” when it comes to the way it moves.
With that said, many investors are attempting to read the tea leaves of the nascent Biden administration. One of the challenges will be that many of the usual suspects such as the FAANG stocks remain popular, yet frighteningly expensive (in terms of share price).
Valuation is in the eye of the beholder. But some investors may be looking for low-priced stocks that can get them more bang for their buck. The good news is that there are many stocks that you can buy for under $20 that not only show impressive growth, but are leaning in to the macroeconomic issues that will be present during at least the early part of the Biden administration.
In this special presentation, we’re giving you seven of our picks for low-priced stocks you can buy for under $20 today. But take note, these stocks may easily be over $20 in the next few months.
Quick Links
- Rocket Companies
- Canoo
- Brightcove
- LG Display
- Ares Capital
- Zynga
- Hanesbrands
#1 - Rocket Companies (NYSE:RKT)
In what could be described as a tale of two economies, the housing market remains strong. There are many reasons why individuals may be moving. But with mortgage rates likely to remain at, or near, historic lows for the foreseeable future it makes sense to scoop up shares of Rocket Companies (NYSE:RKT). Rocket is the parent company of Quicken Loans and Rocket Mortgage.
Rocket has transformed the way consumers shop for and obtain a mortgage. And it is leaning into two significant trends. First, the company puts the entire mortgage approval process online. This is right in the wheelhouse of the millennial audience that is likely to be buying homes in the near future. Second, the company has lower costs because it’s entirely digital format reduces the need for loan officers.
Technically, RKT stock is just above the $20 threshold. At the time of this writing it’s at $20.03. But since the stock began trading publicly in 2020, it has remained steady at right around $20. It’s fair to say that Rocket won’t be alone in this space for long. However this is a rare opportunity to pay a start-up price for a company that is a market leader.
About Rocket Companies
Rocket Companies, Inc, a fintech holding company, provides mortgage lending, title and settlement services, and other financial technology services in the United States and Canada. It operates through two segments, Direct to Consumer and Partner Network. The company's solutions include Rocket Mortgage, a mortgage lender; Amrock that provides title insurance, property valuation, and settlement services; Rocket Homes, a home search platform and real estate agent referral network, which offers technology-enabled services to support the home buying and selling experience; and Rocket Loans, an online-based personal loans business.
Read More - Current Price
- $11.82
- Consensus Rating
- Reduce
- Ratings Breakdown
- 0 Buy Ratings, 6 Hold Ratings, 6 Sell Ratings.
- Consensus Price Target
- $13.92 (17.7% Upside)
#2 - Canoo (NASDAQ:GOEV)
Many electric vehicle (EV) companies came to market by way of a special purpose acquisition company (SPAC). Among those was Canoo (NYSE:GOEV). Let’s keep things real. Many of these companies have interesting ideas that may never reach scale. As it relates to EV stocks, one thing you should look for is differentiation. Canoo delivers that in two important ways.
First, the company is going to be introducing what is known as a multipurpose delivery vehicle (MPDV). Canoo will use a “by wire” design that is part of its “skateboard” platform. The skateboard design is a chassis that essentially provides a template that the company can use to manufacture EVs much faster. And the “by wire” design allows the vehicle to be configured for maximum space and will eventually allow for autonomous driving capability.
And once Canoo’s vehicles hit the market in 2022, they will be offering consumers a “transportation-as-a-service” model that gives it an SaaS component. Consumers can lease a vehicle for a specified period of time (minimum of 30 days). Once that time period ends, they can extend their “lease” or they can return the vehicle with no long-term contract.
About Canoo
Canoo Inc, a mobility technology company, designs, develops, markets, and manufactures electric vehicles for consumer, commercial fleet, government, and military customers in the United States. the company utilizes its multi-purpose platform architecture, a self-contained, fully functional rolling chassis that directly houses the critical components for operation of an electric vehicle, including its in-house designed proprietary electric drivetrain, battery systems, advanced vehicle control electronics and software, and other critical components.
