In this piece, we will take a look at the 10 best US stocks to buy under $5.
Investors are becoming increasingly nervous amid a slowing U.S. economy. Signs of weakness in consumer spending and manufacturing points to an economy that is overheating amid the high interest rate environment
In August, nonfarm payrolls grew by 142,000, an increase from 89,000 in July but short of the 161,000 forecast. The unemployment rate decreased to 4.2%, while the “real” unemployment rate climbed to 7.9%, the highest since October 2021.
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According to Dan North, an economist at Allianz Trade, the recent string of economic data has been disappointing, signaling something is wrong. A slowing economy always takes a significant toll on investors sentiments in the equity market.
The slowdown comes when the stock market is at a pivotal level heading into the year-end. The leading market indices are hovering close to all-time highs amid a slowing economy that needs the U.S. Federal Reserve to tweak its monetary policy.
The earnings season has also added another caveat seen by increased volatility. After months of blockbuster gains, significant stock sell-offs linked to artificial intelligence and semiconductors have come into play. Geopolitical worries, the forthcoming presidential race, and shifts in Federal Reserve strategy usher in uncertainty.
Valuations have gotten out of hand as most stocks are trading way above their historical highs. Given that the stock market experiences about four deep pullbacks of more than 5% every year, there is growing concern that one could be on the way heading into the year-end.
Appearing in an interview on CNBC, George Lagarias, the head economist at Forvis Mazars, stated that although it’s impossible to predict the magnitude of the Federal Reserve’s upcoming rate adjustment, he is in favor of a 25-basis point reduction. Analysts do not see the need for a 50 basis point or more reduction as it could confuse the markets and the economy, portraying a sense of urgency.
A more profound interest rate cut would take a significant toll on stocks trading at premium valuations as they would be the hardest hit with heightened volatility. On the other hand, emerging stocks that haven’t caught the Street’s attention yet could offer some good buying opportunities.
Currently, the market appears favorable for the growth of penny stocks and small-cap companies. Chris Retzler, portfolio manager at Needham Small Cap Growth Fund, suggests that while smaller companies are volatile, their long-term outlook is positive. He anticipates a market broadening in the second half of 2024, which could benefit smaller companies that have recently underperformed.
Retzler highlights the liquidity of smaller companies as a key growth factor. As funds shift from larger to smaller companies, many small-cap stocks may see significant price increases. Additionally, the expectation of lower interest rates over the next year is favorable for penny stocks, which require less capital to see price and valuation growth.
Investing in penny stocks or small-cap companies can be risky due to their volatility and limited historical data. However, these high-risk investments can also offer substantial rewards for those with a higher risk tolerance. While many of these companies face significant issues, some are hidden gems. With this outlook in mind, here is our list of the 10 best U.S. stocks to buy under $5.
Source: Pexels
Our Methodology
We screened for US-listed companies that are trading under $5 and picked the stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. 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 U.S. Stocks to Buy Under $5
10. B2Gold Corp. (NYSE:BTG)
Number of Hedge Fund Holders: 22
Current Share Price: $2.69
B2Gold Corp. (NYSE:BTG) is one of the best U.S. stocks to buy under $5 for strengthening an investment portfolio as gold prices continue rising. Operating as a gold producer, the company operates the Fekola Mine in Mali, the Masbate Mine in the Philippines, and the Otjikoto Mine in Namibia.
B2Gold Corp. (NYSE:BTG) stands out as one of Canada’s most affordable mining companies, and it has a significant edge in the market. Furthermore, the company consistently increases its production each year, further solidifying its position.
B2Gold Corp. (NYSE:BTG) is one of the companies benefiting from rising gold prices and finding support above the $2,200 an ounce level. The company generated revenues of $492,569, attributed to its gold operations in Q2 2024, up from 470,854 in the same quarter last year. The increase came even with the company producing much less gold at 212,508 ounces compared to 262,701 generated in the same quarter the previous year.
