In this article, we will take a look at 11 stocks under $5 with high potential. To skip our analysis of the recent market activity, you can go directly to see the 5 Stocks Under $5 With High Potential.
U.S. stocks posted the seventh consecutive week of gains with the close of markets on December 15. This marks the best winning streak for the S&P 500 Index since 2017 and the best streak for the Dow Jones Industrial Average Index since 2019. The latest optimism follows the conclusion of Federal Reserves meeting earlier this week. The Fed maintained the policy rate at 5.25%-5.50%, as per expectations. The Fed’s Summary of Economic Projections released on the same day showed that the Fed officials now expect three rate cuts in 2024 followed by four more cuts in 2025.
Based on the dovish pivot from the Federal Reserve, U.S. stocks rallied significantly. Major small-cap indices, the Russell 2000 and S&P SmallCap 600 Index have gone up 21.3% and 20.8%, respectively, which outpaces the rally posted by any of the other major U.S. stocks indices. The S&P 500 has gone up 14.6% while NASDAQ Composite Index and the Dow Jones Industrial Average Index have gone up 17.2% and 15.1%, respectively.
Fundstrat Global Advisors cofounder Tom Lee, who previously served as JPMorgan’s chief equity strategist, is optimistic about small-cap stocks in the near future. In a recent interview with CNBC, he said small-cap stocks can jump 50% in the next 12 months.
He believes that the Russell 2000 index, which tracks U.S. stocks with an average market capitalization of just $2.8 billion, could rise from 1,996 to 3,000 by year-end. “On a price-to-book basis, [small-caps] are trading at where they were in 1999, relative to the S&P. And that was the start of a 12-year outperformance cycle,” he added.
Stocks below $5 provide an opportunity for retail and small investors to accumulate stocks at reasonable prices. Retail investors play a key role in any stock market and have the power to move the markets. Retail participation hit a new peak in early 2023 with total trading volume coming from retail investors exceeding 23%. These investors spent more than $1.5 billion a day, on average, during the first couple of months of 2023. After leading a remarkable recovery in the earlier part of the year, retail traders dumped significant amounts of stocks in the last few months, with more than $16 billion worth of stocks sold in October alone. You can read more about this in our recently published article: 11 Stocks Under $20 To Buy Now
Our list of 11 stocks under $5 with high potential includes leading companies across their respective niches belonging to multiple sectors, including clean energy companies Clean Energy Fuels Corp. (NASDAQ:CLNE) and Plug Power, Inc. (NASDAQ:PLUG), leading weapon detection services provider for security screening, Evolv Technologies Holdings, Inc. (NASDAQ:EVLV), and Singapore-based leading Southeast Asian superapp, Grab Holdings Limited (NASDAQ:GRAB), among others.
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Methodology
We used stock screeners to shortlist stocks that were trading at a share price of less than $5 as of December 14. To find stocks with high potential among the shortlisted stocks, we first narrowed down our selection by retaining only stocks that had market capitalization of more than $300 million, didn’t have any negative catalysts, analyst recommendations of buy or better, and more than 20% upside potential based on average price targets. We then corroborated the list with our database of stock ownership by leading hedge funds. The last step involved the ranking of the identified list of stocks based on their popularity among the 910 hedge funds tracked by Insider Monkey. The list of 11 stocks under $5 with high potential is ranked in the ascending order of the number of hedge funds that owned a stock.
11. Conduent Incorporated (NYSE:CNDT)
Share Price as of December 14: $3.47
Number of Hedge Fund Holders: 21
Florham Park, New Jersey-based Conduent Incorporated (NYSE:CNDT) is a global business process solutions company. A pioneer in business process outsourcing, the commercial portfolio of the company includes customer experience management, business operations, healthcare, and human capital solutions. It boasts 80% of the Fortune 100 companies and over 600 government and transportation agencies among its customers.
On November 1, Conduent Incorporated (NYSE:CNDT) released its financial results for Q3 2023. Its revenue declined by 5% y-o-y to $932 million while it reported a net loss of $289 million, compared to a net income of $15 million.
In September, Conduent Incorporated (NYSE:CNDT) announced an agreement to transfer its BenefitWallet HSA portfolio to HealthEquity, Inc. (NASDAQ:HQY) for a purchase price of nearly $425 million.
As of Q3 2023, Conduent Incorporated (NYSE:CNDT) shares were owned by 21 hedge funds with a total value of $178 million according to the Insider Monkey database. Carl Icahn’s Icahn Capital LP was the largest hedge fund shareholder with ownership of 38.1 million shares valued at $133 million.
10. Perimeter Solutions, SA (NYSE:PRM)
Share Price as of December 14: $4.66
Number of Hedge Fund Holders: 21
Clayton, Missouri-based Perimeter Solutions, SA (NYSE:PRM) is a leading global solutions provider, producing high-quality firefighting products and lubricant additives. It produces solutions including PHOS-CHEK® and FIRE-TROL® retardant, foam concentrates and gel products; AUXQUIMIA® and SOLBERG® firefighting foam concentrates; and BIOGEMA® extinguishing agents and retardants.
On November 9, Perimeter Solutions, SA (NYSE:PRM) released its financial results for Q3 2023. Its revenue declined by 11% y-o-y to $143 million while it reported a net income of $19 million, compared to a net income of $106 million. Its normalized EPS of $0.18 exceeded consensus estimates by $0.01.
