Cheap stocks tend to be riskier. But there are exceptions. These three companies offer great bull cases for those who want to spice up their portfolios.
There are so many stocks out there, people can even get lost in them. At the moment the largest companies like Amazon.com or Google parent Alphabet which trade at four-figure prices. Bear in mind that nominal prices don’t mean much – $50 stocks can be just as solid as $250 stocks.
However, typically cheap small caps or even micro-caps are cheap for a good reason. It might be compelling to buy cheap stocks because of the psychological factor; it’s nice to be able to buy many shares. What is more, these stocks are often characterized by price swings, and it seems to investors that they’ll lead to big gains in a short time.
Institutional investors do the opposite, though. Sometimes they trade once a stock dips below $10 or lower. That’s due to low nominal prices typically being a sign of higher risk – they might be in long-term decline. Even good cheap stocks carry some risk, for example, narrow revenue streams or debt.
Here you can find five cheap stocks that have promising potential. Once again: they are risky, so only invest in these what you can afford to lose.
Company’s market value: $195 million
Ever since the start of the pandemic, one of the things people miss is live music: concerts, club performances, dance-hall shows, and so on.
It’s good that in such circumstances LiveXLive Media (LIVX, $3.28) doesn’t only rely on live events. Thanks to it, the company shows more-than-doubling of shares. This digital media company that works with live music does the same thing with streaming music, internet radio, and video content.
In June 2020, LiveXLive announced record 2020 revenues of $38.7 million. That’s a significant improvement from $33.7 million in 2019. Here we have to remember that its losses growing quickly, too.
Despite everything, analyst Brian Kinstlinger has LIVX in his portfolio. He points out that the company has a new direct sales force which is driving better monetization. Another analyst, Jon Hickman, raised his price target, it is now $5.75 instead of $4.50 due to the growth of subscribers.
Company’s market value: $86.0 million
Having a pharmaceutical/biotech name or two is a must in any list of cheap stocks to buy. They are often characterized by having big quick-movement potential based on trial data.
Evoke Pharma (EVOK, $3.48) is among such names. The stock has grown more than two times this year thanks to the excitement caused by its Gimoti nasal spray, which was approved recently by the U.S. Food and Drug Administration (the FDA).
Gimoti (its generic name is metoclopramide), is unique as it’s the only nasal product (others are administered orally) approved to treat gastroparesis, which is a condition that interferes with digestion and let the stomach to contract.
This approval by the FDA gives Evoke a chance to access a $5 million credit line for the purposes of funding manufacturing and commercialization. Also, the company stands out because it virtually has no debt.
EVOK, similar to other cheap stocks, is not appreciated by Wall Street. However, analyst Raghuram Selvaraju upgraded the shares from Neutral to Buy after the FDA approval; he set a 12-month price target of $10, which is three times more than current prices.
Company’s market value: $83.5 million
Of course, right now both the medical community and the stock market are focused on research related to treating coronavirus. AIM ImmunoTech (AIM, $2.56) is a biotech company based in Florida with an entry in the product pool of the disease: Ampligen (rintatolimod), which is used for treating severely debilitated patients with chronic fatigue syndrome. In May, human trials to assess the effectiveness of Ampligen was authorized by the FDA, as well as interferon also called alfa-2b, which is extremely important for the progress in helping cancer patients with COVID-19.
The company has also applied to treat chronic fatigue caused by coronavirus after some evidence backing Ampligen’s effectiveness was found in Argentine. Similarly to many health and pharmaceutical companies working to fight COVID-19, AIM shares have increased in value a lot in 2020; at the start of the year it was below 60 cents, and now it’s well above $2.
The shares have received three Buy ratings from three so far. One of the latest ratings was given by Jason McCarthy; his idea about the price target is $5 per share, as he thinks that the value of Ampligen’s potential hasn’t been quite captured yet.