In the age of meme trades and wild bets in speculative markets, the idea of jumping on board cheap stocks to buy might seem risky from all angles, particularly from the time perspective. That is, you typically don’t want to chase trading narratives that are long in the tooth. And this objection — along with many, many others — is more than justified.
Still, arguably everyone has that tiny voice in their head thinking, what if? For some of us, that voice gets louder until it’s no longer tolerable. If you’re at a stage where you’ve listened to all the objections — mainly that you can lose everything you put into a trade and in some cases, even more — yet you’re ready to take the plunge, then this article may be for you.
I say “may” because once you venture into stocks to buy under $5, you’re taking serious risks. Generally speaking, investment professionals define penny stocks as equity units that trade hands at $5 or less. Is it because President Abraham Lincoln is both on the bill and the penny? I don’t know. But if you want drill into the granularity, you can refer to the Code of Federal Regulations which provides the official definition.
However you want to parse the concept, the overriding reality is that stocks to buy under $5 usually facilitates a quick trip to the poor house. At the same time, though, the benefits of such cheap trades keep enticing investors, generation after generation. Primarily, this is due to mathematical realities: the law of small numbers allow you to accrue big gains, usually over less time.
As well, when you dabble in this speculative arena, you’re mainly (though not always) dealing with companies early in their growth phase. Remember, several big institutions that we know and love today started off as low-priced affairs. With that in mind, here are stocks to buy that are cheaper than a cappuccino in an overpriced coffeeshop.
- Kintara Therapeutics (NASDAQ:KTRA)
- Pixelworks (NASDAQ:PXLW)
- Dogness (NASDAQ:DOGZ)
- TDH Holdings (NASDAQ:PETZ)
- LiveXLive Media (NASDAQ:LIVX)
- National CineMedia (NASDAQ:NCMI)
- Document Security Systems (NYSEAMERICAN:DSS)
Before we get into it, I’d like to take a moment to keep the suits in pointy shoes happy. None of this should be considered investment advice. Buying shares under $5 is a terrible idea. But if you happen to enjoy reading about terrible ideas, here are some cheap stocks to buy under $5.
Stocks to Buy Under $5: Kintara Therapeutics (KTRA)
Easily the most intriguing idea on this list of risky cheap stocks to buy, Kintara Therapeutics plays with your mind for two reasons. First, let’s talk about the bigger picture catalyst. Its core business is oncology, specifically developing “novel cancer therapies for patients who are failing or resistant to current treatment regimens.”
Presumably, most of you know someone who has suffered from this terrible affliction and how agonizingly frustrating it is. If Kintara can provide some hope for sufferers, that’s universally a net positive — no doubt about it. Unfortunately, the novel coronavirus pandemic disrupted the broader healthcare infrastructure. If you didn’t pivot to a Covid-19 treatment or vaccine, this presented problems as many people avoided or delayed care during the virus’ onslaught.
But with the vaccine rollout and other mitigation measures, society is returning to normal, which bodes well for KTRA stock. And the second point about Kintara: its current technical momentum is ridiculous.
What’s more, KTRA stock printed a head-and-shoulders pattern between roughly mid-January to mid-March of this year. Though shares fell per the negative implications of this pattern, they made a comeback in the second half of May.
Could this be the destiny of other heavily followed cheap stocks to buy which recently encountered volatility? Perhaps, which is why the speculative intensity could still enjoy another leg.
One of the highly rated stocks to buy under $5, Pixelworks provides system on a chip (SoC) solutions for the consumer electronics industry, focusing on image processing, network capability for display systems, video surveillance and similar applications. Also, Pixelworks offers digital display, projection devices and digital signage.
What gets lost in the present noise is that PXLW stock was on the upswing in late 2019. At the time, the Trump administration engaged in a tough trade war with China. However, relations between the two biggest economies in the world cooled, boding well for multiple industries. Apparently, that included the integrated circuits business for video imaging as PXLW shares jumped over 32% last year between the beginning of January and Feb. 19.
As you know, that would be the end of the rally as the coronavirus made its way into the U.S. With panic setting in, PXLW stock quickly cratered. Moreover, the shutdown of non-essential businesses by multiple state governments didn’t help matters.
Thankfully, it appears that we’re at the tail end of this pandemic. That could support the continued recovery narrative of Pixelworks as consumer demand normalizes.
Stocks to Buy Under $5: Dogness (DOGZ)
Everyone knows that Americans love their pets. Indeed, the American Pet Products Association reported that we collectively spent $103.6 billion on our furry friends in 2020. And this revenue tally is up nearly 7% from 2019’s total, which is remarkable considering the disruption of Covid-19. But does this apply to other markets, such as China?
Apparently, the answer is a resounding yes. In 2020, data compiled by Statista.com revealed that pet-related businesses in urban China generated 206.5 billion yuan (or $31.95 billion as of June 24, 2021). What’s more interesting, this figure is up 2% from 2019, despite the impact of the coronavirus. As you’ll recall, the Chinese government initiated draconian lockdown measures last year. How much more, then, would pet sales have gone up if not for the pandemic?
