Many people believe that they cannot invest in stocks because they don’t have the spare cash flow to buy. It’s easy to believe when you see Amazon shares at $3,000 each.
Fortunately, everyone can still find cheap stocks to invest in without breaking the bank or your credit card. Online brokerage firms often use stock screeners to locate stocks you want in the parameters you set, including price. But before we go any further, we need to understand what stocks are.
Stocks are proof of ownership in the company.
You are giving money to the company to improve their net worth, and in return, they give you a dividend (cash payout every 3 months or annually). The more stocks you have in a company, the more ownership you have. The more ownership you have, the more influence you have. As the company grows, stock shares will increase in value, which means higher dividends for you.
Imagine if you had invested in Apple when they first started? Your stocks are worth a lot more now!
Stocks are available for all sorts of companies and industries. Think about those things that you are most interested in.
For some people, that may be stocks in the agriculture industry or real estate, and for others, it may be gaming systems or even mining stocks. In this article, we will teach you what to look for and some stocks to consider that have a share price under $20.
What to Look for When Picking Stocks to Invest In
Now that you are a bit excited by the idea of investing, we need to talk about what to look for. Just because a stock is affordable to your wallet does not mean that you should invest in it.
Price to Earnings Ratio
As with any investment opportunity, there is math to be done. The Price to Earnings Ratio (P/E Ratio) is an important one as it explains the stock’s health. First, you need to know the current earnings per share.
You find that by taking the earnings for the last 12 months and dividing it by the common shares outstanding. Then you take the current stock price and divide it by the current earnings per share.
Sounds like a lot, right?
Don’t worry; brokerage firms offer this information, so you don’t have to calculate it. Imagine that a company’s P/E is 20, which means every investor will pay $20 for every $1 earned by the company. It doesn’t sound great. Except if the company is growing fast, then it turns into big money for you.
If the company’s P/E is lower than their competitors but shows significant and consistent growth, that is a stock to consider. If it’s higher than their competitors, watch, but wait. This is similar to market caps and their presentation of company value.
Beta
Beta is a measurement of risk. A beta rating of one is neutral; there really isn’t a measurement of risk at one. Higher than one is a higher risk, and the higher the rating, the riskier everything gets. Anything below one is low risk, and the risk drops the lower the rating.
Generally, those who like to avoid risk will look for low beta ratings. However, this also means that a good return of investment (ROI) might be a lot slower. If there is a dip in Wall Street, the impact won’t be as heavy. Risk-takers will see a great ROI quickly if their stock does really well. But they can also lose a significant amount if the company fails or a drop in the stock market. Know the company’s beta rating and know what level of risk you will be comfortable with!
Debt To Equity Ratio
Debt to Equity Ratio is another assessment of risk. All companies have some debt, but how much debt is important to know. This ratio is found by using the information on the company’s current Balance Sheet. You take the total liabilities amount and divide it by the shareholder equity. For low-risk investors, that number should be 0.3 or less. However, consideration for the industry is important, as some are more debt-laden than others. For example, stocks in the biotechnology industry and construction industry often have higher debt.
Executive Leadership
Who is at the helm is extremely important to investors. We often look to invest in companies that share our same values. We want a company that is devoted to its employees and customers. Family-run businesses are a draw for many, especially if the family has meticulously stuck to its core values as the business stays fluid with the times. The work history of the leadership is also critical. How well has the company bounced back from hardship? Did they do anything to save the company? Has the leadership been fluid with economic fluctuations?
Dividends
The point of income is to make money, and dividends are a key component in investing in a company. Dividends are similar to interest on your savings account. Each quarter (or sometimes annually), the company will issue dividend payments to the shareholders based on their earnings for that time period. Some companies will issue stock rather than a cash payout.
As with many aspects of investing, the industry is important to the dividend yield. Certain industries will have higher returns than others. Healthcare, energy (especially crude oil and gas), utilities, and financial are the industries with higher dividends.
If you are using a brokerage firm, don’t be shy about asking for this information. They are there to help you make money and they can provide you with real-time answers.
What are Some of the Best Stocks Under $20?