Read More - Current Price
- $0.09
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 5 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $22.71 (26,428.4% Upside)
#3 - Brightcove (NASDAQ:BCOV)
The cloud remains another red-hot sector for investors. Brightcove (NASDAQ:BCOV) is a great example of the money that’s being invested in cloud stocks. In January, 2020 BCOV stock was trading for under $10. At the time of this writing, it’s trading around $18 and has the momentum that should push it above that mark shortly.
Brightcove is engaged in cloud delivery of video. When you consider the staggering amount of video content being produced these days, you can understand that there is a desire for companies to monetize video. And that’s where Brightcove comes in. In fact, the company already has a very respectable client list that includes Adobe (NASDAQ:ADBE) and Ford (NYSE:F).
Brightcove has a two-tier pricing system: non-premium and premium. Obviously the goal is to get more of its customers on the premium track. Information in the company’s most recent earnings report suggests it is doing just that. Annualized subscription revenue per premium customer was $89,000 in the prior quarter. That was up from the $84,500 the company recorded in the prior year’s quarter.
About Brightcove
Brightcove Inc provides cloud-based streaming services the Americas, Europe, the Asia Pacific, Japan, India, and the Middle East. It offers Video Cloud, an online video streaming platform that enables its customers to publish, deliver, and distribute high-quality video to internet-connected devices. The company's solutions and products comprise Brightcove Marketing Studio, a video streaming solution; Brightcove Communications Studio for marketers and corporate communications professionals; Brightcove Media Studio, a solution for over-the-top (OTT) video services, media publishers, and leading broadcasters to monetize their media, live stream at scale, and nurture their audience lifecycle; Brightcove Audience Insights, a customer data platform for video streaming businesses; Zencoder, a cloud-based video encoding service; and Brightcove Beacon, a platform that enables its customers to launch premium OTT video streaming experiences, as well as Brightcove Marketplace.
Read More - Current Price
- $4.38
- Consensus Rating
- Hold
- Ratings Breakdown
- 0 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $3.98 (9.2% Downside)
#4 - LG Display (NYSE:LPL)
Prior to the Covid-19 pandemic, finding a quality tech stock at a price tag below $20 was not easy to do. Today, investors have a lot more option. In the initial months after the pandemic began, investors fled to quality and that left some lower-priced stocks dangling.
But in the last few months, as many tech stocks look overvalued, investors are trying to find some underpriced gems. One for you to consider is LG Display (NYSE:LPL). If you’re looking at this article on an iPhone, then you are probably looking at a touch-screen made by LG Display. And as the company’s name suggests it is the screen-maker for the Korean electronics company LG.
The remote work and remote learning environments brought on by the pandemic was a major catalyst for the stock which climbed over 20% last year. The company is projecting demand to stick around for several years. For example, Apple (NASDAQ:AAPL) is supposed to announce higher-than-expected sales for the iPhone 12). And to account for that growth, the company recently opened a new facility in China.
About LG Display
LG Display Co, Ltd., together with its subsidiaries, engages in the manufacture and sale of thin-film transistor liquid crystal display (TFT-LCD) and organic light emitting diode (OLED) technology-based display panels. Its TFT-LCD and OLED technology-based display panels are primarily used in televisions, notebook computers, desktop monitors, tablet computers, mobile devices, and automotive displays.
Read More - Current Price
- $3.21
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 1 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- N/A
#5 - Ares Capital (NASDAQ:ARCC)
Having access to capital has been a key for small- and medium-sized businesses to survive the global pandemic. Ares Capital (NASDAQ:ARCC) helps fill that need. The firm is a direct lender to private, mid-market companies who need financing.
For those who are unfamiliar with the company, Ares Capital is a business development company (BDC). BDCs are a corporate structure that was established in the 1980s as a way for public investors to invest in privately held U.S. businesses.
Since the company’s initial public offering (IPO) in 2004, Ares Capital has averaged an 11% return for its shareholders every year. As of September 30,2020, the company had a fair value of over $14 billion ($14.4 billion) and had a diversified portfolio of 347 companies.
And another thing, BDCs operate similar to real estate investment trusts (REITs) in that they are required to distribute at least 90% of its taxable income as dividends.
