In this article, we discuss the 10 cheap growth stocks to buy today. If you want to skip our detailed analysis of these stocks, go directly to the 5 Cheap Growth Stocks to Buy Today.
Growth stocks have enjoyed a record bull run at the market in the past few years, outperforming their value counterparts by the widest margins since the dotcom era at the turn of the millennium. Even though growth equities retreated a bit in the past few months as inflation fears rose, they have since staged a comeback as a new variant of COVID-19 sweeps the world and prompts lockdowns. Business news platform CNBC has released a Next Generation 50 Index to mark the rise of tech companies across the globe.
Some of the top growth stocks in this index include Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Alphabet Inc. (NASDAQ:GOOG), among others. These stocks provide services that are key to the global economy as well as the personal and professional lives of the young generation. Jim Cramer, a former hedge fund manager and host of Mad Money on CNBC, has termed these companies “senior growth stocks” but highlighted some “higher risk, higher reward” options as well.
As the valuations of tech giants cross into the trillions, a lot of investors who cannot afford these expensive stocks are looking towards cheaper companies to load their portfolios with the same growth potential. Some of these cheaper options are discussed below.
Our Methodology
The companies that are trading at relatively cheap prices compared to their growth potential were selected for the list. The real-time share prices of the stocks, as of December 13, are mentioned alongside other details for further clarity.
In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks were also considered. Hedge fund sentiment was included as a classifier as well.
The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Cheap Growth Stocks to Buy Today
10. Digital Ally, Inc. (NASDAQ:DGLY)
Number of Hedge Fund Holders: 3
Real-Time Share Price as of December 13: $1.11
Digital Ally, Inc. (NASDAQ:DGLY) markets electronic equipment and services. As concerns around policing grow across the world, the stock has room to climb higher as the company is one of the most renowned providers of body cams used by law enforcement personnel.
Digital Ally, Inc. (NASDAQ:DGLY) recently beat market estimates on earnings per share and revenue for the third quarter by $0.20 and $1.7 million respectively. On December 6, the company approved a $10 million share buyback program.
At the end of the third quarter of 2021, 3 hedge funds in the database of Insider Monkey held stakes worth $2 million in Digital Ally, Inc. (NASDAQ:DGLY), compared to 4 in the preceding quarter worth $934,000.
Just like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Alphabet Inc. (NASDAQ:GOOG), Digital Ally, Inc. (NASDAQ:DGLY) is one of the stocks that growth investors are buying.
9. LightInTheBox Holding Co., Ltd. (NYSE:LITB)
Number of Hedge Fund Holders: 3
Real-Time Share Price as of December 12: $1.08
LightInTheBox Holding Co., Ltd. (NYSE:LITB) owns and runs a cross-border ecommerce platform. The firm has been growing margins steadily in the past few months despite tough competition from retail giants and looks set to grow them further in the coming months.
In earnings results for the third quarter, posted in early December, LightInTheBox Holding Co., Ltd. (NYSE:LITB) reported a revenue of $98 million. The company has a market cap of $121 million and was founded in 2007.
At the end of the third quarter of 2021, 3 hedge funds in the database of Insider Monkey held stakes worth $3.3 million in LightInTheBox Holding Co., Ltd. (NYSE:LITB), compared to 4 in the preceding quarter worth $6.4 million.
8. Cronos Group Inc. (NASDAQ:CRON)
Number of Hedge Fund Holders: 7
Real-Time Share Price as of December 12: $4.26
Cronos Group Inc. (NASDAQ:CRON) is a pharma firm that focuses on cannabis products. The introduction of legislation that removes marijuana as a banned substance in the US and leaves reform related to it up to the state promises to bode well for the future of cannabis firms.
Cronos Group Inc. (NASDAQ:CRON) stock has also surged amid reports that the new ruling coalition in Germany is in favor of legalizing marijuana. The coalition plans to allow recreational use of the cannabis products sold through licensed stores.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Cronos Group Inc. (NASDAQ:CRON) with 762,114 shares worth more than $4.3 million.
7. Otonomo Technologies Ltd. (NASDAQ:OTMO)
Number of Hedge Fund Holders: 10
Real-Time Share Price as of December 12: $3.90
Otonomo Technologies Ltd. (NASDAQ:OTMO) operates an automated data services platform. As vehicle data becomes paramount for safety and security purposes, the company could grow existing partnerships with car makers like BMW, Mitsubishi, and others for the long-term.