B2Gold Corp. (NYSE:BTG) prioritizes keeping a solid financial standing and keeps up with its dividend payments by investing in its own expansion and strategic mergers and acquisitions. The company exited the quarter in a solid financial position with $467 million, sufficient to support its mining operations as it looks to take advantage of the high gold prices.
Likewise, the company declared a dividend of $0.04 a share, affirming its commitment to return value to shareholders. B2Gold is a top mining stock for income-focused investors. The stock yields 6.04%, which is one of the highest in the sector. Its payout has more than tripled over the last four years. While trading at a forward price to earnings multiple of 5, B2Gold is unbelievably cheap while offering a high yield.
In the second quarter of 2024, hedge fund interest in B2Gold Corp. (NYSE:BTG) grew, with the number of funds holding stakes rising from 19 to 22, as per Insider Monkey’s database. The total value of these stakes is around $132.61 million. Among these, Jim Simons’s Renaissance Technologies stood out as the largest stakeholder.
9. Kosmos Energy Ltd. (NYSE:KOS)
Number of Hedge Fund Holders: 25
Current Share Price: $4.37
Kosmos Energy Ltd. (NYSE:KOS) is one of the oil and gas companies under $5 offering exposure in the energy sector. It engages in the exploration, development, and production of oil and gas. Its primary assets include production projects located in offshore Ghana, Equatorial Guinea, and the U.S. Gulf of Mexico.
It is one of the companies well-positioned to benefit from higher oil and gas prices as the global economy bounces back from a period of slow growth. The company’s revenue growth has been strong, showing a 16.34% rise over the past year ending in Q2 2024 and an impressive 64.99% growth in revenues per quarter during the same period. These statistics indicate that although the stock value has encountered downward trends, the core operations of the company are undergoing substantial development.
Kosmos Energy Ltd. (NYSE:KOS) has made considerable progress towards achieving its objective of a 50% increase in production, with its output currently standing at 62,000 barrels of oil equivalent daily, representing a 7% rise compared to the previous year. Even with delays in projects and reduced output from the Jubilee field in Ghana, the company is determined to reach its goal of producing 90,000 barrels of oil daily by the end of the year.
Additionally, Kosmos Energy Ltd. (NYSE:KOS) has outlined its plan to generate substantial free cash flow, estimated to range from $100 million to $150 million each quarter. This cash will be used to pay off debt and to fund future expansion, adhering to a strict capital strategy.
Kosmos Energy Ltd. (NYSE:KOS) has reached a major milestone in production with the start of operations at Winterfell, located in the Green Canyon region of the U.S. Gulf of Mexico. This project, which Beacon Offshore Energy manages, sees Kosmos Energy owning a 25.04% interest in the operation.
The beginning of oil extraction at Winterfell represents a major accomplishment for the company. This move is anticipated to help the company meet its annual growth goals. With a low P/E ratio of 4.36, the company appears to be trading at a discount, after accounting for its near-term earnings growth.
With 25 hedge funds holding Kosmos Energy Ltd. (NYSE:KOS)’s stocks out of 933 in Insider Monkey’s database, it is considered as one of the best American stocks to buy now. Patient Capital Management, spearheaded by Samantha Mclemore, holds the largest stake in the company, possessing 9 million shares valued at approximately $50.33 million.
8. Geron Corporation (NASDAQ:GERN)
Number of Hedge Fund Holders: 26
Current Share Price: $4.28
Headquartered in Foster City, California, Geron Corporation (NASDAQ:GERN) is a late-stage clinical biopharmaceutical company that focuses on developing and commercializing therapeutics for myeloid hematologic malignancies.
It is one of the best US stocks to buy under $5 in the aftermath of the U.S. Food and Drug Administration’s (FDA) Oncologic Drugs Advisory Committee (ODAC) voting in favor of its candidate drug imetelstat branded Rytelo for the treatment of transfusion-dependent anemia. The approval of Rytelo, a treatment for lower-risk myelodysplastic syndromes, is expected to play a crucial role in Geron Corporation (NASDAQ:GERN)’s future financial performance.
