Advantage Oil & Gas (AAV): An Oversold Natural Gas Play
Advantage Oil and Gas is a natural gas producer based in Alberta, Canada. The stock has a market capitalization of $610, and currently trades on a price earnings multiple of 8.2. However, analysts are forecasting earnings growth of 79 percent next year and 48.8 percent over the next 5 years.
AAV was sold heavily in 2017 as the price of natural gas came under pressure. However, the stock price fell far more than the gas price which has since stabilized. This company has a long history of profitability, which the market has ignored until now.
The downtrend has lost momentum as the stock approaches levels last seen in 2011. It’s very likely that the stock will find support at current levels, given that the PE is now below 10. While the ROE is only 7.4, that’s’ fair for a stock trading at such a low valuation.
In March the stock was upgraded by the brokerage Tudor Pickering, and it’s likely that investors will begin to pay attention to it when other stocks in the energy sector become too expensive. These factors make AAV one of the best cheap stocks to consider buying now.
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Banco Bradesco (BBD): A Tiny Bank on Sale Now
Banco Bradesco is a small bank and financial services company operating in Brazil, but also listed on the NYSE. The stock has a market capitalization of $61 million, and currently trades on a price earnings multiple of 15.5. However, analysts are forecasting earnings growth of 19 over the next 5 years.
Furthermore, Brazil is one of the cheapest equity markets in the world right now. It is beginning to show up on investors radars, and once the money starts flowing into the market, small companies like Banco Bradesco will appreciate rapidly.
The price to book ratio is 2.06 and the price to sales ratio is 3.5, neither of which is demanding. The fact that JP Morgan upgraded the stock to overweight in January adds to the argument that this is one of the best cheap stocks to think about investing in. Furthermore, Goldman Sachs upgraded the stock late last year. So that’s two top tier banks that like this company.
It’s not often you get to buy share sin a bank that is valued at less than $100 million. The share price is currently consolidating, and there’s a good chance the next breakout will be to the upside.
Francesca’s Holdings Corporation (FRAN): Retailers Are Oversold
Francesca’s Holdings Corporation operate a chain of retail fashion and apparel boutiques. Like many retailers it has been under pressure from online competitors (like Amazon), and had a really bad 2017. However, when sentiment is so bad, stocks often become too cheap. That’s why Francesca’s Holdings is now one of the cheap stocks to consider buying.
The stock has a market capitalization of $182 million, and currently trades on a price earnings multiple of 9.9. However, analysts are forecasting earnings growth of 13 percent next year and 10 percent over the next 5 years. We also have to remember that analysts have very low expectations for the sector, and many retailers are now doing better than analysts have been forecasting.
The company is well managed and has adequate cash reserves and no debt. The book value is $3.22. So, it’s price to book value is quite low at 1.6. It also has an ROE of 13 percent which is high for a company trading on such a low valuation.
While online competitors are taking market share away from companies like Francesca’s, the are not going to take all of its business – some people still like to shop in stores. All in all, this is one of the cheap stocks to buy while sentiment in the sector is low.
Golden Star Resources (GSS): A Leveraged Play on the Gold Price
Golden Star Resources is a gold mining and exploration company based in Toronto, Canada. The company has mining and exploration operations in Ghana and Brazil.
So, what makes GSS one of the best cheap stocks to buy right now? The stock has a market capitalization of $374 million, and currently trades on a very low-price earnings multiple of 7.05. However, analysts are forecasting earnings growth of 61 percent next year and 10 percent over the next 5 years. The forward PE is therefore very low at 3.5.
GSS is heavily geared to the gold price. As a relatively high cost producer, it’s profits are marginal at current levels. However, any increase in the gold price will lead to a rapid increase in profits. With equity market volatility increasing, there’s a good chance the gold price will begin to move higher, making gold stocks a good option in 2018.
GSS can be included in a list of cheap stocks both on the basis of its low price (it’s trading at 65 cents) and its low valuation. The downside is therefore fairly limited, while the upside is open ended, and dependant on the gold price.
Hudson Technologies (HDSN): An Oversold Opportunity
Hudson Technologies is a refrigeration services company based in New York. It sells reconditioned and new refrigeration equipment, and provides associated services. The stock is trading at the lowest levels its seen in the last two years.
The stock has a market capitalization of $184 million, and currently trades on a price earnings multiple of 20. However, analysts are forecasting earnings growth of 49 percent next year and 30 percent over the next 5 years. That means the forward PE is very compelling at 7.7.
