4 Best Stocks Under $5
The 4 Best Penny Stocks Trading for Less Than $5
This article puts me in a tough situation. My team and I operate Peter Leeds Stock Picks, where we provide our best selections to subscribers who pay the annual fee. So, how is it fair to our loyal customers to provide others with the benefits of our analysis and research skills at no cost?
Well here is my take - my team and I are specialists on penny stocks, those low-priced shares which are trading for less than $5. However, most of our selections go for much lower amounts, such as $1 or $2, and even some for as little as a few cents per share.
We will discuss some of our favorite higher-priced penny stocks here for free, in this article. By keeping our focus on the higher-priced penny stocks, which trade for $4 per share or more, I think we can all benefit without upsetting anyone.
Our best low-priced investment selections (as in those trading for a buck or two) will still be reserved for paying subscribers. I trust that this will be a fair solution for everyone.
Now that we have the "housekeeping" out of the way, let's discuss some of the favorite penny stock picks of my team and I. We have not received a single penny in compensation or payment from any of these companies, nor are myself or any of my team members personally invested in the shares we discuss below, unless explicitly stated in the content.
ARC helps engineering, construction, and architect professionals. Any project which requires computer aided design, digitized blueprints, large format printing, or the collaboration of multiple specialists, will benefit from the services which ARC provides.
This is not a "small business" by any means, being valued at $194 million dollars, based on the current stock price (which is just above $4 as of the time of writing this article). Over the last 12 months, ARC has generated $428 million in revenue.
ARC is one of those small corporations which is widely loved by professional money handlers (such as hedge fund and mutual fund managers). Such institutional investors hold 75% of all the available shares of the company. When added to the 17% owned by insiders, there is only about 7% of ARC stock left to trade on the open market each day.
This penny stock is 2 and a half times as volatile as the overall markets. It means that ARC shares have been more active than the average investment, which can mean the gains (and the losses) are greater than you will see with the majority of other investments.
ARC has $17 million in cash (which works out to about 36 cents in cash per share). Speaking of assets, the important numbers from the balance sheet look very solid.
To get a quick lesson in the balance sheet (which is the very first thing we look at with our penny stock analysis). The balance sheet basically shows what a company OWNS compared to what it OWES.
- Current (short term) assets are $104 million, and total assets have reached $466 million.
It compares very favorably to the company's liability position:
- Current liabilities are $64 million, and total liabilities are $263 million.
In other words, ARC is in very solid financial shape. Their operational results are even better.
Specifically, last year the company reported $97 million in net earnings. That means "ARC" should actually be spelled, "Cash Cow."
While recent growth has been neutral, I expect that their profit margins will improve (recover) in the coming quarters. Combined with the financial results which management is anticipating (30-35 cents per share in earnings, $60 million in cash flow), this would put the forward-looking price to earnings (P/E) ratio at only 11.5. Remember, with P/E; lower numbers are stronger than higher ones!
In other words, ARC is highly undervalued at current prices. The fact that they are buying their shares back on the open market, while also paying down their outstanding debt by another $4 million, is just gravy.
You almost certainly have used RealPlayer at some point. After all, it is built into most computers before you even take them out of the box.
Well, the company has expanded beyond its early roots now, and their portfolio includes games, music for call waiting, apps, and other programs to help people have the best experience with technology possible.
So, is RNWK on the right track? $123 million in revenue over the last 12 months says so.
Never mind that this $154 million company has $87 million in cash. That works out to $2.36 per share, for a penny stock which is trading at just above $4 as of the time of writing this article and has no debt.
Professional investors are pretty greedy with this one and why wouldn't they be? They know a good thing when they see one! Between institutions and insiders, they hold over 90% of all available shares.
It should be a pretty solid year for RNWK. They are anticipating a return to growth in both revenues and profitability, as am I after analyzing their operations.
Added to that should be improved operating efficiencies. These benefits will come from a corporate realignment in two of their three main operating divisions, which has already been implemented but only now is starting to show the benefits fully.
Speaking of the "soft turnaround," much of the heavy lifting is done now. The benefits of the new, leaner and meaner RNWK should begin to pay off in the coming months and years.
Many are worried about a potential recession, and the impact it would have on stocks. I explained all of this on our penny stock blog recently, and have long been preparing for a domestic and international economic slowdown.
