7 Cheap Stocks to Buy for $20 Or Less in September
InvestorPlace - Stock Market News, Stock Advice & Trading Tips Each of these seven stocks can be had for $20 or less, but these aren't just cheap...
Investment guru Warren Buffett emphasizes two seemingly simple yet important rules: first, don’t lose money, and second, “don’t forget the first rule.” And he recommends investing in robust stocks that offer good value. Many investors, therefore, are on the hunt for cheap stocks that are a good value.
However finding cheap stock that are also undervalued is not always easy. Therefore, today I’ll introduce seven cheap stocks under $20 that offer potential for a strong rally in the coming months. The companies come from diversified sectors that could rebound further in the post-Covid-19 recovery period.
Broader U.S. markets are trading near record highs. So far in 2021, the S&P 500 index, the Dow Jones Industrial Average (DJIA) and the Nasdaq 100 index are up around 20%, 15% and 19% respectively. Even in such an environment where valuations seem overstretched relative to historical averages, there are cheap stocks that trade under their intrinsic values. However, due diligence is important before one hits the “buy” button.
With that information, let’s take a closer look at the following seven cheap stocks to buy for under $20:
- ASE Technology (NYSE:ASX)
- Beazer Homes USA (NYSE:BZH)
- Container Store Group (NYSE:TCS)
- E. W. Scripps (NASDAQ:SSP)
- Flex (NASDAQ:FLEX)
- Ford Motor (NYSE:F)
- KeyCorp (NYSE:KEY)
Cheap Stocks to Buy: ASE Technology (ASX)
52-Week Range: $3.93 – $9.62
Dividend Yield: 3.41%
Today’s first choice is the Taiwan-based semiconductor assembly and testing firm ASE Technology. The company operates in the U.S., Taiwan, China, South Korea, Japan, Singapore, Malaysia, Mexico and several European countries. It serves customers in three segments including packaging, testing and electronic manufacturing.
According to second quarter financial results reported in late July, net sales grew 18% year-over-year (YOY) to 126.9 billion TWD ($4.58 billion). Net income was 10.3 billion TWD ($370 million), up 49% compared to 6.9 billion TWD ($250 million) in the prior-year period. Diluted earnings per share (EPS) was 2.40 TWD (8.7 cents), or 17 cents per American depositary share, and increased 47% from Q2 FY20. Cash and equivalents ended the quarter at nearly 53 billion TWD ($1.91 billion), a decline of 9% YOY.
On the Q2 earnings conference call, COO Dr. Tien Wu said, “first quarter of 2021 has been stronger than all of our expectation. We’re looking forward to another strong Q1 in 2022. Many of the customer are extending the long term service agreement beyond 2022 into 2023.”
The company also released monthly revenues for July, indicating a YOY growth of 24.5% in TWD and 32.1% in U.S. dollars.
ASX shares have returned nearly 48% year-to-date (YTD) and hit an all-time high in early August. The shares currently trade at 1.05 times sales and 2.27 times book value. The company also offers a juicy dividend yield, currently well over 3%. Given the metrics, growth investors should keep the stock on radar to buy the dips.
Beazer Homes USA (BZH)
52-Week Range: $10.96 – $26.12
Atlanta, Georgia-based Beazer Homes USA is a geographically diversified homebuilder. The company specializes in single-family housing and multi-unit buildings in 13 states.
On July 29, Beazer Homes announced strong Q3 financial results. Total revenue was $570.9 million, up 7% YOY. Net income from continuing operations came in at $37.1 million compared to $15.2 million in prior-year quarter. Diluted earnings per share (EPS) was $1.22, up 139% YOY. Unrestricted cash at quarter end was $358.3 million. Total liquidity stood at $608.3 million.
On the results CEO Allan P. Merrill said, “We generated significant gains in operating margin and adjusted EBITDA, leading to quarterly net income that was more than double the same period last year. At the same time, we grew our total active lot position while continuing to reduce leverage.”
Recent metrics suggest, “Low mortgage rates, limited existing inventory, and government protection against forbearance and foreclosure on mortgage payments will offer support for market recovery … The construction industry in the United States is expected to grow by 15.6% to reach US$ 1515659.4 million in 2021.”
Therefore, we can expect many builders to grow revenues steadily in the quarters ahead. In fact, Beazer management anticipates FY21 EPS to exceed $3.25 and aims for a double-digit EPS growth in FY22.
So far this year, BZH stock is up about 25%, and hit its highest value since the 2008 market crash in May. The shares trade at 0.26 times current sales. The company’s price-to-book ratio stands at 0.88. Interested readers could consider investing around these levels.