The company has set a wholesale price of $9,884 for the 188 mg vial and $2,471 for the 47 mg vial of Rytelo. Analysts at Baird have set estimates of $933 million for the drug in 2029, affirming the company’s huge value is well poised to generate.
The fact that there are few treatment options for patients struggling with this type of blood cancer underscores the potential impact of Rytelo in the long term.
Geron Corporation (NASDAQ:GERN) exited the second quarter with mixed financial results, with net revenues of $882,000, a significant improvement from $29,000 a year ago. Net revenues for the first six months were up to $1.2 million from $500,000 as of last year. The company plunged to a wider-than-expected net loss of $67.4 million and $122.4 million for the three and six months of the year, respectively, much higher than a net loss of $49.2 million and $87.3 million for the three and six months of last year respectively.
Nevertheless, it remains in a solid financial position with projected revenues from U.S. sales of RYTELO, which is expected to fund projected operating requirements into the second quarter of 2026.
Insider Monkey scoured through 912 hedge fund portfolios and discovered 26 Geron Corporation (NASDAQ:GERN) investors as of Q2 2024 end. Out of these, the firm’s largest shareholder is Peter Kolchinsky’s RA Capital Management due to its $195.90 million stake.
7. Uranium Energy Corp. (NYSE:UEC)
Number of Hedge Fund Holders: 28
Current Share Price: $4.37
Uranium Energy Corp. (NYSE:UEC) is an energy company engaged in the exploration, pre-extraction, extraction, and processing of uranium and titanium concentrates in the United States, Canada, and Paraguay. It operates as a critical supplier of Uranium in the U.S. and Canada. It is one of the best U.S. stocks to buy under $5 as Uranium prices show signs of edging higher.
The stock sentiments received a significant boost early in the year after the spot price of Uranium rose from $49 to $95. While the price has since pulled back to about $68, Uranium Energy Corp. (NYSE:UEC) is one company well positioned to benefit as prices edge higher amid strong Uranium demand.
Uranium Energy Corp. (NYSE:UEC) is currently developing several projects in both North and South America, aiming to establish a reliable supply of nuclear fuel, provided that the demand for Uranium stays high. The use of nuclear energy appears to be attracting new supporters as a consistent source of power that does not release carbon dioxide, positioning it as a sustainable energy option.
Uranium Energy Corp. (NYSE:UEC)’s competitive edge in the industry stems from its inked advantageous deals to buy Uranium when its price was quite low. The firm has created one of the biggest stockpiles of Uranium in the U.S. It obtained a contract from the U.S. Department of Energy to provide 300,000 pounds of U3O8 as part of the nation’s effort to create a local uranium reserve.
Uranium Energy Corp. (NYSE:UEC) has made a smart move by agreeing to purchase Uranium at record-low prices, which enables it to accumulate a cost-effective stockpile of the nuclear energy source. The earnings from selling this stockpile can, in turn, support the company in financing its extensive plans for developing mines, which is an intriguing narrative.
The company is well positioned to benefit from the U.S. government banning Russian uranium imports as the Nuclear Fuel Security Act also supports the growth of the U.S. uranium industry, ensuring a reliable supply of clean energy.
As of Q2 2024 end, 28 out of the 912 hedge funds part of Insider Monkey’s database were Uranium Energy Corp. (NYSE:UEC)’s investors. Richard Driehaus’s Driehaus Capital is the firm’s largest shareholder among these, as it owns 9.15 million shares that are worth $54.98 million.
6. Ardagh Metal Packaging SA (NYSE:AMBP)
Number of Hedge Fund Holders: 29
Current Share Price: $3.57
Ardagh Metal Packaging SA (NYSE:AMBP) is a consumer cyclical company that supplies consumer metal beverage cans. Its products are used in various end-use categories, including beer, carbonated soft drinks, energy drinks, hard seltzers, juices, and pre-mixed cocktails.
It stands out as one of the best U.S. stocks to buy under $5 owing to its ability to drive value through organic and inorganic growth. The company delivered solid second-quarter results, marking another consecutive quarter of outperformance.
