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All Contents © 2018The Kiplinger Washington Editors
By Jeff Reeves
| December 11, 2017
The best cheap stocks to buy now are never sure things. There are many stocks under $10 right now that deserve to be there, and will only get cheaper.
However, keep in mind that share value is all relative, among cheap stocks as well as expensive ones.
For instance, Amazon.com (AMZN) is worth about $1,133 a share right now. However, what will make it go up or down? Surely not its size alone, but rather its growth potential and Wall Street sentiment.
The same is true for the best cheap stocks, too. You simply have to look deeper than the share price and explore the fundamentals and future growth potential. Yes, some picks have fallen from great heights, but the only thing that matters is where they go from here—not whether they ever get back to all-time highs from a decade ago.
Staying objective is important, and you should always do your own research. But if you're looking for tips on the best cheap stocks to buy now, here are a few names I like:
Prices and data are from the original InvestorPlace story published on Dec. 5. Click on ticker-symbol links in each slide for current prices and more.
This slide show is from InvestorPlace, not the Kiplinger editorial staff.
Share price (as of Dec. 4): ~$5.89
AgroFresh Solutions is one of the best cheap stocks to buy now to capitalize on increased demand for healthier eating.
AgroFresh specializes in technologies to keep produce like apples and avocados fresh and attractive to customers. Considering how once-seasonal fruits and veggies are in continuous demand in every geography, this is a no-brainer investment no matter the price.
But with shares well under $10 a share and with AGFS posting a brisk 15% revenue growth in its latest earnings, this is a lock for any investor looking for cheap stocks to buy now.
Share price (as of Dec. 4): ~$7.48
Royal Bank of Scotland Group PLC may sound like a crazy bet on this list of the best cheap stocks to buy now, given the risks of the Brexit and continued anemic growth in the U.K. and nearby eurozone.
However, keep in mind that getting a nearly $40 billion bank for under $7 a share at present prices is a rare occurrence—and last time we saw massive banks like this trade at bargains, patient investors made a killing. Think Bank of America (BAC), which traded for $7 or so as recently as 2012 as investors shunned the stock in the wake of the financial crisis and continued troubles. Now, BAC trades for $12.
RBS provides the same potential opportunity for patient and determined investors, as its shares are trading for just 60% of book value.
Share price (as of Dec. 4): ~$7.72
Everi Holdings, formerly Global Cash Access Holdings, is a Nevada-based company that produces slot machines and services to casinos.
In 2017, hopes of a cyclical recovery backed up by strong consumer spending numbers has led to high hopes for this segment of the entertainment and leisure sector. Shares of Everi have soared 200% year-to-date, but remain around $7 a share.
EVRI continues to be one of the best cheap stocks to buy now. After impressive first-quarter earnings that included 16% revenue growth, analysts at Stifel recently raised their price target on this gaming stock and expect it to go much higher.
Share price (as of Dec. 4): ~$4.03
Kinross Gold is a bit risky, but what cheap stock isn't an aggressive investment?
While gold prices have struggled to find traction in a risk-on environment, we have seen the U.S. dollar weaken recently and a bit of fear creep in after Republican economic policies have run into a wall and as geopolitical unrest has continued. If we see a market correction or an increase in uncertainty, gold prices and KGC stock will benefit nicely.
And unlike a junior miner without much room for error, Kinross is a $6 billion company with much better access to credit and capital... so don't worry about it imploding because of short-term volatility in gold prices.
Shares are up 50% year-to-date, and could continue to run much higher.
Share price (as of Dec. 4): ~$4.05
Harmonic is a video and audio systems company that helps digital media companies and traditional broadcast outlets process and produce their content. As podcasts and streaming video become the norm, HLIT services are increasingly in demand—particularly as the video and soundbites of an intensely partisan media environment are difficult to ignore.
HLIT is scheduled to turn a profit of just 6 cents per share this year, but that's much better than previous fiscal years in the red. And if predictions hold, Harmonic will post 32 cents in EPS next year—more than 5x growth!
As American consumers increasingly use alternative media sources and those digital outlets try to meet demand with audio and video, Harmonic should see continued growth in 2017 and beyond. That makes HLIT one of the best cheap stocks to buy now.
Share price (as of Dec. 4): ~$4.15
It's admittedly dangerous to buy a cheap stock into a downtrend. But in the case of Community Health Systems, short-term pressures shouldn't scare investors off the longer-term potential.
Yes, revenue remains under pressure, and rhetoric out of Washington regarding cuts in Medicare are weighing heavily on this hospital operator. However, revenue declines aren't because of poor operations but rather strategic divestitures of 30 hospitals as part of a debt-reduction strategy. The result, if projections hold, will be FY2018 earnings that are roughly profits this year thanks to organizational efficiencies.
I don't believe Congress will cut Medicare spending, and I don't believe Wall Street is being realistic about the future of CYH after the short-term pressures on revenue as operations shrink. There are assuredly pressures on the company, which used to be the largest for-profit hospital operator in America.
But CYH also has long-term potential for bold investors who buy in.
Share price (as of Dec. 4): ~$6.55
BlackRock Capital Investment is not to be confused with its $67 billion parent, investment management company BlackRock (BLK).
The smaller and more focused BKCC is a business development company that provides loans to small- and mid-sized firms, and the regular payments on that debt can provide for a juicy revenue stream and fuel big dividends. Right now, the company pays more than 9% in annual yield based on its 18-cent quarterly payout.
The risk is that those dividends could be cut, as they were reduced from 21 cents per share in 2016 to the current level and even that 21-cent payday was down from 26 cents back in 2014. And of course, there's also a risk of share declines if companies BKCC lends to can't make good on that debt.
But a mammoth dividend yield and a great brand like Blackrock are reasons to give this cheap stock the benefit of the doubt.
Furthermore, if you believe in an economic expansion, then more midsize companies will look to expand and tap into BlackRock Capital to fuel that growth.
Share price (as of Dec. 4): ~$2.08
Avon Products is hardly the powerful cosmetics brand it once was. But remember: Many cheap stocks are often cheap for a reason as they've fallen from previous highs.
Just because Avon trades for under $3 a share right now doesn't mean it's doomed. Rather, it just means that investors need to get realistic about what to expect—and frankly, it's realistic to expect a nice double-digit gain from here, even if the company doesn't revisit 2013 levels over $20 ever again.
That's because AVP is expected to grow revenues over the next couple of years, even if it's only in the low single digits, and because earnings are set to soar from just 4 cents per share last year to 22 cents per share in fiscal 2017 and then 36 cents in 2018.
Sure, Avon stock has fallen on hard times. But this is one of the best cheap stocks to buy now based on its current valuation and outlook... so long as you can look past the pain of a few years ago.
This article is from Jeff Reeves of InvestorPlace. As of this writing, Reeves did not personally hold a position in any of the aforementioned securities.
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