Hudson is not overly geared, having a debt to equity ratio of 1.82. It also has healthy gross margin of 27 and an operating margin of 10 percent. Both the price-to-book and price-to-sales ratio are below 1.5, which makes this a value play.
So why is the one of the best cheap stocks to consider for the second half of 2018? Hudson has a solid track record, but saw a drop in earning growth in 2017.
As a result, the market sold the stock heavily – probably too heavily. This type of selling creates opportunities that gives us cheap stocks to buy from time to time.
The price fell from over $10 in June 2017, to below $5 by March this year.
R1 RCM (RCM): A Healthy Recovery Ahead?
R1 RCM helps healthcare providers manage their cashflows. Unfortunately, the company didn’t manage its own cashflows very well and went through a rough patch between 2012 and 2017, but is now recovering. Turnaround situations often create the best opportunities to buy cheap stocks with good prospects.
The stock has a market capitalization of $764 million, and currently trades on a price to book ratio of 1.7. After a few years of losses, the income statement doesn’t look good. But most of the bad news is now in the past and analysts are bullish on earnings going forward. In addition, the balance sheet is strong, and the company has no debt.
Perhaps what really makes this one of the best cheap stocks to buy now, is the chart. After a multiyear decline and a two-year bottoming pattern, the price is now in an uptrend. Furthermore, the stock was recently upgraded by Robert Baird.
The Healthcare sector is likely to come under pressure in the next few years, and healthcare providers will need help from companies like R1 more than ever. Investors have been paying attention to this theme and accumulating the stock, which is already up 150 percent from 2017’s lows.
Banco Santander (SAN): Quality and Size for a Low, Low Price
Banco Santander may be the highest quality, largest and best cheap stocks to invest in now. Banco Santander is a global banking empire based in Spain and worth $104 billion.
It still qualifies as one of the best cheap stocks to buy right now because it’s share price is below $10 and its price earnings multiple is just 12. Furthermore, it is trading on a price to book below one, and a price to sales ratio of 1.54. The PEG ratio of 0.96 indicated that it is cheap relative to its growth rate.
The stock has been out of favour with investors for a few years despite the fact that it is a high quality global banking group. One of the reasons it is out of favour is its exposure to Europe’s economy which has been weak for much of the last decade. However, Europe’s economy is now on the road to recovery, and stocks like Banco Santander are likely to come back into favour soon.
The stock price began building a new bull trend in 2016, and is finally breaking out of the downtrend going back to 2010. Once it breaks $8 it will probably accelerate rapidly and begin to attract momentum investors.
SORL Auto Parts (SORL): A Tiny Company with a Very Big Market
SORL Auto Parts is a China based, Nasdaq listed auto parts manufacturer. The company makes and sells braking systems and other safety equipment to vehicle manufactures in China.
SORL has a market capitalization of just $86 million, and currently trades on a price earnings multiple of 3.68. However, analysts are forecasting earnings growth of 15 percent next year, making the forward PE 2.8 which is very cheap.
SORL is exposed to the rapidly growing auto market in China. China has already emerged as the biggest auto market in the world – and most auto makers now sell more cars in China than anywhere else. Vehicle penetration amongst consumers in China, is very low, at just 154 per 1000 people. It’s also only just beginning to rise. SORL’s small size means it can easily grow tenfold in the coming years.
Increasingly, the best opportunities are companies based all over the world, but listed in the US. It’s worth checking out the range of stocks you can trade on each broker’s platform. You may well find that many cheap stocks to buy now are based overseas. Also remember diversity is the key to any balanced stock portfolio.
Cheap Stocks to Buy Now
This article highlighted some of cheap stocks to buy now, based both on their price and their valuation. All of these stocks are priced below $10 and most have price earnings ratios below 12. While value stocks have not performed well during the bull market starting in 2009, there time may be approaching. Many of the stocks that have led the way over the last 8 or 9 years are losing momentum and looking precarious. They also have a lot of growth priced into them.
Value stocks on the other hand have a margin of safety in that they are already trading at low valuations. They don’t have years of growth priced in, and therefore have less downside, even if they disappoint.
Before choosing the best cfd broker for your needs it’s worth considering the types of stocks you may want to buy. Not all brokers will give you access to stocks below $10. A stock trading below $10 doesn’t necessarily offer better value, but you can buy more shares for the same price. They can also be more liquid for small investors.