As of Q3 2023, Perimeter Solutions, SA (NYSE:PRM) shares, worth a combined total of $245 million, were owned by 21 of the 910 hedge funds tracked by Insider Monkey. Snehal Amin’s Windacre Partnership was at the top of this list with ownership of 21.6 million shares valued at $98 million.
9. Nerdy, Inc. (NYSE:NRDY)
Share Price as of December 14: $3.15
Number of Hedge Fund Holders: 22
Nerdy, Inc. (NYSE:NRDY) is a technology company operating a leading curated platform for live online learning. Its flagship business, Varsity Tutors, leverages technology and AI to deliver personalized live learning at scale.
On November 7, Nerdy, Inc. (NYSE:NRDY) released its financial and operational results for Q3 2023. During the quarter, the company managed to grow its Active Members base by 27% to 39,500 paying customers, while its institutional business also expanded with the execution of 80 contracts, yielding $10.6 million of bookings, an increase of 89% year-over-year.
Following the earnings release, Cantor Fitzgerald analyst Brett Knoblauch maintained an ‘Overweight’ rating for Nerdy, Inc. (NYSE:NRDY) shares and lowered the price target to $6 from $8. The price target represents a potential upside of 90.48% based on the share price on December 14.
Like other stocks such as Vimeo, Inc. (NASDAQ:VMEO), Clean Energy Fuels Corp. (NASDAQ:CLNE), and Grab Holdings Limited (NASDAQ:GRAB), the shares of Nerdy, Inc. (NYSE:NRDY) are among the stocks under $5 with high potential.
8. Clean Energy Fuels Corp. (NASDAQ:CLNE)
Share Price as of December 14: $3.85
Number of Hedge Fund Holders: 22
Clean Energy Fuels Corp. (NASDAQ:CLNE) is a leading provider of clean fuel for the transportation market. It focuses on the development and delivery of renewable natural gas (RNG), a sustainable fuel derived by capturing methane from organic waste. It operates a network of nearly 600 fueling stations across the U.S. and Canada.
On December 13, Clean Energy Fuels Corp. (NASDAQ:CLNE) announced that it has entered into a six-year $300 million senior secured term loan with Stonepeak. The agreement also includes a two-year delayed draw term loan commitment of an additional $100 million. The company intends to use the funds to repay existing loans, for new RNG production facilities, and the expansion of the company’s fueling infrastructure targeting the heavy-duty truck market.
On November 27, Stifel analyst Derrick Whitfield raised the price target for Clean Energy Fuels Corp. (NASDAQ:CLNE) shares to $8.0 from $7.5 and maintained a ‘Buy’ rating. The target price represents a potential upside of 107.79% based on the share price on December 14.
7. SomaLogic, Inc. (NASDAQ:SLGC)
Share Price as of December 14: $2.53
Number of Hedge Fund Holders: 24
SomaLogic, Inc. (NASDAQ:SLGC) is a protein biomarker discovery and clinical diagnostics company based in Boulder, Colorado. Its technology platform comprises of both assay services and diagnostics in combination with one of the largest clinical proteomic databases in the world.
On October 4, SomaLogic, Inc. (NASDAQ:SLGC) and Standard BioTools Inc. (NASDAQ:LAB) announced a definitive agreement to combine in an all-stock merger which values the combined companies at a pro-forma equity value of over $1 billion. The transaction creates a leading platform of multi-omic technologies with the highest throughput and highest data quality to power clinical research insights.
As of Q3 2023, SomaLogic, Inc. (NASDAQ:SLGC) shares were held by 24 hedge funds with the total shares held by them valued at $112 million. Cathie Wood’s ARK Investment Management was the largest hedge fund shareholder with ownership of 13 million shares valued at $31 million.
6. Baytex Energy Corp. (NYSE:BTE)
Share Price as of December 14: $3.36
Number of Hedge Fund Holders: 24
Calgary, Alberta-based Baytex Energy Corp. (NYSE:BTE) is an energy company engaged in the acquisition, development and production of crude oil and natural gas in the Western Canadian Sedimentary Basin and in the Eagle Ford in the United States.
On November 28, Baytex Energy Corp. (NYSE:BTE) announced the sale of certain of its Viking assets located at Forgan and Plato in southwest Saskatchewan for C$154 million. The company intends to use the net proceeds from the sale to reduce its bank indebtedness.
Earlier in June, Baytex Energy Corp. (NYSE:BTE) completed the acquisition of Ranger Oil Corporation for a total cash and stock consideration of $2.2 billion. The acquisition adds 162,000 net acres in the crude oil window of Eagle Ford.
Baytex Energy Corp. (NYSE:BTE) is working on an aggressive shareholder return program and intends to allocate 50% of its free cash flow for share buybacks and dividend payments with the remaining 50% to be used for strengthening its balance sheet.
Like other stocks such as Grab Holdings Limited (NASDAQ:GRAB), Plug Power, Inc. (NASDAQ:PLUG), and Vimeo, Inc. (NASDAQ:VMEO), Baytex Energy Corp. (NYSE:BTE) is among the 11 stocks under $5 with high potential.
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Disclosure: None. 11 Stocks Under $5 With High Potential is originally published on Insider Monkey.
