Best Stocks Under $5 To Buy This Month

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Most investment professionals tell investors to stay away from stocks under $5. These stocks, commonly referred to as penny stocks, tend to come with the highest levels of risk. On the other hand, they also represent compelling opportunities. Believe it or not, small-cap stocks have outperformed their large-cap counterparts throughout history.

The key to investing in smaller companies is doing adequate research and choosing the best stocks under $5. These are the types of stocks that have the potential to experience significant growth.

What Are the Best $5 Stocks To Buy Now?

If you’re looking for the best stocks under $5, you’re in risky territory. The smaller the company, the higher its potential to face insolvency, bankruptcy and significant losses. However, there are some gems in the market.

1. Ambev S.A. (NYSE: ABEV)
2. Braemar Hotels & Resorts (NYSE: BHR)
3. Sachem Capital Corp. (NYSE: SACH)
4. Bark, Inc. (NYSE: BARK)
5. MarketWise, Inc. (NASDAQ: MKTW)
6. Envela (NYSE: ELA)
7. Genasys Inc. (NASDAQ: GNSS)
8. Tetra Technologies (NYSE: TTI)
9. Kosmos Energy (KOS)

1. Ambev S.A. (NYSE: ABEV): $2.34 per Share

Ambev is an interesting play because it trades like a penny stock but is part of one of the largest companies in the world. The company is the South American arm of the world’s largest brewer, Anheuser-Busch InBev SA, and is the exclusive distributor of Pepsi products in Brazil.

Ambev’s full-year revenues and profits have grown each year for the last three years, although growth slowed in 2023. Free cash flow is up as well, from $13.11 billion in 2022 to $18.71 billion last year. Investors get some of that cash back as dividends, which currently yield 6.37%. Slumping share prices could reflect the struggling Brazilian economy, but trading at just over 13 times earnings, the stock appears to be undervalued.

Analysts rate ABEV a “hold” according to MarketBeat, giving it a score of 2.33 out of five — similar to scores for consumer staples companies and the S&P 500.

2. Braemar Hotels & Resorts (NYSE: BHR): $3.02 per Share

Braemar Hotels & Resorts is a real estate investment trust that invests in luxury hotels and resorts. Its current portfolio includes Hilton, Marriott and Ritz-Carlton branded properties in seven states throughout the U.S., with a combined total of over 4,000 rooms.

CEO and president Richard J. Stockton came to Braemar 25 years ago after 15 years with Morgan Stanley. He said in a Q3 2023 earnings recap that record highs in 2022 resulting from a return to travel after the pandemic were unsustainable, as demonstrated by unfavorable year-over-year comparisons. But the resort hotel performance continues to outperform pre-pandemic levels.

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While the company emphasizes annual results over quarterly, Stockton acknowledged a difficult year-over-year comparison between the first quarter of 2024 and the first quarter of 2023, which received a lift from the Super Bowl.

MarketBeat reports a “hold” recommendation, with analysts scoring Braemar 2.0 out of 5, 0.46 points lower than the finance companies category 0.51 points lower than the S&P 500.

3. Sachem Capital Corp. (NYSE: SACH): $2.46 per Share

Connecticut-based Sachem Capital Corp. is another REIT, but instead of purchasing real estate, it originates, services and manages first mortgage loans. The company’s investors and shareholders fund a variety of loan types, including bridge loans, new construction, fix and flip and refinance.

Shares appear to be an excellent value right now, with analysts forecasting 52% gains in the coming year. What’s more, the 32-cent dividend represents a 13.17% yield. Analysts polled by MarketBeat rate the stock a “buy,” with a consensus rating score of 3 out of 5. Finance companies and the S&P 500 received scores of 2.46 and 2.51, respectively, which means analysts expect Sachem to outperform competitors and the broader market.

4. Bark, Inc. (NYSE: BARK): $1.74 per Share

Bark is a direct-to-consumer company focused on the pet supplies space. Founded in 2012 as BarkBox, the company has since changed its name to Bark, Inc.

Bark’s flagship product, the BarkBox — a monthly subscription-based product that ships goodies for your dog to your home — did well during COVID-19. However, as traditional retail opened back up, sales slumped. At the same time, investors ran from special-purpose acquisition companies — Bark went public as a result of its merger with Northern Star Acquisition Corp., a publicly traded SPAC — causing further pain for the company.

Nonetheless, some are expecting a comeback after the company restructured its business to strengthen operations and offer more products. Of the four analysts following this stock over the last two months, one rates it a “hold,” one rates it a “buy” and two rate it a “strong buy.” Their consensus price target is $2.27 — about 30% higher than the current share price.

