In an interview with CNBC on January 25, Jill Carey Hall, Global Research Head of U.S. Small and Mid-Cap Strategy at BofA, discussed her outlook for the small-cap and mid-cap space. She believes that this year may not be the best for small caps, citing a tough backdrop and disappointing profit growth. According to Hall, the profit growth recovery story that many investors were bullish on last year has continued to get revised down and pushed out further into 2025, resulting in negative year-over-year earnings growth in the small-cap segment.
Hall thinks that mid-caps are a better bet, citing better fundamentals and balance sheets. She notes that if the market broadens out, mid-caps could offer the best risk-reward, especially in an environment where multiple rate cuts have gotten priced out of the market. BofA expects the Fed to stay on hold and not cut rates further, which could pose refinancing risks for small caps. In contrast, mid-caps have better balance sheets and fundamental trends, making them a more attractive option.
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Despite the optimism around the economy and potential policies from the Trump administration, Hall believes that rates still matter more than anything else. She notes that small caps have underperformed for a decade and are due for an outperformance cycle, but this year may not be the best time to jump back in. Hall thinks that investors are nervous about small caps and need to see a more convincing profit turn and stabilizing rates before becoming more bullish. However, she does see opportunities in domestic mid-caps, particularly those with less leverage, less refinancing risk, and economic sensitivity.
Hall advises being selective in the small-cap space, rather than owning a benchmark. She believes that certain pockets of the market, such as financials, are well-positioned to benefit from the current backdrop, and that owning stocks with rising earnings estimates could be a good strategy. She emphasizes the importance of watching rates and profit growth, and being selective in one’s investments, rather than making broad bets on the small-cap space.
While small caps may face headwinds this year, mid-caps appear to present a more favorable opportunity due to stronger fundamentals and reduced refinancing risks. With that in context, let’s take a look at the 10 best affordable stocks under $5 to buy now.
A stock market data shown on a tablet. Photo by Burak The Weekender on Pexels
Our Methodology
To compile our list of the 10 best affordable stocks under $5 to buy now, we used Finviz and Yahoo stock screeners to identify 25 companies with a forward price-to-earnings (P/E) ratio below 15 as of January 24, and an average analyst-projected earnings growth of at least 8% for the current year. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Affordable Stocks Under $5 to Buy Now
10. Getty Images Holdings, Inc. (NYSE:GETY)
Number of Hedge Fund Holdings: 4
Forward P/E Ratio as of January 24: 14.77
Earnings Growth This Year: 10.53%
Stock Price as of January 24: $2.62
Getty Images Holdings, Inc. (NYSE:GETY) is a leading global provider of premium visual content and services. The company offers an extensive collection of high-quality images, videos, and other media assets to businesses, media organizations, and creative professionals worldwide. Getty Images Holdings, Inc. (NYSE:GETY) operates through three primary brands: Getty Images, iStock, and Unsplash+.
Getty Images Holdings, Inc. (NYSE:GETY) has been expanding its subscription business, which contributed to over 50% of its total revenue in Q3. The company has experienced nine consecutive quarters of strong double-digit growth in its annual subscriber base. This growth has been fueled by the success of its e-commerce platforms, particularly iStock and Unsplash+, which have attracted new customers from target growth markets across EMEA, APAC, and the Americas and supported the company’s geographic expansion strategy.
Getty Images Holdings, Inc. (NYSE:GETY) is also emphasizing its Custom Content offering, which has been trusted by leading brands such as Citi, Mitsubishi Motors, HSBC, Asahi, and 3M to produce tailored product and brand-specific content. These projects not only generate significant revenue but also strengthen customer relationships and create additional opportunities for upselling and cross-selling. Additionally, Getty Images Holdings, Inc. (NYSE:GETY) is leveraging its extensive archive to create commercials for global brands, including Prime Video. The company has also partnered with Sony Pictures on its Venom series and will utilize Getty Images Holdings, Inc.’s (NYSE:GETY) high-quality generative AI models to support the Venomize My Pet promotional campaign.
9. Inter & Co, Inc. (NASDAQ:INTR)
Number of Hedge Fund Holdings: 6
Forward P/E Ratio as of January 24: 8.81
Earnings Growth This Year: 53.85%
Stock Price as of January 24: $4.95
Inter & Co, Inc. (NASDAQ:INTR) is a leading financial technology company in Brazil, known for its innovative “Super App” that integrates a wide range of financial services, from banking and credit to investments, insurance, and e-commerce.