Adjusted earnings were up 18% to $178 million, exceeding guidance. Global beverage can shipments grew by 3%, driven by 5% growth in Europe. Revenue remained stable at $1.25 billion. From a business perspective, Ardagh Metal Packaging SA (NYSE:AMBP)’s revenue for the last 12 months ending Q2 2024 amounts to $4.826 billion, showing a slight increase of 4.12%, indicating a consistent performance in its industry sector.
It is hopeful about the rise in profits for 2025 and 2026, mainly due to an increase in sales volume. Even though there are some difficulties in certain markets, like a brief downturn in the energy drink segment, Ardagh Metal Packaging SA (NYSE:AMBP) continues to have a strong financial perspective and is in a strong position for further expansion.
The company improved its 2024 outlook, projecting shipments growth approaching mid-single digit percentage and full-year Adjusted EBITDA of $640-660 million. Even though there’s been a 7% drop in beverage can deliveries in Brazil, the area is expected to see double-digit expansion.
Ardagh Metal Packaging SA (NYSE:AMBP) also achieved notable progress in sustainability on securing a $300 million loan agreement. It has declared a quarterly dividend of $0.10 per share. While trading at a price-to-earnings multiple of 15, the company boasts a solid 11.275 dividend yield, affirming its status as one of the best U.S. stocks to buy under $5 for passive income.
A total of 29 hedge funds tracked by Insider Monkey had stakes in Ardagh Metal Packaging SA (NYSE:AMBP) as of the end of the second quarter of 2024. Of those, Canyon Capital Advisors was the top stockholder in the company and held a position worth $34.53 million.
5. Sirius XM Holdings Inc. (NASDAQ:SIRI)
Number of Hedge Fund Holders: 33
Current Share Price: $2.91
Sirius XM Holdings Inc. (NASDAQ:SIRI) is a communication services company that operates as an audio entertainment company. Its Sirius XM segment provides music, sports, entertainment, comedy, talk, news, traffic and weather channels, and other content. It also distributes satellite radios through automakers, retailers, and its website.
It is one of the stocks worth paying attention to as it moves to merge with Liberty Media Corporation , creating a new public entity operating under the Sirius XM brand. This restructuring aims to simplify the company’s organizational framework and establish an independent entity that will persist in providing a varied selection of live, instant, and selected audio entertainment and services to a North American market.
While Sirius XM Holdings Inc. (NASDAQ:SIRI) has taken a significant beating over the past few years, it remains a firm favorite for billionaire investor Warren Buffett, who has been ramping up stakes through his investment firm Berkshire Hathaway. The investment comes from Sirius, which has posted double-digit revenue growth since 2014 and has returned significant value to shareholders through dividend payments.
Sirius XM Holdings Inc. (NASDAQ:SIRI) stands out as a good choice for investors looking for steady income due to its strong track record of dividend increases. For seven straight years, the company has been raising its dividends, positioning itself as one of the top dividend picks below $5. At present, it pays a quarterly dividend of $0.0266 per share, boasting a dividend yield of 3.42% as of August 23.
The solid track record in dividend payments comes from SiriusXM X.M. generating 10-figure free cash flow over the last few years. In an era where traditional media outlets are battling to remain viable, Sirius XM Holdings Inc. (NASDAQ:SIRI) offers a bargain by allocating funds toward online projects. It’s currently valued at less than ten times its trailing earnings. This earnings ratio is still considered fair when considering Sirius XM’s inflated market value.
During the second quarter of 2024, Sirius XM Holdings Inc. (NASDAQ:SIRI) saw a significant increase in interest from top-tier money managers. According to Insider Monkey’s database, the number of hedge fund positions in the company rose from 17 to 33. These investments are collectively valued at approximately $530 million.
4. Grab Holdings Limited (NASDAQ:GRAB)
Number of Hedge Fund Holders: 34
Current Share Price: $3.34
Grab Holdings Ltd (NASDAQ:GRAB) is a technology company and operator of a superapp. It offers a Grab ecosystem, a single platform for driver- and merchant partners and consumers that allows access to mobility, delivery, and digital financial services.
