The U.S. market remains hot — even an epidemic can’t stop it.
While China and other countries are scrambling because of the coronavirus, the U.S. markets keep chugging along.
And disruption abroad is actually a good thing for the U.S. markets, since all that money from outside the U.S. needs a place to go for growth and safety.
Our economy is growing, and the Federal Reserve continues to sit on its hands and allow a very easy monetary policy that helps businesses continue to grow. Slow and steady is winning the race right now.
And small stocks are a way to leverage that growth. The seven stocks under $5 to take a chance on below are from a variety of industries but all have “A” ratings from my Portfolio Grader.
Note that given their size and the volatility of the market now, some may have popped slightly above $5, but they’re still worth your interest. And remember, don’t put all your money on one horse; these are small companies that will lead the market up and lead it down as well.
Stocks to Buy: Orion Energy Systems (OESX)
Orion Energy Systems (NASDAQ:OESX) has found a niche that is now expanding rapidly.
What do I mean by rapidly? The stock is up 420% in the past year and nearly 60% year-to-date.
It’s in what seems like a pretty boring space, to be honest, building and retrofitting lighting systems. But think about the demand for energy efficient lighting systems not only in stores but in warehouses and offices.
It has a $154 million market capitalization currently and continues to win sizable contracts. These systems are one more way companies can shave operating costs off their businesses and in some cases even get some green tax breaks. And with low interest rates, this is a great time to upgrade.
The stock has broken through $5 and continues to rise, so it may be wise to establish a position and then buy more on dips.
Spar Group (SGRP)
Spar Group (NASDAQ:SGRP) is a global company that does something few of us ever think about as a business but impacts our lives every day.
It specializes in merchandising solutions. Or more simply put, it designs the shelving and displays that go in major retailers’ stores.
If you have ever gone through a store that is going through a reorganization of its space — like a grocery store or a drug store — you get the idea.
Two big trends are a play here that lean to SGRP’s advantage. Older stores are being redesigned to help consumers access the stores better. And other stores are being revamped as industry consolidation expands.
For example, Walgreens (NASDAQ:WBA) purchased nearly 2,000 Rite Aid (NYSE:RAD) stores. All of them have to be converted into Walgreens locations. SGRP does that kind of work. It has over 25,000 worldwide clients and does over 20,000 resets every year.
It has a $25 million market cap and is up over 90% in the past year.
Envela (NYSEMKT:ELA) has been around since 1965 and labels itself as a “recommerce” company.
Fundamentally, it operates gold and jewelry stores as well as websites that sell jewelry, watches and even bullion. The other aspect of its business is re-selling older computer parts to developing markets in need of IT equipment. In this capacity, ELA acquires the equipment, wipes the data and secures contracts for repurchases.
Obviously, the IT side of the business is a newer addition. But both are very solid businesses. And with collectibles as well as precious metals being very hot right now, this is a great space to be in.
ELA stock is up nearly 420% in the past 12 months, nearly 70% year-to-date. And it’s still trading at a price-to-earnings ratio below 25. It has a $63 million market cap, so a good economy is also good for Envela stock.
B2Gold (NYSEMKT:BTG) is on the other end of precious metals business — it’s a Canada-based gold mining company with mines in Namibia, Nicaragua, Mali and the Philippines.
With a market cap of $4.3 billion, it’s one of the biggest companies in this list.
Generally, the pattern with gold miners is their performance is leveraged to the price of physical gold. When gold is trending lower, miners’ performance is leveraged lower. When gold is rallying, miners’ performance is leveraged to the upside.
Over the past year, we’ve seen gold prices rise, and with the coronavirus-driven volatility in the markets, that should continue.
BTG stock is up 40% in the past year, and that kind of upside should continue at least through 2020.
Plug Power (PLUG)
Plug Power (NASDAQ:PLUG) is one of those renewable energy companies that has been able to survive the dot-com bubble and every other market impediment that has been thrown at it since 1997.
Yet it’s not in the solar or wind business. It’s in the hydrogen fuel cell business. Even today, this seems like a pretty futuristic concept. And the fact that hydrogen cars may never have their own Elon Musk doesn’t mean that hydrogen fuel cells aren’t a big deal.
As a matter of fact, they are already in use in forklifts and other warehousing and shipyard equipment. They are used as batteries and energy storage in electric vehicles. And they are also in wide use as back-up generators. Their potential uses range from aerospace to robotics.
And PLUG is also the biggest hydrogen fueling supplier in the business.
A recent article in Forbes notes that 50% of all supply chain shipping costs come in the last mile of delivery. Hydrogen-powered delivery vehicles would be great for companies and consumers.
Simply put, what was a tech fantasy is now a reality and PLUG has endured being a leader in the field. The stock is up 210% in the past 12 months and has strong momentum. And its $1.2 billion market cap means it has a solid foundation behind it.
Veru (NASDAQ:VERU) is a biotech that focuses on drug treatments for prostate issues, including prostate cancer. Currently it has one drug going through the approval process for benign prostatic hyperplasia (BPH) and erectile dysfunction. The drug, Tadfin, should hit the market in the second half of 2020.
It has four other drugs in advanced drug trials, with its most promising drug being VERU-111 for metastatic prostate cancer. It continues to progress through trials.
The company’s earnings have been solid and it looks well positioned to establish itself in the market as its drugs come online.
Prostate cancer and other prostate issues are part of the aging process in men, so these drugs will have a growing audience as many nations around the world see a graying population with chronic issues such as these.
The stock is up 190% in the past year and 103% in the past quarter.
FlexShopper (NASDAQ:FPAY) is an online rent-to-own business that is a new twist on the conventional rent-to-own businesses out there. It doesn’t have to deal with brick-and-mortar stores.
Everything is online. You download the app. You apply for credit — up to $2,500 instant credit ($113 per week). Then you pick what you want to rent, and it ships to you. Your payment is then deducted weekly from your bank account.
And at the end of the year, you own that item.
Given the company is making money on the cost of the item and the financing without having to deal with any overhead, the margins are pretty tempting.
It also continues to add products, like tires. Currently the company is aggressively growing its market but the concept is sound and the rise of digital banking and e-commerce make this a great idea for people that have poor credit or lack the disposable income to buy big-ticket items at once.
The stock is up 260% in the past year, and 73% in the past quarter. Its current market cap is about $50 million, so it has plenty of headroom in a good economy where the consumer is confident.
Speaking of e-commerce, this is a time of phenomenal growth for internet and software companies. Going forward, much of that growth will be driven by an earth-shaking technological advance that’s gearing up now.