We recently published a list of 10 Best Nasdaq Stocks Under $5 to Buy. In this article, we are going to take a look at where Diversified Healthcare Trust (NASDAQ:DHC) stands against other best Nasdaq stocks under $5 to buy.
The Nasdaq is one of the top three most-followed stock market indices in the United States, comprising over 2,500 stocks. Its composition is heavily skewed towards the Technology sector, and as of February 10, 2025, the technology sector constituted around 60% of the index’s weight. Consumer Discretionary follows as the second-largest sector, accounting for approximately 20% of the weight. Given this substantial weighting, the Nasdaq is commonly regarded as a leading indicator of the performance of the IT industry.
While the Nasdaq includes tech giants with the largest market capitalizations, it also presents opportunities to invest in stocks often referred to as “penny stocks.” These stocks, priced under $5, offer significant growth potential for investors seeking high returns at a relatively low capital outlay. Although these stocks come with high return and diversification opportunities, they also carry higher risks due to their smaller market capitalization, relatively higher debt, and greater volatility in share prices.
To provide a perspective on the small-cap investing landscape, we refer to recent insights from Francis Gannon, Co-Chief Investment Officer at Royce Investment Partners. In November 2024, during an interview with Yahoo Finance, Gannon discussed his thesis on small-caps. He noted that small-caps had been out of favour for an extended period, with the Russell 2000 reaching its peak three years ago and experiencing negative returns since then. Gannon believes the new Trump administration, reshoring efforts, leading innovation, and a favourable earnings season will significantly boost small-cap companies, describing this shift as nothing short of a “revolution.”
As a result, exciting return opportunities are anticipated in the small-cap space in the coming years. When reviewing stocks priced under $5, investors should carefully select emerging companies with innovative business models or disruptive technologies, and those that have the potential to deliver exponential growth as they capture market share, develop new products, or enter new markets.
Our Methodology
To identify the 10 best Nasdaq stocks under $5 to buy, we screened Nasdaq-listed companies with a market price below $5. We selected the 10 companies that were the most widely held by hedge funds and ranked them in ascending order of hedge fund holders, as of Q3 2024.
Note: All pricing data is as of market close on February 10.
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).
A seasoned real estate professional inspecting a property with the company’s branding in the background.
Diversified Healthcare Trust (NASDAQ:DHC)
Current Market Price: $2.64
Number of hedge funds: 23
Diversified Healthcare Trust (NASDAQ:DHC) is a real estate investment trust (REIT) that specializes in owning and managing a diversified portfolio of healthcare-related properties across the U.S., including senior living communities, medical office buildings, and life science facilities. The company’s primary strategy is to generate steady income through long-term leases with healthcare operators and tenants, leveraging the increasing demand for healthcare services and facilities.
On February 2, 2025, Diversified Healthcare Trust (NASDAQ:DHC) reported the completion of the sale of MUSE, a 186,000 square foot, three-building life science property in Torrey Pines, San Diego, for $159.0 million. At the time of sale, the property was 49% leased, with an average lease term exceeding eight years. The company intends to use the sale proceeds to pay down its senior secured notes due in January 2026. As per the company’s business strategy, they occasionally sell properties if keeping them or the required expenses won’t provide the desired returns, if they’ve already maximized returns, or if better opportunities arise. In the long-term, Diversified Healthcare Trust (NASDAQ:DHC) is well-positioned to benefit from the aging population and increasing healthcare needs, which drive demand for senior living and medical office spaces.
Overall, DHC ranks 2nd on our list of best Nasdaq stocks under $5 to buy. While we acknowledge the potential of DHC to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DHC 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
Disclosure: None. This article is originally published at Insider Monkey.