Grab Holdings Ltd (NASDAQ:GRAB) is an appealing investment opportunity as one of the best U.S. stocks to buy under $5 due to its dominant market share in Southeast Asia. The company enjoys a near-monopoly status in the area, particularly following its takeover of Uber’s operations in Southeast Asia in 2018.
The acquisitions are already having a significant impact as Grab continues to strengthen the Grab ecosystem and improve usage frequently. In the second quarter, it achieved a new milestone of serving a record high of 41 million monthly transacting users (MTUs) and delivering continued profitable growth at scale.
The company achieved top-line growth across all segments, with On-Demand GMV growing 18% year-over-year. This was driven by strong demand growth of a 22% increase in On-Demand transactions. Revenue rose 17% year-over-year, $664 million. Loss shrunk to $68 million, an improvement of $79 million due to an improvement in Group Adjusted EBITDA.
Furthermore, Grab Holdings Ltd (NASDAQ:GRAB) boasts a robust financial position, having ended Q2 2024 with cash liquidity of $$5.6 billion compared to $5.3 billion as of the first quarter. Consequently, Grab continues to return value to shareholders through buybacks, having bought 9.6 million shares as part of its $500 million program.
Grab Holdings Ltd (NASDAQ:GRAB) maintains a strong financial position, with its balance sheet showing it has more cash than it owes. Additionally, its liquid assets surpass its short-term debts. This gives the company a cushion to keep running and to invest in expansion, even though it hasn’t made a profit in the past year and hasn’t distributed any dividends to its investors.
According to Insider Monkey’s database, 34 hedge funds held stakes in Grab Holdings Ltd (NASDAQ:GRAB) and Tiger Global Management LLC group managed by Chase Coleman and Feroz Dewan has the highest stakes of 92.92 million shares having a value of $329.88 million.
3. TeraWulf Inc. (NASDAQ:WULF)
Number of Hedge Fund Holders: 37
Current Share Price: $4.21
TeraWulf Inc. (NASDAQ:WULF) is a financial services company that operates as a digital asset technology company. It develops and operates bitcoin mining facilities. It also owns and operates vertically integrated, environmentally clean data center infrastructure deployed to mine Bitcoin sustainably.
It is one of the best U.S. stocks to buy fewer than 5 to gain exposure in the burgeoning digital asset landscape. The operator of zero-carbon energy Bitcoin mining facilities has achieved a significant milestone in paying off its term loan, therefore reaching a clean balance sheet. The last payment of $77.5 million, which covered pre-payment charges and unpaid interest, represents a major achievement for the business, boosting its ability to manage its finances.
The early payoff of debt is a tactical step that sets the stage for TeraWulf Inc. (NASDAQ:WULF) to quickly expand its business activities and implement its energy infrastructure to meet increasing needs. This infrastructure focuses on Bitcoin mining and supports high-performance computing (HPC) and artificial intelligence (AI) projects.
The company achieved significant growth in its bitcoin mining capacity in August, doubling year-over-year to 10.0 EH/s. TeraWulf mined 184 bitcoin, averaging 5.9 bitcoin per day. Given that the average cost per bitcoin mined was $35,407, with a power rate of $0.044/kWh, the company is well positioned to generate significant value with Bitcoin trading at more than $50,000 a coin.
TeraWulf Inc. (NASDAQ:WULF) is in a robust growth phase, with 280.01% revenue growth over the last 12 months, as it benefits from higher Bitcoin prices. This upward trend is in line with the company’s strategy to pay off its debts and its bold plans for growth in the field of zero-emission Bitcoin mining.
In the second quarter of 2024, 37 hedge funds had stakes in TeraWulf Inc. (NASDAQ:WULF) with total positions worth $227.16 million. This is compared to 11 funds with positions worth $18.97 million in the preceding quarter.