Part of what will help in your investing endeavors is why you are investing. Maybe it’s to save for retirement or to buy a new home. There are lots of ways to save for those in the investment world. Certificate of Deposits (CDs), Exchange-Traded Funds (ETFs), Crypto (such as Bitcoin), and Mutual Bonds are options, but the tried and true method has been through stocks. To help you make a more informed decision, here are four stocks (disclaimer: in no particular order) we suggest you investigate.
- SilverSun Technologies (NASDAQ: SSNT)
- SSR Mining (NASDAQ: SSRM)
- Big 5 Sporting Goods (NASDAQ: BGFV)
- Teva Pharmaceuticals (NYSE: TEVA)
SilverSun Technologies (NASDAQ: SSNT)
If technology is a passion of yours, then consider SilverSun Technologies. Founded in 1988, this tech company has been providing applications and consultations to find business management solutions, financial reporting, and warehouse management for nearly 40 years.
SilverSun Technologies is located in East Hanover, NJ, and boasts annual revenues of around $40 million. The last year has been full of steady growth with few dips in value, which is typical for tech stocks. Yahoo Finance indicates a bullish pattern, which means the stock value should be rising very soon.
This may be because of the recent announcement where the company announced its intent to acquire the Human Capital Management (HCM) Division of PeopleSense. The company opened its own HCM department in 2018 and has seen explosive growth in the coming years. This acquisition will enable them to support the expansion.
Mining Industry Stock: SSR Mining (NASDAQ: SSRM)
In the modern world, we forget that some industries still exist. The mining industry is one of those, and yet it’s one of the strongest sectors to consider investing in. SSR Mining began in Vancouver, Canada, in 1946. It owns the largest silver mines in Argentina and North America. It also produces gold, zinc, and tin. With a business succeeding for over 80 years, it is easy to see why they make the list.
The company stock has been growing but has seen some volatility. The 52-week high occurred in July 2020, when the stock was $24. Their low was in March 2020, when it was $12.50. Stock value at publication is $14.93. Analyst ratings indicate a neutral pattern which means they don’t predict growth or fall in the coming months. This is a stock that is worth investing in if you don’t mind the high risk involved.
Big 5 Sporting Goods Corporation (NASDAQ: BGFV)
For sports fans in the midwest and west coast, Big 5 Sports Goods is home away from home. Based out of El Segundo, California, this company has been supplying its customers with workout apparel, hiking equipment, and everything you need to play your favorite sport since 1955.
Under the helm of Steven G. Miller, the company has been doing quite well. Current earnings are under $60 million, and revenues have reached $1 billion. This may be due to the global pandemic and lockdowns across the United States.
With more people at home and the need to find things to bide their time, there is an uptick in sports and activities. Many folks have turned to running as a way to shed off the Coronavirus weight gain, and shoes and gear are necessary. The store also utilized e-commerce more with the shutdowns than before.
Does this mean that there will be a drop in value? Yahoo Finance is noticing a pattern indicating more gains to the stock in the coming months.
Teva Pharmaceuticals (NYSE: TEVA)
As we mentioned previously, health-related stocks do quite well, and that goes for the pharmaceutical companies. Teva Pharmaceuticals is one of the leading companies in the pharma industry. Its journey began in 1901 in Petah Tikva, Israel, where it is still located. Its main focus is developing renewable generic medications and biopharmaceuticals. It also provides over-the-counter treatments and specialized therapies.
2020 revenue was over $16 billion. The past year has shown some incredible growth and painful losses. This is a stock meant for those who like to take risks. May 2020 saw one of their biggest growth spikes over the year, with a major drop in September 2020. They have been working their way back up, but Yahoo Finance predicts another loss in the coming weeks. Afterwards, there should be more growth making this a strong buy right now.
In Conclusion
So we have discussed how easy it is to find low-priced stocks and what to keep an eye out for. Knowing your budget and your reason for investing will keep you motivated to learn more.
Remember to think about your passions. If you work in the field of natural gas and want to invest in a company, that would be ideal.
Or perhaps penny stocks with a biotechnology company or partial stocks with Tesla. Healthcare is big but so is cannabis! Our list of stocks is a jumping-off point so that you can learn as you go and figure out what you want to do in future investments.
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