Inter & Co, Inc. (NASDAQ:INTR) is continuously enhancing its Super App to offer a more comprehensive and seamless user experience. The app is designed to go beyond traditional banking services and integrates features such as hyper-personalization, AI-powered concierge services, and a robust content platform. Hyper personalization is a key focus and the company using advanced data analytics to tailor services and offerings to individual client needs to drive higher conversion rates and increased sales. Furthermore, Inter & Co, Inc. (NASDAQ:INTR) recently launched an AI-powered Inter Shop Concierge which is expected to further drive traffic and monetization in the company’s e-commerce platform.
Inter & Co, Inc. (NASDAQ:INTR) is focusing on global expansion through its Global Account initiative. The company has already made significant inroads in the U.S. using its services for banking, investing, and shopping. The Global Account feature allows clients to manage international transactions and investments. Inter & Co, Inc. (NASDAQ:INTR) also plans to launch a credit card in the U.S. by 2025, which will further enhance its offerings. Beyond the U.S., Inter & Co, Inc. (NASDAQ:INTR) plans to explore other international markets through a bank-as-a-service model by leveraging its existing technology and financial infrastructure.
8. Banco Santander (Brasil) S.A. (NYSE:BSBR)
Number of Hedge Fund Holdings: 7
Forward P/E Ratio as of January 24: 6.22
Earnings Growth This Year: 9.09%
Stock Price as of January 24: $4.24
Banco Santander (Brasil) S.A. (NYSE:BSBR) is a subsidiary of the global financial giant Banco Santander, headquartered in Spain. The bank operates in Brazil and offers comprehensive banking services, including loans, mortgages, wealth management, and corporate banking solutions.
Banco Santander (Brasil) S.A. (NYSE:BSBR) is committed to diversifying its revenue streams and enhancing profitability. The bank has been expanding its presence in the auto loan market, which has shown strong dynamics and higher profitability compared to other credit products. Additionally, the bank is optimizing its funding mix, reducing funding costs, and improving the quality of its loan portfolio.
Another key area of focus for Banco Santander (Brasil) S.A. (NYSE:BSBR) is the expansion of its services to small and medium-sized enterprises (SMEs). The bank has launched a new service model that involves placing experts in the field to provide personalized support to SME clients. These experts, who are no longer based in traditional branches, are better positioned to understand the unique needs of SMEs and offer tailored solutions. The bank is also investing in content and educational programs to help SMEs grow and succeed.
Furthermore, Banco Santander (Brasil) S.A. (NYSE:BSBR) is leveraging advanced technology to enhance the customer experience. The bank is investing heavily in digital platforms, such as its new investment portal and the integration of its digital brokerage house, Toro, with its traditional banking services. This technological integration allows for a more personalized and seamless experience, making it easier for clients to manage their finances and access a wide range of services.
7. Telefónica, S.A. (NYSE:TEF)
Number of Hedge Fund Holdings: 9
Forward P/E Ratio as of January 24: 11.73
Earnings Growth This Year: 18.75%
Stock Price as of January 24: $3.91
Telefónica, S.A. (NYSE:TEF) is a multinational telecommunications company headquartered in Spain, The company has a presence in over 20 countries and serves millions of customers across Europe, Latin America, and beyond. The company provides mobile, broadband, and pay-TV services, as well as advanced digital solutions for businesses.
Telefónica, S.A. (NYSE:TEF) is heavily investing in digital transformation to stay at the forefront of technological advancements and is actively expanding its next-generation infrastructure to enhance its network capabilities and provide superior customer services. The company has been rolling out its fiber network and has a target of around 30 million by 2026. In Germany, Telefónica, S.A. (NYSE:TEF) has strengthened its position as a fiber infrastructure provider by acquiring Infra Fiber Germany, which will accelerate the expansion to 2 million premises. Additionally, Telefónica, S.A. (NYSE:TEF) is investing in 5G infrastructure and aims to offer cutting-edge connectivity solutions that will enhance customer satisfaction and drive premium service adoption.
Telefónica, S.A. (NYSE:TEF) is also focusing on increasing its backlog of higher-value contracts, which will bring more recurring services and revenue flows. The company’s Tech division, which includes managed and professional services, is concentrating on large contracts from the private sector. Furthermore, Telefónica, S.A. (NYSE:TEF) is exploring potential in-market consolidation opportunities to reduce network overlap and use invested capital more efficiently.
