7 cheap and promising US stocks for 2023
Investing in the cheapest and promising stock in the US market is the goal of every investor. 8 cheap US stocks have a future for those who do not have enough experience to choose the best cheap US stocks. Cheap stocks are those stocks that are trading at less than $5 a share, as defined by the US Securities and Exchange Commission (SEC) for penny stocks.
If you want to buy cheap US stocks that have a future in 2023, you should first know some things about them to reduce the level of risk involved. A cheap share price does not necessarily mean that it is a promising investment opportunity, so we do not buy it just because it is cheap.
7 cheap US stocks with a future
The US stock market started the month of May 2023 with weak momentum, as the market experienced strong selling after investors assessed the implications of the more tightened monetary policy put in place by the Federal Reserve to fight high inflation. Given this, many people may feel that now is a bad time to invest in cheap US stocks, but if you are smart in your choices, this could be an excellent time for your investment in the best and promising cheap US stocks 2023.
Cheap US stocks are generally stocks of small companies that trade for less than $5 per share. If a rebound occurs, small-cap stocks can benefit from their very low prices, as the adage “buy sell low high” will increase the chances of a recovery.
When it comes to these cheap stocks, people may wonder if they can be made money and if they are a good buy. The answer to these two questions is yes. Certainly, although cheap stocks are more risky than other, more established stocks, higher risks come with higher returns as long as fundamental analysis is applied.
1- Canaan Corporation and stock symbol (CAN)
Canaan (NASDAQ:CAN) is a Chinese company that designs chips aimed at supporting blockchain technology and bitcoin mining. This company has a price-to-earnings ratio (for the next 12 months, or TTM) of 1.7 and a 1-year target of $14.83. Compared to Friday’s closing price of $3.09, that represents a potential return of 381%.
These stocks incurred losses of 40% in 2022, and there could be more volatility ahead as the company will announce its results for the first quarter of 2022 on May 19th.
The recovery in the cryptocurrency market, which also saw a sharp sell-off along with the stock market, should be supportive of this company. In 2021, its sales growth of 1.092% was explosive, as was profitability as net income increased by 1.095%. Diluted EPS grew to $1.81 in 2021 compared to -20 cents in 2020.
The third positive factor that makes this stock one of the most promising cheap US stocks for 2022 is the explosive growth of its free cash flow, as its free cash flow jumped 2.765% in 2021 to $222.6 million. This enhances the possibility of a rally in shares until the earnings release on May 19th.
This stock is among the 7 best promising cheap US stocks in 2023 due to the company’s high potential for growth.
2- Pitney Bowes Company stock symbol (PBI)
Pitney Bowes (NYSE: PBI) is a global freight and mail company that provides technology, logistics, and financial services in the United States and internationally. It has a dividend yield of 4.4% at last Friday’s closing price of $4.55. Having an attractive dividend yield is encouraging as it can boost the overall yield on a potential upside.
The TTM of 15.2 is relatively low and the one year target of $7, if achieved, would represent a return of 54%, which is very good.
First quarter 2022 financial results were strong Mark, President and CEO of Pitney Bowes, stated: “We saw significant margin expansion in our global e-commerce business and excellent execution in our SendTech and Presort businesses. More importantly, global e-commerce posted its highest quarterly gross margin ever, and SendTech and Presort grew in aggregate again in terms of their first-quarter earnings.”
In addition, the company has strengthened its balance sheet by reducing debt by $99 million in one quarter. Unfortunately, the company has been inconsistent in terms of profitability over the past five years, posting a net loss in 2020. But on the other hand, it is constantly generating positive free cash flow, which is indicative of an uptrend.
The price at which this stock trades, as one of the 7 best cheap and promising US stocks, is a very low price compared to the price levels it knew in its past months and years. So the possibility of its rise is a very logical and feasible possibility.
3- Telefónica and stock symbol (TEF)
Telefónica (NYSE:TEF) is a European and Latin American telecom services company that has a price-to-earnings ratio of 3.4 and a dividend yield of 8.2% with last Friday’s closing of $4.92.
Who says cheap US stocks can’t offer high dividend yields to offset their risks? This stock is one of the cheap stocks that you can buy with an attractive return.
One year target for Telefónica stock is $6.46. The company is expected to achieve a growth in earnings per share in the next three to five years also by 15.87%.
This puts Telefónica stock in the list of cheap stocks that are expected to deliver strong growth while providing attractive passive income. Revenue growth isn’t impressive, but profitability does, as it is flat and increased by 492.34% in 2021 to $7.88 billion. The diluted yield of $1.37 increased by 466% in 2021, compared to the diluted yield of 24 cents in 2020.
In the end, investors only care about one thing: returns. This is why Telefónica’s stock is one of the most attractive cheap stocks and makes it among the cheapest stocks in the US market and promising on this list.
