The stock market can be a brutal place. Far too often, today’s winners will turn into tomorrow’s losers.
Just think of all the excitement generated by stocks like Peleton, Zoom, and Teladoc. These stocks soared higher in 2021 only to crumble in the subsequent bear market punishing those who were greedy and overstayed their welcome.
But, the opposite is also true.
Some of the best-performing stocks of tomorrow will be found by looking at the parts of the market that investors are avoiding due to years of underperformance.
Think about how energy stocks were universally hated with oil even falling to an unimaginable, negative price level for a brief moment in April 2020 as the pandemic led to a buildup of inventories and falling demand. Of course, this turned out to be a historic buying opportunity that led the way last year.
Because of the above, today we are going to discuss 3 reasons why investors should be looking at the universe of stocks under $10. This is the pathway to discovering hidden gems that will shine so brightly in the future.
Reason #1: Incredible Upside (if the Ingredients are Right)
The first reason is pretty intuitive.
These stocks have the most potential for gains. In fact, I can guarantee that the best-performing stocks in the future will be found within this group.
These stocks tend to be under-owned and under-followed leading to their cheap stock status. Thus, they are ready to explode higher on even the slightest positive catalyst like a strong earnings report, an acceleration in economic growth, or some improvement in sector conditions.
Of course, the challenge is to identify the high-quality ones while filtering out the “junk”. To this end, we have the POWR Ratings system which is our quantitative rating system that can help eliminate the stocks that you should avoid….and point to the ones with the most upside potential.
In fact, we have created a stellar strategy that focuses on the “Top 10 Stocks Under $10” which harnesses the best of the POWR Ratings. We share more info on that topic further below.
Reason #2: Inefficient Markets
Some of the greatest fortunes have been made in illiquid and inefficient markets.
It’s these exact conditions that create opportunities for investors. Compare this to more efficient and liquid markets, where it’s tough for individual investors to have any sort of advantage over institutional investors with more resources or high-frequency, trading algorithms.
It’s normal in a large and liquid stock to see any sort of news or developments immediately reflected in the stock price. With stocks under $10, the fundamentals matter just as much but prices don’t react as instantly or swiftly to these events.
This lag is your edge.
Another factor is that less liquidity means more volatility. This is another potential advantage for smart investors who can take advantage of this volatility to enter or exit positions at favorable prices.
Reason #3: Turnaround Opportunities
The final reason to love stocks under $10 is that this is where we can find “turnaround” opportunities in the market.
These are companies that are executing or experiencing a pivot in their business that will lead to an acceleration in earnings. Sometimes, it comes about due to a change in management, new regulations, or a change in monetary or economic conditions.
This is a powerful factor that can lead to many-fold returns for investors who are early and correct in identifying these opportunities.
Of course, investors have a better chance of identifying such situations with low-priced stocks, because they tend to be under owned and under covered by Wall Street and institutional investors. Once again, the POWR Ratings and our proprietary Stocks Under $10 strategy help pinpoint the best of these turnaround opportunities.
What To Do Next?
If you’d like to see more top stocks under $10, then you should check out our free special report:
What gives these stocks the right stuff to become big winners, even in this brutal stock market?
First, because they are all low priced companies with the most upside potential in today's volatile markets.
But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system and they excel in key areas of growth, sentiment and momentum.
Click below now to see these 3 exciting stocks which could double or more in the year ahead.
Meredith Margrave
Chief Growth Strategist, StockNews
Editor, POWR Stocks Under $10 Newsletter
SPY shares fell $0.27 (-0.07%) in after-hours trading Friday. Year-to-date, SPY has gained 6.49%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Meredith Margrave
Meredith Margrave has been a noted financial expert and market commentator for the past two decades. She is currently the Editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Meredith's background, along with links to her most recent articles.
3 Reasons to LOVE Stocks Under $10 StockNews.com