This question represents the underlying narrative for Dogness, a China-based company that manufactures and markets pet products, specifically, “leashes, collars, harnesses, handles, ornaments, and other specialty products for dogs and cats.” As well, Dogness has a global footprint, with viable markets in neighboring Asian countries.
To be fair, DOGZ stock trades at a little over $2 at time of writing. Therefore, the risk is not something you should trifle with. Still, if you have the stomach for extreme volatility, this might do it for you.
TDH Holdings (PETZ)
Unsurprisingly, the Covid-19 disaster imposed an unfavorable spotlight on China. The Pew Research Center revealed late last year that global opinions on the country dipped to staggering lows. And this year, Pew reported that most Americans support a tougher stance on China regarding human rights and economic issues.
Those are facts that cannot be disputed. But another fact — which is an inconvenient truth — is that Chinese consumers are gradually becoming like Americans. Hence, big business wasn’t exactly thrilled with the Trump administration’s trade war — such conflicts risk cutting into the bottom line.
A great example of Chinese consumers turning American is the pet market. In suburban China, the market size of pet-related businesses soared 1,346% between the beginning and end of last decade. As a result, astute traders have high hopes for TDH Holdings, which manufactures and sells pet food products in China, Asia, Europe, and North America.
Just like its compatriot above, TDH Holdings is wildly risky. Frankly, PETZ stock is all over the map, closing just under $5 in February this year, while also dipping below $2 in May. Still, this is a relevant business operating in relevant markets. If you want to take a shot, just know there are far dumber ideas among cheap stocks to buy.
Stocks to Buy Under $5: LiveXLive Media (LIVX)
One of the more complicated narratives that sprouted during the Covid-19 lockdowns was the fate of the entertainment industry. Because it’s so broad, it’s difficult to make any overriding pronouncement of the sector. For instance, streaming services and video games won big because they provided convenient, at-home entertainment. Further, the contactless nature of it aligned perfectly with the new normal.
But other segments of the industry didn’t fare as well. For instance, a foot traffic analytics report by Placer.ai noted that monthly visits to popular cineplexes this year were way down from pre-pandemic levels. And that makes LiveXLive Media, a digital media firm specializing in streaming live events and music festivals, a tricky proposition.
On one hand, LIVX stock enjoyed strong swings upward over the trailing year-and-a-half period. By streaming concerts, the underlying company was able to keep musical acts connected with their fans. At the same time, the business has struggled to attract and maintain investor interest.
But could societal recovery help the case for LIVX stock? This is a very risky idea, even with the caveats I made for these cheap stocks to buy. But if you can overlook the threats, it’s possible. Consumers raging with retail revenge cannot buy everything. So, streaming live events may be a happy medium for those that can’t attend in person.
National CineMedia (NCMI)
A company that deserves multiple caveats before consideration, National CineMedia for years had a difficult storyline. An advertising company mostly known for its commercials that entertain early bird moviegoers prior to the trailers, National CineMedia would probably be a perfect business during the 1990s and 2000s decades. But in the contemporary age? I’ll be diplomatic and say it’s been a challenge.
I want to be clear. It’s not so much about the advertising business or NCMI stock as it is the moviegoing experience. Frankly, it’s just not as enticing to young consumers as it was for prior generations. Debate is rife on this issue and I don’t want to get involved in it. However, many argued that streaming services will kill the box office and it’s easy to see why.
Still, it’s important to note that certain movies cater to the big screen: think Star Wars or the Marvel Comics franchises, for instance. You can watch such movies in your living room or on your phone but come on — these blockbusters deserve the box office experience.
Also, the pandemic basically denied people the ability to watch movies at the cineplex for a year or longer. Certainly, pent-up demand for this experience exists and that could help boost NCMI and related stocks to buy.
Stocks to Buy Under $5: Document Security Systems (DSS)
Billed as an “industry leader in providing dynamic solutions to protect corporations, financial institutions, and governments,” Document Security Systems is a corporation that operates a diversified portfolio of companies. Currently priced under $2, DSS is easily one of the riskiest cheap stocks to buy. Not helping matters is that the company has a confusing brand.
For instance, Document Security offers a premiere packaging and direct mailing business, which involves providing products such as basic mailers to custom folding cartons. Also, the company has its Impact BioMedical business, which “targets unmet, urgent medical needs and expands the borders of medical and pharmaceutical science.”
And then, it has a fintech and blockchain business because of course it does.
Still, I’d like to give the benefit of the doubt to DSS stock because its blockchain business, which provides “security, tracking, and tracing solutions for supply chain logistics” could become relevant. This assumes, though, that mainstream industries will adopt blockchain technology into their infrastructure.
Despite my love for cryptocurrencies, I want you to know that this isn’t a guarantee. As a Wired.com article pointed out, current systems already perform the same functions as blockchain networks — and sometimes in superior fashion.
Still, anything can happen in this crazy world. If you want to take your chances with cheap stocks to buy, this might be worthwhile.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.