Well, there are certain types of businesses which will get destroyed by a recession (such as luxury goods, and consumer discretionary products). However, there are also the types which will be fine (such as pharmaceuticals and medical surgery services).
Misonix is in the latter group, providing needed cutting edge (no pun intended) surgical devices. They specialize in implements for spine and skull procedures, as well as the tools for cosmetic and laparoscopic procedures, among other things.
Recession or not, people tend to go ahead with life-saving and life-altering medical procedures. That is what makes MSON such a solid store of value when most other stocks are teetering on the brink of a correction.
Of course, even without an economic slowdown, Misonix should do very well. Their recently announced quarterly results showed that 73% of revenue is now recurring in nature, which is up from 57% in the comparable period from a year earlier.
The greater the percentage of repeating revenue, the more fiscally stable and predictable the shares become. It also insulates the company from possible shocks such as the loss of a major customer, or a significant lawsuit, and/or cash crunches.
Some of MSON's customers are located in China and Russia. Both of these markets have been showing weakness recently, but still, represent tremendous growth potential for Misonix. The company expects conditions to recover in both of these countries, which would lead to increased sales activity. By excluding the "anchor effect" of China and Russia, MSON's revenue increased by am impressive 17%.
The company is debt-free and is sitting on $8.4 million (1.07 per share) in cash. As well, ongoing operations are currently funded by cash flow alone, giving management reason to state their optimism, which is exactly what they did in their most recent financial reports.
Looking backward over the trailing 12 months, MSON achieved $23 million in revenues. It generated a very compelling P/E ratio of only 12.4, which demonstrates that this is an undervalued company, especially considering the attractive growth rate.
With a market capitalization of only $39 million, MSON should also be considered a potential takeover target - but not simply due to their "easily digestible size." Bigger corporations in the space typically love to acquire smaller niche companies, as long as they have "clean books" - as in no debt and lots of cash.
DRIO provides laboratory testing capabilities to consumers, using the individual's smartphone. For example, their Dario system allows you to use your mobile device to test and monitor your blood glucose levels.
LabStyle has a lot of great things going for them, including but not limited to all the incredible advancements in healthcare and technology. As I mentioned in the previous write-up about MSON, the healthcare industry is going to be a reliable store of value, no matter what the economy throws at us! You don't stop taking medications when times get tough, and people rarely hold off on life-saving health care simply because of recession, inflation, stock market weakness, or otherwise.
The applications for DRIO's smart glucose meter apply to various situations, but, of course, the big one is diabetes. Within 6 seconds, an individual can test their levels, log their results, and even shares the data with their caregivers or doctors.
LabStyle is a $28 million company, but one with potential many times that size. Given the potentially addressable market they hope to conquer, operational successes could take DRIO shares to much higher levels and never look back!
Just like MSON and RNWK discussed above, DRIO has no debt. They also have over $8 million in liquid cash, which equates to $1.50 for each and every one of the 5.6 million outstanding shares.
DRIO has been losing just over $1.5 million in each of the last several quarterly periods. While net earnings are always better than losses, these kinds of operational results are actually exactly what you would expect from a company in DRIO's industry, and at this stage of their corporate life cycle.
As well, these slight losses (which again will be the norm for any business actively driving towards product acceptance and growth) seem much less significant when considering their fiscal position. Specifically, DRIO has $10.3 million in current assets, against only $1.5 million in current liabilities.
Taking the long term view, DRIO is still sitting pretty. Their total liability position equals only $3.4 million, while they are holding $11 million in total assets. I explain the importance of the balance sheet in this video, and it is actually the very first place we look when analyzing any penny stock.
With such a solid financial position, DRIO will have plenty of opportunities to take advantage of their possible growth channels. In fact, as more people adopt the Dario system, the company sees improvements in their metrics and results, such as decreases in their gross and net losses, while their revenues climb.
DRIO is a relatively new company, at least from the perspective of being publicly traded. In the first quarter of last year, they completed their initial public offering and uplisted to the NASDAQ stock exchange.
They have also just begun online sales in America, which represents another potential growth driver to complement all the others they have. People are increasingly taking their health (including testing and monitoring) into their own hands, and DRIO's technologies will be a huge part of that for diabetics.