6. Borr Drilling Limited (NYSE:BORR)
Number of Hedge Fund Holdings: 10
Forward P/E Ratio as of January 24: 4.96
Earnings Growth This Year: 100.00%
Stock Price as of January 24: $3.52
Borr Drilling Limited (NYSE:BORR) is an offshore drilling contractor specializing in providing high-quality drilling services to the oil and gas industry. The company owns and operates a fleet of modern jack-up rigs, which are deployed to explore and produce hydrocarbons in shallow waters. Borr Drilling Limited’s (NYSE:BORR) clientele includes major oil companies and national oil corporations.
Borr Drilling Limited (NYSE:BORR) has consistently invested in modernizing and expanding its fleet to maintain a competitive edge in the market. The recent completion of its new build program, with the delivery of the Var, brings the company’s total fleet to 24 premium rigs, the youngest in the industry. This strategic investment not only enhances the company’s operational capabilities but also positions it to meet the evolving needs of its clients, who increasingly demand state-of-the-art technology and high performance. The company’s focus on maintaining a modern fleet is expected to drive long-term contracts and higher day rates, contributing to sustained revenue growth and profitability.
To mitigate the risks associated with regional market fluctuations, Borr Drilling Limited (NYSE:BORR) is diversifying its contract portfolio across multiple regions, including the North Sea, the Middle East, Africa, and Asia. This diversification strategy has been instrumental in securing a strong backlog of contracts. The company is also actively exploring opportunities to reduce its environmental footprint and is upgrading its Prospector 1 rig to operate with 100% green energy, which will enable the rig to achieve near-zero emission levels.
5. Sasol Limited (NYSE:SSL)
Number of Hedge Fund Holdings: 14
Forward P/E Ratio as of January 24: 7.81
Earnings Growth This Year: 18.62%
Stock Price as of January 24: $4.80
Sasol Limited (NYSE:SSL) is a South African energy and chemical company with a significant global footprint across 30 countries. The company is engaged in the production and marketing of chemicals, fuels, and other related products.
Sasol Limited (NYSE:SSL) is actively exploring opportunities for diversification and expansion to ensure sustained growth and competitiveness. The company is making significant investments in emerging sectors, such as renewable energy and sustainable aviation fuels. The company is developing an innovative sustainable aviation fuel in a joint venture with Topsoe, which is expected to meet the rising global demand for cleaner energy solutions. The company is also targeting market expansion in regions such as Africa and Asia, where the demand for energy and chemicals is increasing rapidly.
Additionally, Sasol Limited (NYSE:SSL) is heavily investing in research and development (R&D) to develop new technologies and processes that can reduce costs, enhance operational efficiency, and bolster its competitive edge. By partnering with other companies and organizations, Sasol Limited (NYSE:SSL) is leveraging external expertise to accelerate technological advancements. In its chemicals division, for example, the company collaborates with industry partners to develop advanced catalysts and innovative processes aimed at improving efficiency and sustainability across its operations.
4. Fortuna Mining Corp. (NYSE:FSM)
Number of Hedge Fund Holdings: 18
Forward P/E Ratio as of January 24: 5.17
Earnings Growth This Year: 45.45%
Stock Price as of January 24: $4.46
Fortuna Mining Corp. (NYSE:FSM) is a Canada-based mining company focused on the production of silver, gold, and other precious metals. The company operates mines in West Africa, and Argentina and is actively advancing exploration projects in Senegal.
Fortuna Mining Corp. (NYSE:FSM) is making substantial investments in capital projects to enhance the long-term productivity and profitability of its operations. Among its key initiatives is the leach pad expansion at the Lindero mine in Argentina, a project with a budget of $42 million. This expansion is expected to be completed by early 2025 and is poised to considerably increase the mine’s capacity and extend its operational life by an additional decade. Similarly, the company is accelerating underground development at the Yaramoko mine in Burkina Faso, where an additional $11 million has been allocated to integrate newly identified mineralized zones into the mine plan for 2025.
In addition to its current operational upgrades, Fortuna Mining Corp. (NYSE:FSM) is actively pursuing high-value exploration opportunities to bolster its resource base and uncover new mining prospects. Key focus areas include the Seguela mine in Côte d’Ivoire, the Diamba Sud Project in Senegal, and continued exploration at the Lindero mine in Argentina. These efforts are critical for expanding the company’s gold reserves and discovering new deposits.
3. GoodRx Holdings, Inc. (NASDAQ:GDRX)
Number of Hedge Fund Holdings: 20
Forward P/E Ratio as of January 24: 13.61
Earnings Growth This Year: 17.14%
Stock Price as of January 24: $4.93
GoodRx Holdings, Inc. (NASDAQ:GDRX) is a leading digital healthcare platform that empowers consumers to access discounts on medications by comparing prices across pharmacies. The company serves millions of users, including individuals without insurance and those looking to lower costs. The company’s platform offers a wide range of services, including prescription price transparency, co-pay assistance, and direct-to-consumer e-commerce solutions.
