How to find cheap stocks under $10 to buy for February and beyond

The market made an impressive comeback in afternoon trading on Monday to end the day in the green, even after the Nasdaq fell around 4% at one point. The brief comeback showed buyers are ready to step in once they think the sale has gotten out of control.

The three major US indexes fell again on Tuesday to prolong the slowdown that accelerated in early January. The Nasdaq is down more than 16% from its November highs and the S&P 500 is officially in correction territory (down 10% or more from its highs). Both indices posted their worst performances since the start of the pandemic last week and are trading below their 200-day moving averages for the first time since the initial Covid selloff.

As awful as they may be at the time, corrections and pullbacks are healthy and necessary aspects of the market. The market was expecting something substantial after three years of strong gains and the sell-off may continue. That said, many growth stocks, as well as a few established tech giants, have seen nearly all of their pandemic gains wiped out.

All of the selling has significantly recalibrated valuations, with the S&P 500 currently trading near pre-pandemic levels in terms of forward earnings. Therefore, investors may want to start snacking on some stocks, as it is extremely difficult to time the market exactly.

Also remember that the S&P 500 revenue, margin and earnings outlook is strong for 2022 and 2023. Additionally, interest rates will need to climb much higher before making equities globally unattractive (see also: 3 things namely on the earnings of the fourth quarter Season).

Against this backdrop, investors might consider adding stocks as we get closer to February and hopefully start to put what was a brutal January behind us. Today we used a Zacks screen to find top stocks trading below $10 a share to consider buying amid the market downturn…

Penny Stocks

A dollar or less was the common threshold for what we call penny stocks. Today, the SEC extended penny stocks to securities that trade for less than $5 per share. Many investors avoid these stocks because they are speculative in nature.

Meanwhile, penny stocks often trade infrequently and hold wide spreads between bid and ask. These stocks also have many other characteristics that in many cases lead to excessive volatility. That said, some penny stocks perform incredibly well, which helps keep them attractive.

Stocks Under $10

Moving on, let’s briefly discuss the next cheap stock class. Stocks that trade between $5 and $10 are generally less risky than their penny stock counterparts. Investors might be more likely to have heard of these companies or seen the tickers. However, they are still inherently more speculative than many other higher priced stocks.

Investors can obviously find winning stocks under $10 if they are extremely selective. So today we’ve whittled down the list of thousands of those more speculative stocks to a more manageable group of $10 and under stocks that could help boost your portfolio.

Screen settings

• Price less than or equal to $10

• Volume greater than or equal to 1,000,000

• Zacks rank less than or equal to 2

(No reservations, sales or strong sales.)

• Average broker rating less than or equal to 3.5

(Average broker rating of a take or better.)

• # of analysts in the rating greater than or equal to 2

(Minimum of at least two analysts covering the stock.)

• % change in F1 revenue estimate revisions: 12 weeks greater than or equal to 0

(Preferably upward revisions to earnings estimates, but certainly no downward revisions.)

here is of them stocks of the 40 highly ranked names trading under $10 a share that hit the screen today…

NextTier NEX Oilfield Solutions

NexTier is an American onshore oilfield services company that operates a diverse set of well completion and production services “in the busiest and most demanding basins”. NexTier boasts that its integrated solutions approach delivers “efficiency today”, while its innovation helps customers “better cope with what’s next”.

NexTier shares have soared over 60% in 2022 and there is still room to climb before it hits its current Zacks consensus price target. The NEX high and low outlook for the next year is strong and part of the highly ranked Oil & Gas – Field Services industry.

GoPro GPRO

GoPro makes small, mountable cameras that record both video and photos. GPRO’s offerings have become hugely popular in the world of action sports, from ski slopes to mountain bike trails, and beyond. GoPro’s various small, high-resolution cameras, including the HERO10, are waterproof and have impressive stabilization features. Overall, GoPro cameras are appealing to people who take photos and videos in situations where their smartphones won’t suffice.

GoPro lands a Zacks No. 1 (Strong Buy) rank right now, alongside its “A” rating for Growth and “B” for Momentum in our Style Scores system. Zacks estimates predict strong sales and even more impressive growth in adjusted earnings this year and next. And GoPro’s stock has grown over 95% in the past two years.

Both stocks offer solid growth potential. Still, it’s not wise to fill your portfolio with cheap stocks of $10 or less. Still, these stocks are certainly worth further investigation, as grabbing a few of the top names on this list could bolster your returns. And let’s not forget that picking a few cheap stocks can be a lot of fun too.

Get the rest of the stocks on this list and start searching for the best stocks under $10 on your own. And don’t forget to test your strategy so you know how successful it has been before you put your money at risk.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in the options mentioned herein. An affiliated investment adviser may hold or have shorted securities and/or hold long and/or short positions in options mentioned herein.

Disclosure: Information on the performance of Zacks portfolios and strategies is available at: https://www.zacks.com/performance/.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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