4- X Financial and stock symbol (XYF)
X Financial (NYSE: XYF) is a Chinese company that provides personal financial services such as credit loans, home loans, investment products, and insurance. Shares of X Financial have experienced moderate losses of around 16% year-to-date, and 2021 appears to mark an inflection point as the company reported sales growth of 76% to $562.3 million. It also turned to the profit path after recording in 2020 a net loss of $189.58 million.
In 2021, X Financial reported net income of $127.98 million, a growth of 167.5%. The unaudited financial results for the fourth quarter of 2021 and the unaudited financial results for the full year were strong, showing a year-on-year increase of 15% to 823.4 million yuan from 716.3 million yuan in the first quarter.
The full-year income from operations in 2021 was 1,311 million yuan, compared to a loss from operations of 1,430.3 million yuan in 2020.
5- Charles & Colvard, stock symbol (CTHR)
Charles & Colvard is a fine jewelry company that saw a loss of approximately 52% of its stock in 2023. The price-to-earnings (TTM) ratio of 3.9 is very low and the 1-year price target is $2, which represents a potential upside of 45%.
The company announced its results for the third quarter of fiscal year 2022 on May 5, which showed great strength in the level of sales. There was a 22% increase in charlesandcolvard.com’s revenue year-over-year, but the big news was the announcement of a $5 million share buyback Prograame.
In general, share buybacks by companies are considered positive, as they reflect optimism in business prospects and often indicate that management considers its shares to be undervalued. In 2021, net income growth and revenue growth were 307.9% and 34.4%, respectively.
This stock is trading, as one of the best 7 cheapest and promising US stocks in 2023, at a price of $1.45 currently and its price is supposed to rise to higher levels in the future.
6- Companhia Siderurgica Nacional, stock symbol (SID)
Companhia Siderurgica Nacional (NYSE: SID) is a steel producer with operations in Brazil and Latin America. The price-to-earnings ratio (TTM) is up to 2.8 which is generally low.
The dividend yield of 11.5% is very attractive and could add a safety net to the share price, which closed at $3.53 last Friday. On the other hand, the 1-year target at $4.65 indicates a probability of an upward move of approximately 32%.
The expected three to five year earnings per share growth of 3.21% isn’t too bad. Some other factors to admire about SID stock is the steady sales growth which was at 10.74%, 18.19% and 59.37% in 2019, 2020 and 2021 respectively. Profitability is also very strong, with net income growing 223% to $12.26 billion in 2021.
The company is generating steady positive free cash flow as well. So, it’s a cheap stock with deep value now.
Like most of the stocks on this list of the top 7 cheapest US stocks for 2023, this stock is trading as cheap as $3.6 currently.
7- Destination XL Group, stock symbol (DXLG)
Destination XL Group (NASDAQ: DXLG) is a large and tall men’s apparel and footwear retail company in the United States and Canada. The stock has a price-to-earnings ratio (TTM) of 5.3 and a 1-year price target of $10.
After closing at $4.36 last Friday, Destination XL Group shares have suffered losses of nearly 23% in 2022.
The company will announce its financial results for the first quarter of 2022 on May 26, so volatility can be expected on that day.
Meanwhile, this retailer did several things right on key metrics for fiscal 2022. Revenue increased 58.34% to $505.02 million; For the company to turn into profits, as it recorded net income of $56.71 million after a series of net losses for the fiscal years 2018-2021; Free cash flow increased to $85.23 million.
Another positive factor is the 7,367.00% increase in fiscal 2022 net operating cash flow to $90.5 million. The company has made a lot of money from its normal business operations, and that’s great news.
What is the secret of the attractiveness of cheap US stocks?
Some of the cheap US stocks have great growth potential and high returns, but they carry higher risks compared to blue-chip stocks. Therefore, US stock hunters look for stocks that look cheap either because of temporary factors or because the market has not yet realized its true potential.
The motive behind searching for the cheapest stock in the US market that has upside potential is the chances that the small consideration will develop into profit and a large return. Buying a $1 stock and it only takes the price to rise to $2 or $3, so you can double the capital you invested in this stock.
The low value of some cheap US stocks is for reasons that are not necessarily negative. You may find cheap shares for companies facing difficult financial conditions, the possibility of bankruptcy, or suspicions of fraud. In some of these companies’ cases, a company can go through tough times and then bounce back if it has a strong management team or is an emerging business with strong growth potential. But of course these are exceptional cases.
But this type of analysis is very wrong. While it may seem like a simple step, the stocks of major companies may develop in the same way or more, which will also achieve a great return. The rise in the price of a cheap stock by 30 cents and the evolution of its price is not the same situation as in the cases of high-priced stocks. Big stocks are behind big and well-established companies, so the price of their shares is often coherent and develops in the long term. While in the case of cheap stocks, it is often very difficult to develop the price at an increasing pace and achieve double the price because the companies behind those stocks are not all with the same potential and potential for success.