One of the key areas of focus for GoodRx Holdings, Inc. (NASDAQ:GDRX) is its Pharma Manufacturer Solutions (PMS) offering. This segment has been experiencing significant momentum and has helped pharmaceutical manufacturers reach patients and physicians through innovative programs such as point-of-sale cash discounts, co-pay cards, and patient assistance programs. As of Q3, the company has signed over 72 point-of-sale cash programs, more than doubling the number of deals from the beginning of 2024. These programs not only provide immediate savings to consumers but also benefit manufacturers by driving incremental prescriptions and revenue. GoodRx Holdings, Inc. (NASDAQ:GDRX) e-commerce capabilities, which allow brands to integrate their direct-to-consumer experiences into the platform, further enhance the value proposition for both manufacturers and consumers.
GoodRx Holdings, Inc. (NASDAQ:GDRX) is also expanding its Integrated Savings Program (ISP), which complements health insurance by providing consumers with the lowest possible prices on covered medications. The ISP has been performing well and is expected to launch additional offerings, such as off-formulary brand deals, in early 2025. These programs aim to reduce patient script abandonment and increase the number of filled prescriptions, which can improve the overall economics of retail pharmacies.
2. New Gold Inc. (NYSEAMERICAN:NGD)
Number of Hedge Fund Holdings: 23
Forward P/E Ratio as of January 24: 8.27
Earnings Growth This Year: 94.74%
Stock Price as of January 24: $2.92
New Gold Inc. (NYSEAMERICAN:NGD) is a Canadian mining company focused on producing gold and copper. The company operates major projects such as the Rainy River and New Afton Mines in North America. New Gold Inc.’s (NYSEAMERICAN:NGD) client base includes international markets, jewelry, and industrial applications.
New Gold Inc. (NYSEAMERICAN:NGD) is actively advancing several key growth projects to enhance production and extend the mine life of its operations. At New Afton, the company has developed an underground block cave area known as the C-Zone that has significantly extended the mine’s life by providing a large new source of copper and gold ore. New Gold Inc. (NYSEAMERICAN:NGD) is now also exploring the potential to increase mineral reserves at C-Zone without additional capital expenditure. The company is also conducting a technical study in the eastern part, which aims to add a new high-grade zone and improve the copper and gold production profile.
At Rainy River, New Gold Inc. (NYSEAMERICAN:NGD) has completed significant milestones in the underground mine development, including the first ore development from the Underground Main zone. These developments are critical for preparing the underground mine in the first half of 2025 and ramping up production to 5,500 tonnes per day by 2027.
1. Ardagh Metal Packaging S.A. (NYSE:AMBP)
Number of Hedge Fund Holdings: 23
Forward P/E Ratio as of January 24: 12.71
Earnings Growth This Year: 25.00%
Stock Price as of January 24: $2.81
Ardagh Metal Packaging S.A. (NYSE:AMBP) is a leading provider of infinitely recyclable metal beverage cans and ends. The company serves leading brands in the beverage industry, including soda, beer, and energy drink producers, based in Europe and the Americas.
Ardagh Metal Packaging S.A. (NYSE:AMBP) is focusing on several key initiatives to maintain and enhance its market position. The company is investing in capacity expansion and network optimization to address short-term capacity constraints and align production with market demand. This includes the ramp-up of new projects and the adjustment of existing facilities to better serve regional and product-specific needs.
Ardagh Metal Packaging S.A. (NYSE:AMBP) is leveraging its strong customer relationships to drive pack-mix shifts from less sustainable packaging materials, such as plastics and glass, to metal cans. Additionally, Ardagh Metal Packaging S.A. (NYSE:AMBP) has recently made a virtual power purchase agreement in Portugal, which will provide approximately half of the company’s Europe’s energy consumption from renewable sources starting in 2026. The company has a goal of achieving 100% renewable energy by 2030.
Furthermore, Ardagh Metal Packaging S.A. (NYSE:AMBP) is concentrating on capturing opportunities in high-growth categories such as carbonated soft drinks and sparkling waters. The company is also investing in manufacturing efficiency and cost management to enhance its competitive position.
While we acknowledge the potential of Ardagh Metal Packaging S.A. (NYSE:AMBP) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMBP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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