8 Best Cheap Stocks To Buy Under $5.00 (2024)

Most investment professionals tell investors to stay away from stocks under $5. These stocks, commonly referred to as penny stocks, tend to come with the highest levels of risk. On the other hand, they also represent compelling opportunities.Believe it or not, small-cap stocks have outperformed their large-cap counterparts throughout history.

The key to investing in smaller companies is doing adequate research and choosing thebest stocks under $5. These are the types of stocks that have the potential to experience significant growth.

8 Best Stocks Under $5

If you’re looking for thebest stocks under $5, you’re in risky territory. The smaller the company, the higher its potential to face insolvency, bankruptcy and significant losses. However, there are some gems in the market.

1. Ambev S.A. (NYSE: ABEV)
3. Sachem Capital Corp. (NYSE: SACH)
4. Bark, Inc. (NYSE: BARK)
5. MarketWise, Inc. (NASDAQ: MKTW)
6. Ardelyx, Inc. (NASDAQ: ARDX)
7. EMagin (NYSE: EMAN)
8. Genasys Inc. (NASDAQ: FNSS)

1. Ambev S.A. (NYSE: ABEV): $2.88 per Share

Ambev is an interesting play because it trades like a penny stock but is part of one of the largest companies in the world. The company is the South American arm of the world’s largest brewer, Anheuser-Busch InBev SA, and is the exclusive distributor of Pepsi products in Brazil.

Ambev’s full-year profits dipped slightly in 2020 but grew 11% and 14%, respectively, over the next two years. Revenues have climbed steadily, from $52.6 billion in 2019 to $79.71 billion last year. The company is also flush with cash, as demonstrated by its 5.12% dividend yield.

Analysts rate ABEV a “buy” according to Yahoo Finance, although the tide is shifting toward “hold.” If the growth in its parent company is any indication of its future, the stock is one of the best in its price range.

2. Braemar Hotels & Resorts (NYSE: BHR): $4.08 per Share

Braemar Hotels & Resorts is a real estate investment trust that invests in luxury hotels and resorts. Its current portfolio includes Hilton, Marriott and Ritz-Carlton branded properties in seven states throughout the U.S., with a combined total of over 4,000 rooms.

CEO and president Richard J. Stockton came to Braemar 25 years ago after 15 years with Morgan Stanley. He said in a Q1 2023 earnings recap that the company had solid first-quarter results despite a volatile economic environment. This was thanks to strong demand at resort properties, especially urban resorts, and a continuing rebound in demand for meeting and convention space.

BHR shares are up 2.69% so far this year, and its dividend yields 4.89%. Analysts who follow the stock rate it a “buy” with the potential to nearly double in price in the next 12 months.

3. Sachem Capital Corp. (NYSE: SACH): $3.18 per Share

Connecticut-based Sachem Capital Corp. is another REIT, but instead of purchasing real estate, it originates, services and manages first mortgage loans. The company’s investors and shareholders fund a variety of loan types, including bridge loans, new construction, fix and flip and refinance.

Shares appear to be an excellent value right now, with analysts forecasting 31% gains in the coming year and 116% growth over the next five years. What’s more, the 52-cent dividend represents a whopping 16.94% yield. Analysts polled by Yahoo Finance rate the stock a “buy.”

4. Bark, Inc. (NYSE: BARK): $1.10 per Share

Bark is a direct-to-consumer company focused on the pet supplies space. Founded in 2012 as BarkBox, the company has since changed its name to Bark, Inc.

Bark’s flagship product, the BarkBox — a monthly subscription-based product that ships goodies for your dog to your home — did well during COVID-19. However, as traditional retail opened back up, sales slumped. At the same time, investors ran from special-purpose acquisition companies — Bark went public as a result of its merger with Northern Star Acquisition Corp., a publicly traded SPAC — causing further pain for the company.

Nonetheless, some are expecting a comeback after the company restructured its business to offer more products. Of the four analysts following this stock in May, three rated it a “strong buy” and one rated it a “buy.”

5. MarketWise, Inc. (NASDAQ: MKTW): $2.62 per Share

Tech stocks fell hard in the bear market that began last winter, but they’re rebounding nicely as the markets recover. MarketWise, Inc. is a perfect example. While down over 23% for the past year, this fintech, which offers a subscription-based platform with financial research, education and tools for self-directed investors, has gained 45.24% so far this year. And analysts say it’s still undervalued.

MarketWise’s subscriber base grew 6.6% year over year in the first quarter, and profits are up 32.9%. Analysts rate the stock a “strong buy” with a $3.50 price target — nearly 50% higher than its closing price on June 1.

6. Ardelyx, Inc. (NASDAQ: ARDX): $3.63 per Share

Ardelyx is a biopharmaceutical company focused on developing and commercializing drug candidates that address significant unmet medical needs. Its current product takes a novel approach to treating irritable bowel syndrome. Pipeline products include a small-molecule therapy for renal and cardiorenal conditions, including metabolic acidosis, for which there is no cure.

The bottom fell out in July 2021 for ARDX shares, and at one point they traded for 25 cents. But prices have trended upward over the past year, gaining over 470% — 24.21% year to date. All seven analysts who follow the stock rate it a “buy” or “strong buy,” and the price target is $8.21 — more than double the current share price as of June 5.

7. EMagin (NYSE: EMAN): $1.99 per Share

EMagin is one tech stock that managed to avoid much of last year’s volatility. Founded in 2020, the company develops, designs and manufactures active-matrix organic LED microdisplays for use in augmented and virtual reality devices and other imaging products. Samsung recently acquired the company in a transaction that’s expected to close in the second half of 2023, according to a press release. Samsung will compensate shareholders $2.08 per share.

Shares rose from $1.68 to $2.02 following the May 17 announcement and have hovered close to $2.00 since then. That means you’ll need a lot of shares to make money on a $1.99 purchase, but the stock still has a consensus “strong buy” rating.

8. Genasys Inc. (NASDAQ: FNSS) $2.66 per Share

Critical communications systems are an integral part of emergency management. Genasys provides an Internet of Things platform for those communications, giving governments and other enterprises the tools they need to broadcast targeted messages, issue mass alerts and facilitate evacuations.

Genasys has had six consecutive years of revenue growth and expects 2023 to be its seventh. While not yet profitable, its 12-month price target is $5.31, more than double the current share price.

Final Take

Although most stocks under $5 come with significant risk, sometimes taking that risk pays off. If you’re considering jumping into small-cap stocks, those listed above are some of thebest stocks under $5 on the market today.

Daria Uhlig contributed to the reporting for this article.

Share prices are accurate as of market closing on June 5, 2023.