2. Peloton Interactive Inc (NASDAQ:PTON)
Number of Hedge Fund Holders: 38
Current Share Price: $4.77
Peloton Interactive Inc (NASDAQ:PTON) is a consumer cyclical company that operates a fitness platform. It creates exercise gear for home use that is equipped with digital displays, allowing it to be used for watching online classes or listening to music. It offers connected fitness products under the Peloton Bike Peloton Bike+, Peloton Tread, Peloton Tread+, Peloton Guide, and Peloton Row names.
Peloton Interactive Inc (NASDAQ:PTON) has been one of the biggest disappointments; its market value has shrunk over the past few years as losses grew so large that they threatened the company’s survival. Nevertheless, the company’s fortunes and prospects show signs of improvement going on to its better-than-expected fiscal fourth-quarter results. The results show that business is finally mounting a turnaround.
Revenue in the quarter rose for the first time in 10 months by 0.2% to $643.6 million, exceeding forecasts at $630.6 million. The increase came as the company achieved a 2.3% increase in the subscription area, reaching $431 million.
Peloton Interactive Inc (NASDAQ:PTON) achieved significant gains in its financial performance, as its gross profit margin increased significantly following the closure of its Precor manufacturing plant in North Carolina. This move significantly improved its connected fitness gross margin, rising from -37.5% to 8.3%. It contributed to a rise in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from a deficit of $34.7 million to $70.3 million.
Regarding its financial health, the company disclosed a per-share loss of $0.08, an improvement from a loss of $0.68 a share in the same period last year but lower than the anticipated loss of $0.17. A total of 38 funds in Insider Monkey’s database had Peloton Interactive Inc (NASDAQ:PTON) shares in their portfolios in the second quarter of 2024.
1. Transocean LTD (NYSE:RIG)
Number of Hedge Fund Holders: 42
Current Share Price: $4.12
Transocean LTD (NYSE:RIG) is an oil and gas company providing offshore drilling services for oil and gas wells worldwide. It operates a fleet of mobile offshore drilling units comprising ultra-deep-water and harsh environment floaters. Its primary clients are integrated energy companies. Government-owned or government-controlled energy companies.
It is one of the best US stocks to buy under $5 as it is currently trading at a discount coming under pressure on the overall industry, facing challenges ranging from fluctuating oil prices to increased regulatory scrutiny. Deteriorating market conditions have pushed the stocks’ valuations to the lowest level.
Amid the deteriorating conditions, Transocean LTD (NYSE:RIG) continues to deliver solid financial results as it also inks multi-million dollar deals that should allow it to generate long-term value. It delivered an adjusted EBITDA of $284 million and contract drilling revenues of $861 million for Q2 2024. Its revenue growth over the past year has been strong at 15.07%
While the company posted a net loss of $123 million in the quarter, it inked a $123 million contract with BP that should strengthen its revenue base. It has also inked a 2-well contract with Beacon Offshore Energy.
Transocean LTD (NYSE:RIG) has also inked six new contracts, including three lucrative deals in the U.S. Gulf of Mexico, highlighting the robust demand for offshore drilling services. This is further supported by Transocean’s substantial $8.8 billion backlog, indicating a healthy pipeline of future work. Additionally, the broader energy sector, particularly offshore drilling, is experiencing positive momentum due to rising oil and gas demand. These factors boosted investor confidence and drove up Transocean LTD (NYSE:RIG)’s stock price.
While the stock trades under $5, it trades at a price-to-earnings multiple of 16, signaling its potential to generate earnings and shareholder value in the future. As of the end of the second quarter of 2024, 42 hedge funds had stakes in Transocean LTD (NYSE:RIG).
The best US stocks to buy under $5 are of high quality companies trading at discounted valuations with tremendous upside potential. However, given that the artificial intelligence arms race is just but starting, there are under-the-radar AI stocks trading at highly discounted valuations that hold greater promise for anyone looking to diversify their portfolio. If you are looking for an AI stock that is more promising than the stocks on our list, check out our report about the cheapest AI stock.
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