In addition, some people buy cheap American stocks because it enables them to obtain a large number of shares, but be aware that large profits are not determined by the amount of shares you own, but by the value of the shares you own.
On the other hand, some investors avoid this type of cheap US stocks for many reasons, most notably that they are sometimes subject to some manipulations.
Reduce the risk of trading cheap US stocks
If you decide to try investing in this type of stock, here is what you should know before buying any cheap US stock, to reduce the risks involved in this type of stock and increase the chances of finding cheap US stocks that have a future:
* Understand that you are a speculator and not an investor:
If you are buying cheap US stocks just because you got interesting advice from an email, then you are a speculator. This means that you are investing in stocks in search of a quick and big jump, not to keep them forever or for long periods of time. In the event that you have got your expected jump, it will often be better to sell your shares to move forward because these shares will often decrease in value over time again. In contrast to the case of speculators, investors buy stocks with high values because their companies are strong and well-established. So investors follow the long-term buy-and-hold strategy because they invest for years and sometimes decades instead of speculating on prices in the short term.
If you want cheap US stocks with a future, you should start small and move slowly and carefully. Allow this type of stock a small part of your overall investment portfolio, not to exceed 10 percent or less of your individual stock balance. Learn more about this type of stock, and the factors that can contribute to its decline and rise.
Beware of fraud and deception:
Cheap US stocks often form the bottom of the market, often in secondary stock market trades rather than on major exchanges such as the NYE or Nasdaq. Outside the scope of the main stock exchange, companies may not be required to tell their investors everything related to the financial statements as a main investment requirement, which means that the most important information about the company in which you invest will be missing. Here, in the absence of figures and transparent financial statements, trading decisions will be based on emotion, which is often easy to manipulate.
Cheap stock scammers often engage in the two most common types of scams. In the first type, the company and the first partners may hire a commercial promoter to write emails or electronic newsletters to raise the value of shares. These emails or flyers can contain all kinds of promises regarding the company’s future to raise investor enthusiasm. And when the value of the shares rises as a result of the increase in the new demand, the partners and the company sell a large number of shares at a high profit rate, after which the value of the shares decreases again. In some cases, the reverse method may be used, as stock promoters try to reduce the value of shares by promoting the possibility of a drop in the price of shares and broadcasting negative news about the company. This hype allows sellers to take profits thanks to the devalued shares.
Check trading volumes:
You often only make profits when you close your deals (selling your shares that you bought). If you own the cheapest share in the US market, which is likely to grow, but you are unable to sell your shares of this share, this growth in value will not make any difference to you. Therefore, before you buy any share, you must search for the average daily share trading volume.
Be keen on the principle of diversification:
Make sure you keep your money safe in long-term investments such as the S&P 500 index fund. These funds are often easy to sell, as well as adding the best American companies to your investment portfolio in a way that balances the risks involved in the cheap stocks you invest in.
Always be prepared to do research.
In the same way that you should research blue-chip stocks, you should read about any financial deposits. The latter can be obtained directly from the company or from the Securities and Exchange Commission. In the absence of any financial statements, this can be a big red flag. In this case, you should leave this stock and move on to look for another.
When you are in the midst of searching for cheap US stocks that have a future, you must be careful to separate the propaganda and its hype from the reality of the situation. This means that you will need to build real industry knowledge from other sources, not just from the company. The management department often engages in inflation in a desire to raise the price of the stock so that they can sell it or so that the company can issue more shares and keep the business afloat.
Avoid extra graphics:
If you’re buying cheap US stocks, you’re basically buying a large number of low-priced shares. Some stockbrokers may charge additional fees for shares whose price is less than a certain level, and they may charge you more fees in the event that you will trade more shares than the specific number they have set.
There is no reason for you to be complacent with these overcharges. Therefore, look for a broker that does not impose any additional fees or restrictions on the number of shares allowed to be traded and also allows you to trade small-cap stocks in the same way that you trade high-priced stocks.
There are a plethora of reasons why you should steer clear of cheap US stocks. In addition to the fact that you will be more susceptible to manipulation of this type of stock, in addition to that finding the best cheap American stocks is not easy, and it may be difficult to resell them compared to the popular stocks in the market.
Cheap stocks are known for their volatile nature which can generate huge losses at times. Therefore, you must make informed investment decisions in order to protect yourself. The price levels in this article do not really represent buying recommendations or investment advice. Keep in mind that it is your responsibility to make your own trading decisions based on your own capabilities of logical and financial analysis and on your own risk management skills.
But even these reasons may not stop some investors from trying their luck with cheap US stocks.
Disclaimer: The content of this article is for informational purposes only. The information provided should absolutely not be considered as investment advice or a recommendation. No warranty is made, express or implied, as to the accuracy of the information or data contained herein. Users of this article agree that Money Secrets does not accept responsibility for any of their investment decisions. Not every investment or trading strategy is suitable for anyone. See the risk warning statement.