Otonomo Technologies Ltd. (NASDAQ:OTMO) posted nine-month earnings on November 12, reporting a revenue of $0.66 million over the period. The cash and cash equivalents at the end of September were around $232 million.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Rima Senvest Management is a leading shareholder in Otonomo Technologies Ltd. (NASDAQ:OTMO) with 3.2 million shares worth more than $15 million.
6. Lithium Americas Corp. (NYSE:LAC)
Number of Hedge Fund Holders: 12
Real-Time Share Price as of December 12: $33.61
Lithium Americas Corp. (NYSE:LAC) is a Canadian resource firm with core interests in the lithium business. The firm has lots of potential to grow as the demand for lithium skyrockets in tandem with the rise in production of electric vehicles across the world in the next few years.
On November 24, investment advisory B Riley raised the price target on Lithium Americas Corp. (NYSE:LAC) stock to $44 from $25 and maintained a Buy rating, noting the potential of growth projects of the firm and higher price assumptions as long-term growth catalysts.
Among the hedge funds being tracked by Insider Monkey, Singapore-based investment firm Himension Capital is a leading shareholder in Lithium Americas Corp. (NYSE:LAC) with 2.2 million shares worth more than $50 million.
In addition to Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Alphabet Inc. (NASDAQ:GOOG), Lithium Americas Corp. (NYSE:LAC) is one of the stocks on the radar of elite investors.
In its Q1 2021 investor letter, Massif Capital, an asset management firm, highlighted a few stocks and Lithium Americas Corp. (NYSE:LAC) was one of them. Here is what the fund said:
“Lithium Americas: The volatility noted above in LAC has resulted in solid returns via our options trades around our core equity position. At the current time, we are short calls on LAC, as we have done multiple times throughout the position’s life, expiring on May 21, 2021, at a $17.5 and $22.5 strike price. The volume of contracts sold at each strike corresponds to the size of the equity position we want should the calls expire in the money, and the underlying equity gets called away from us. The thought process behind this trade construction is that if we know the size of the position we want at a particular price point, there is no reason not to accumulate additional returns by pre-selling the stock we would have sold anyway.
High levels of volatility positively impact the price of options, increasing the premium we can earn from selling covered calls. To date, we have sold covered calls on LAC that have expired worthless four times, yielding a roughly 7% return on the equity position’s current value or 71bps for the portfolio overall. The outstanding covered calls appear to be trending towards a similar worthless expiration. If they do, the covered call trades on LAC will result in us owning the shares with committed capital of -$0.28 per share.
Although we believe in the fullness of time LAC warrants a $30+ valuation, the prices achieved in early January of this year were not justified by the underlying fundamentals. Some will argue we should have sold down our position. We had already established our option positions and believe LAC is an emerging major in the lithium mining industry. Thus, we decided to maintain the position unchanged. Although still relatively high, the current $15 per share valuation is not crazy compared to where we think the firm should be trading based on fundamentals, so we are no longer overly concerned with the position as is.
LAC management also took advantage of the volatility issuing stock on January 22 for $22 a share. The ~$400 million in proceeds will be used to develop Thacker Pass, the US-based clay lithium deposit, which will likely be the largest producing Lithium mine in America when turned on. In our opinion, the stock issuance could not have come at a better time. LAC management has advanced the project through various development stages (de-risking), but with the share issuance, they have significantly reduced the need to bring in an outside partner to develop the asset as the first phase of the project is expected to cost roughly $581 million. After-tax and at an 8% discount rate, the Thacker Pass project’s present value is approximately $2.6 billion (the firm’s current market capitalization is $1.5 billion). Although the share issuance was dilutive, increasing the total shares by 17%, we believe it will, in the long run, prove a forward-looking, value-additive decision by management.
The lithium market remains an area of interest and focus for us. This reflects our belief that the most exciting investment opportunities to capture secular trends in EV’s and batteries are found upstream in the mining industry. It is also a reflection that there is a greater diversity of lithium investment opportunities relative to other battery metals.”
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Disclosure. None. 10 Cheap Growth Stocks to Buy Today is originally published on Insider Monkey.
