Before buying these under-$5 stocks for new investors, ask yourself two questions. One, does it have the financial strength to survive the next few years, especially in today’s macro climate? And two, are its unique value propositions sufficiently differentiated to create long-term opportunities?
Here are just a few of the top under-$5 stocks for new investors you may want to buy and hold today.
ChargePoint (CHPT)
One of the top under-$5 stocks for new investors is ChargePoint (NYSE:CHPT).
Granted, critics highlight several issues, including decelerating installation rates, liquidity worries, and the challenge of contending with Tesla’s (NASDAQ:TSLA) expansive charging network. And while these concerns are indeed valid, the. CHPT stock still stands out as a promising candidate.
Rick Wilmer, CEO of ChargePoint, has characterized the recent quarters as a period of cautious observation rather than a decline in operations. Looking ahead to 2024, he expressed optimism, noting an improvement in the company’s outlook as more economic data becomes available, suggesting a possible “soft landing” for the economy.
Competing in the electric charger installation market, especially against Tesla, is an expensive venture. However, a reduction in interest rates could open up new avenues for liquidity, potentially catalyzing a swift expansion.
Talkspace (TALK)
Talkspace (NASDAQ:TALK) emerges as one of the select under-$5 stocks providing remote mental health treatment, including psychiatric care. This distinction is crucial because many well-known mental health services focus solely on therapy and cannot prescribe medication. Moreover, unlike some competitors, Talkspace accepts insurance, broadening its potential customer base.
In recent years, Talkspace had challenges with profitability, rate increases, and adjustments to post-pandemic realities. Nevertheless, TALK is on a swift recovery trajectory, with prospects looking brighter. According to the company’s CEO, mental health services demonstrate remarkable resilience against the trends of returning to office settings compared to other healthcare sectors. He highlighted that mental health accounts for 65% of all telehealth consultations.
In addition, Talkspace is rapidly advancing its market share within this 65% segment by extending its services to include Medicare and Medicare Advantage members. Accessing these segments represents a significant achievement.
Stem (STEM)
Stem (NYSE:STEM) stands out from solar stocks on two counts: an emphasis on AI and, of course, its under-$5 status. The company specializes in optimizing energy consumption for its commercial and industrial clients through its flagship software, Athena. That software employs advanced analytics to automate energy decisions, which can lead to substantial cost and energy savings.
Stem is expanding its reach through strategic partnerships and exploring new markets, tapping into the growing demand for intelligent energy solutions. Its AI-focused approach sets it apart in the competitive landscape of clean energy storage, providing a significant edge.
In addition, its latest quarterly report signals a path toward profitability. Its focus on enterprise solutions also offers a buffer against the residential solar sector’s challenges. Additionally, with a valuation that is more attractive compared to other solar stock picks, STEM is an excellent addition to an under-$5 stock portfolio.
Matterport (MTTR)
Matterport (NASDAQ:MTTR) shares seem to have stabilized in recent weeks. Despite disappointing its shareholders with a revenue estimate miss, Matterport demonstrated effective cost management over the past year. For example, its non-GAAP loss dropped from $0.09 per share to $0.04. This improved bottom line suggests the company is well-positioned to capitalize on an ongoing surge in virtual reality.
In response to challenging economic conditions, Matterport laid off 30% of its workforce as part of its cost-reduction efforts. While such layoffs are unfortunate, this action signals Matterport’s commitment to streamlining operations to ensure its long-term sustainability. CEO RJ Pittman emphasized that these difficult decisions are aimed at focusing the company more sharply, improving execution speed, and hastening its journey toward operational cash flow profitability.
Perimeter Solutions (PRM)
Perimeter Solutions (NYSE:PRM) also stands out as an under-$5 undervalued stock. Specializing in firefighting equipment, particularly chemicals crucial for fire suppression and extinguishment, the company has seen impressive growth since 2010. Last year, Perimeter reported a CAGR of 7.2% since 2010 and projected its revenue to reach $100.2 billion by 2027, up from $70.8 billion in 2022. This anticipated growth rests on the consistent demand for firefighting equipment.
Perimeter aims to “provide private equity-like returns with the liquidity of a public market,” and it successfully meets this objective on both counts. This achievement positions it as a prime investment opportunity for those looking for under-$5 stocks. With a price-to-book ratio of just 0.76, PRM offers value opportunity.
Tilray Brands (TLRY)
Tilray Brands (NASDAQ:TLRY) stands out as an under-$5 stock that’s positioned to capture multiple growth segments: craft beer and cannabis.
Last year, the company made significant strides into the former market, a move that was much more than just a pivot from the cannabis industry or a simple diversification strategy. Tilray’s acquisition of eight craft beer brands from Anheuser-Busch (NYSE:BUD) provided a unique differentiation tool for investors.
Beyond acquiring the brands, which include well-known names like Shock Top, Tilray gained access to an established distribution network, a powerful marketing apparatus, and a wealth of knowledge on legal compliance. Beverage companies have mastered the science of enticing consumers to enjoy their products, and Tilray smartly bypassed years of learning by purchasing this institutional knowledge.
This strategic move is especially promising for Tilray’s focus on cannabis-infused beverages. With the potential legalization of cannabis, Tilray is well-positioned to introduce products through its newly acquired supply chains quickly. This early advantage positions Tilray as a frontrunner in a competitive market, potentially securing a dominant stance early on. Given Tilray’s current valuation in nearly penny stock territory, it’s arguably a top cannabis stock and easily one of the best under-$5 stocks for new investors.
Flexible Solutions International (FSI)
Pool covers and chemicals may not strike many as a hot stock sector investment, but Flexible Solutions International (NYSEAMERICAN:FSI), an under-$5 stock for new investors, stands out as significantly undervalued and poised for a swift recovery. Over the last decade, the company has quadrupled its revenue, a remarkable achievement given its focus on a relatively niche market. Moreover, its solid financial health is evident in a cash-heavy balance sheet where current assets significantly exceed debt, indicating a stable capital structure capable of weathering volatility or funding growth endeavors.
In November 2023, FSI’s shares plummeted following a disappointing earnings report. However, all signs suggest this downturn was an isolated incident unlikely to recur. Despite this, FSI’s stock is currently trading below its book value (0.7x) and sales (0.58x). While it may not transform investors into millionaires due to its modest growth prospects, its pronounced undervaluation marks it as an ideal short-term investment in the under-$5 segment.
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On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.