About Ares Capital
Ares Capital Corporation is a business development company specializing in acquisition, recapitalization, mezzanine debt, restructurings, rescue financing, and leveraged buyout transactions of middle market companies. It also makes growth capital and general refinancing. It prefers to make investments in companies engaged in the basic and growth manufacturing, business services, consumer products, health care products and services, and information technology service sectors.
Read More - Current Price
- $21.38
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $22.29 (4.2% Upside)
#6 - Zynga (NASDAQ:ZNGA)
Mobile gaming was already popular before the pandemic (think Candy Crush). Zynga (NASDAQ:ZNGA) is known as the brand behind such popular games as FarmVille, Words with Friends and, more recently Harry Potter: Puzzles and Spells.
Like any company in a field such as this, user engagement is critical. And on that score, Zynga is doing very well. In its most recent quarter, the company reported 31 million daily active users and 83 million monthly active users. Both numbers were numbers the company had not seen in about six years.
Zynga turned that user engagement into a 46% year-over-year revenue increase to $503 million. More impressively, the company set another record by generating a positive cash flow of $113 million.
It could be fair to say that this growth was a one-off due to the pandemic. However Zynga continues to develop more games and increase its development talent to ensure it can keep those engagement numbers high.
Zynga is also a backdoor play on 5G technology. The company is making inroad into the Asia market and expects that market to continue to heat up as 5G technology and its accompanying speed will make mobile gaming more desirable.
About Zynga
Zynga Inc develops, markets, and operates social game services in the United States and internationally. The company provides social games as live services played on mobile platforms, such as Apple iOS and Google's Android operating systems; social networking platforms, such as Facebook and Snapchat; and personal computers consoles, such as Nintendo's Switch game console, and other platforms and consoles.
Read More - Current Price
- $8.18
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - Hanesbrands (NYSE:HBI)
When you think about making undergarments a sexy investment, there might be other stocks that come to mind. Hanesbrands (NYSE:HBI) may not be the brand consumers will choose for a romantic post-pandemic getaway, but the company’s products may have been practical, low-cost holiday gifts in a year when practical, low-cost gifts were on everybody’s mind. And Hanes brand products were available at retailers such as Target (NYSE:TGT) and Walmart (NYSE:WMT) which made them easy for consumers to find.
Also when you buy HBI stock you’re buying into the Champion brand. And while that may also not be a sexy brand, Esquire magazine does think that the Champion brand is pretty cool.
Investors seem to agree. After falling over 25% after a disappointing earnings report in November, HBI stock has made a strong recovery. The stock is positive year-to-date and in the last 12-month period. Although the consensus price target for the stock suggests it may be overvalued, recent price target suggest the stock has more room to grow.
About Hanesbrands
Hanesbrands Inc, a consumer goods company, designs, manufactures, sources, and sells a range of range of innerwear apparels for men, women, and children in the Americas, Europe, the Asia pacific, and internationally. The company operates through three segments: Innerwear, Activewear, and International.
Read More - Current Price
- $8.23
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $6.90 (16.2% Downside)
As mentioned in the introduction, now is not the time to throw in the towel on stocks. In fact, equities are going to be the place to be as the economy reopens. But that doesn’t mean you need to have your capital chasing stocks that may be overvalued.
With that said, low-priced stocks are not without risk. All of the stocks in this presentation are small-cap or mid-cap stocks. In times of market volatility, these stocks can have major price moves. Of course that can be good and bad. The point is that you should only be tapping into the speculative part of your portfolio to buy these stocks.
Investors with a lower risk tolerance may choose to come at these stocks from a different angle. There are numerous mutual funds and exchange-traded (ETF) funds that specialize in small- and mid-cap stocks. Three of the most popular mid-cap ETFs are the iShares S&P Mid-Cap 400 Growth ETF (NYSEARCA:IJK), the Vanguard S&P Mid-Cap 400 Growth ETF (NYSEARCA:IVOG), and the SPDR S&P 400 Mid Cap Growth ETF (NYSEARCA: MDYG).
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