How to Find Cheap, Buy-Ranked Stocks under $5

Yet again, the S&P 500, the Dow Jones, and NASDAW broke previous records. With the market as strong as it currently is, investors might be wise to broaden their portfolio with a few cheap, yet solid, stocks to your name. Searching for “stocks under $5” with profitable potential can be an extremely attractive strategy for investment. It is recognizing which has lucrative likelihood and which do not. 

Finding the Best Stocks to Buy

However, there are other factors to consider when buying stocks under $5 too, both contextual and comparable, not just cost. Price is not all there is to it. With that said, any stocks in this price range are cheap, but not all are the same when it comes to yield, and this is what makes all the difference. These stocks tempt you to purchase a substantial position in the business. However, what does that quite mean? 

Understanding Penny Stocks

Penny stocks, as their name implies, derive from the fact that just a dollar, even less, could buy you a share. These days, according to the U.S. Securities and Exchange Commission, that threshold is $5, making any share $5 or less a verifiable penny stock. Because these stocks are, by nature, highly speculative, these stocks can be unpopular among some investors, the best stocks to buy among others. 

However, this is not always the case. Penny stocks regular trade infrequently, and they hold wide spreads for bid and ask. They have many other characteristics too that, quite often, can cause intense volatility. Having said that, all stocks carry risk, and some penny stocks perform exceedingly well, which is why they continue to remain an attractive option for investors, especially novice traders. 

Stocks under $5

As you know now, stocks trading at $5 or less are penny stocks. Those trading at $10 or less falls into the next category of cheap stocks, considered generally to be less risky than penny stocks. $5 stocks carry high risk. Often, investors have no idea who these companies are, nobody has ever seen the tickers, but if you trade smart, you can win big, or lose little, since $5, even $10, is really not much to cause woe. 

However, despite more investors knowing about companies trading in the $10 class and the tickers, they remain inherently and significantly more speculative than most other stocks priced in a higher range. If very selective, you can find winning penny stocks, and if you trade very wisely, you could even make excellent money doing it. How? You screen them. Properly. 

Screen Parameters

As with any investment, even $5 ones, it is imperative that you research the companies you invest in. Know their stocks. Know them well. If you are looking for stocks priced at $5 or less, make sure they have a greater volume than 1,000,000, or have at least equal volume. Aim for a ranking of two or less, with no holds, sells, or strong sells stipulated. Check the following too: 

    • Make sure penny stocks have a broker rating of either Hold or Better, which averages around a rating of 3.5 stars. Anyone rated lower might deserve a pass. 

    • You do need analysts covering the stock, at least two of them, more if you want, but no less. 

    • You want to see revisions to the Earnings Estimate, upward preferably and not downward. Over 12 weeks, stocks should be performing. If worsening, it might be time to sell. 

Best Stocks to Buy

Penny stocks can be very lucrative if you know how to play them. The best stocks to buy are not always obvious. You want solid growth potential, but you want it without burdening your portfolio with cheap stocks under $5. Still, they can work for you, and are worth considering bolstering your profits. However, it is important to remember your homework. Screen for the best stocks to buy yourself, and test them.