5. MarketWise, Inc. (NASDAQ: MKTW): $0.77 per Share

MarketWise, Inc. is a fintech company that offers a subscription-based platform with financial research, education and tools for self-directed investors. It’s a struggling company, as demonstrated by plummeting share prices in 2023 and difficulty keeping shares moving upward — the result of fall-off following the influx of new customers who joined the platform during the pandemic but didn’t remain active after life returned to normal. However, last October the company made leadership changes and announced an internal review to improve operations and increase the company’s intrinsic value.

T F. Porter Stansberry, MarketWise founder and current CEO, acknowledged in a May 15 letter to shareholders that the company has a lot of work to do, and he explained the initiatives the company is implementing to rebuild its subscriber base and increase billings.

Analysts who watch the stock are cautiously optimistic, rating the stock a “moderate buy.” They expect shares to reach $2.50 in the next 12 months — a 223% increase.

6. Envela (NYSE: ELA): $4.90 per Share

Envela is a “re-commerce” company offering retail and commercial services. On the retail side, it buys and sells jewelry and bullion to consumers, dealers and institutions. On the commercial side, it provides electronics recycling solutions that help businesses safeguard their data while reducing waste.

ELA share prices plummeted last summer and continued to trend downward until early November. They’re currently up from their 52-week low but still appear to be undervalued. Analysts who watch the stock believe it could reach $7.50 within the next 12 months, according to Yahoo Finance.

7. Genasys Inc. (NASDAQ: GNSS): $2.90 per Share

Critical communications systems are an integral part of emergency management. Genasys provides an Internet of Things platform for those communications, giving governments and other enterprises the tools they need to broadcast targeted messages, issue mass alerts and facilitate evacuations.

Genasys had six consecutive years of revenue growth before a decline last year, and profits were down, too. And it’s still a risky stock, although CEO Richard S. Danforth announced that “Genasys is finally turning the corner” in a May 14 earnings release. The stock has a solid “buy” rating and a price target of $4.13, which represents about 42% upside, according to MarketBeat.

8. Tetra Technologies (NYSE: TTI): $3.07 per Share

Tetra Technologies is an energy services and solutions company that’s leveraging its aqueous chemicals experience, minerage acreage and global infrastructure to expand into low-carbon energy markets. Its initiatives include the development and commercialization of its resources for use in oil and gas products as well as batteries and other energy storage — a perfect entry point to the electric vehicle industry.

In its earnings release for the second quarter of 2024, Tetra reported record revenue of $1.25 billion and a record profit of $1.05 billion. Its performance was so strong that the company increased its full-year projections for profits and earnings per share. Shares appear to be trading at a steep discount, prompting 11 out of 14 analysts watching the stock to rate TTI a “strong buy” (two analysts) or “buy” (nine analysts), according to Yahoo Finance. They expect share prices to hit $7.42 in the next 12 months.

9. Kosmos Energy (NYSE: KOS): $4.79 per Share

Kosmos Energy is a deep-water exploration and production company making a strong showing in 2024. The company announced in 2022 that it was looking to begin projects in Ghana, the Gulf of Mexico, Mauritania and Senegal and increase its overall production about 50%, HartEnergy reported. It reached the halfway point in early August.

Kosmos has beat earnings expectations for the last four quarters, and on Aug. 5, reported a second-quarter production increase of about 7% year over year. Eleven analysts out of the 15 watching the stock rate it a “strong buy” or “buy,” and the rest recommend holding. The price target is $8.05, 68% higher than the closing price on Aug. 28.

Tips for Selecting Penny Stocks

Stock investing is inherently risky, and penny stocks are some of the riskiest of all. However, you can reduce the risk of losing some or all of your investment by researching stocks before you buy. Here’s what to look for:

• Shares that trade on a major exchange, such as the Nasdaq or New York Stock Exchange, rather than over the counter.
• Undervalued companies. Use an online screening tool to compare a stock’s P/E ratio to the ratios of similar companies. Lower ratios are better.
• Stocks for companies that represent an economic moat. A moat is a distinct advantage that helps a company maintain an edge over competitors. Alphabet is one example. As it came to dominate the internet search market, it leveraged its processes and its data to expand into advertising and other industries to the point that there’s no close second waiting in the wings.
• Liquidity. A stock with low trade volume might be difficult to sell and could leave you with worthless shares.
• Stocks with share prices of at least $1. Stock exchanges can delist companies whose shares trade for less than $1 for an extended period.

If you’re not sure you’re ready to invest real money into penny stocks, consider opening a practice account. A number of brokerages, including Webull and Schwab, offer simulators you can use to test and hone your stock-picking skills.

Final Take

Although most stocks under $5 come with significant risk, sometimes taking that risk pays off. If you’re considering jumping into small-cap stocks, those listed above are some of the best stocks under $5 on the market today. 

Daria Uhlig contributed to the reporting for this article.

Share prices are accurate as of market closing on Aug. 28, 2024.

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