Cheap Stocks to Buy: Container Store Group (TCS)
52-Week Range: $3.70 – $19.31
Coppell, Texas-based Container Store Group is a specialty retailer of storage and organization products. Founded in 1978, the company operates under two segments. The Container Store segment mainly consists of retail stores and online sales. The Elfa segment manufactures component-based shelving and drawer systems and made-to-measure sliding doors.
According to Q1 metrics released in early August, consolidated net sales came in at $245.3 million, 61.7% higher than Q1 in the previous year. Understandably, sales last year were impacted by pandemic-related lockdowns and setbacks. Adjusted net income was $18.2 million, or 36 cents per diluted share compared to adjusted net loss of $15.5 million, or loss of 32 cents per diluted share in same quarter of fiscal 2020.
CEO Satish Malhotra said, “We are in the early stages of our path to $2 billion in net sales, but our progress to date further solidifies our confidence in our ability to drive strong results.” The company expects a 4% YOY growth in Q2 consolidated sales and an EPS of around 28 cents.
TCS stock is up around 12% YTD and hit a multi-year high in mid-March. The shares trade at 0.53 times current sales and 1.56 times current book value. I believe the stock offers value around around these levels. Buy-and-hold investors could invest below $11 to improve the margin of safety further.
E. W. Scripps (SSP)
52-Week Range: $8.95 – $24.78
Dividend Yield: 1.14%
Our next choice for today is the Cincinnati, Ohio-based media enterprise E. W. Scripps. Founded in 1878, the company operates a portfolio of 61 stations in 41 markets through its segments including local media and national media.
SSP issued Q2 financial results on Aug. 6. Revenue came in at $565 million, up 57% from the prior-year quarter, showing the impact of the ION acquisition. Net income was $5.6 million compared to a loss of $22 million same quarter previous year. Basic and diluted loss per share was 9 cents compared to a loss of 27 cents a year ago. The quarter ended with around $86 million of cash on hand and $393 million of additional borrowing capacity.
Following the release of the metrics, CEO Adam Symson said, “Scripps’ second-quarter results for our Local Media and Scripps Networks divisions have surpassed expectations for both revenue and segment profit,” and added, “Our improved financial profile today positions us well for ongoing business growth, future free cash flow generation and the ability to continue reducing our debt.”
As a result of strong demand and rate growth in direct response advertising, the company raised its free cash flow guidance for fiscal year 2021 from $210-$240 million to $240-$260 million.
So far in 2021, SSP stock is up slightly over 12% and saw a multi-year high in March. Price-to-sales and price-to-book ratios stand at 0.66 times and 1 times, respectively. Given growth expectations, investors should keep the stock on radar with a view to buy around $17.
Cheap Stocks to Buy: Flex (FLEX)
52-Week Range: $10.07 – $20.04
Singapore-based Flex is an electronics contract manufacturer. The group operates in 40 different countries with 200,000 employees. The company reported Q1 fiscal year 2022 results in late July.
Net sales grew 23% YOY reaching $6.3 billion. Non-GAAP net income of $230 million meant an increase of 98.3% YOY. Adjusted EPS was 46 cents, up 100% from the prior-year quarter. Cash and equivalents stood at $2.7 billion compared to $1.9 million a year ago.
CEO Revathi Advaithi commented, “Flex’s strong first quarter performance exceeded our prior expectations due to broad-based demand across our portfolio and solid execution, delivering record Q1 adjusted operating margin and EPS. We remain focused on driving profitable growth through disciplined execution and our differentiated capabilities.”
The company raised its FY2022 revenue guidance from $25.5 billion to $26.5 billion and adjusted EPS guidance from $1.70 to $1.85.
FLEX shares have returned 2.6% YTD and hit a 52-week high in January. The stock trades at 0.38 times current sales. The strong earnings outlook and current metrics make FLEX an attractive pick for value investors.
Ford Motor (F)
52-Week Range: $6.41 – $16.45
Dearborn, Michigan-based Ford Motor needs little introduction. It is well-known for its Ford trucks, utility vehicles and cars, as well as its Lincoln luxury vehicles. On July 28, Ford released better-than-expected Q2 financial results.
Revenue was $26.8 billion, up 38% from the prior-year period. Adjusted net income of $511 million translated into an adjusted diluted EPS of 13 cents. A year ago, adjusted net loss and diluted loss per share were $1.4 billion and 35 cents.
Adjusted free cash flow for the quarter was negative $5.1 billion, due to the ongoing semiconductor shortage. Ford ended the period ended with cash and liquidity of $25.1 billion and $41.0 billion, respectively.
On the results CEO Jim Farley commented, “Ford+ is about creating distinctive products and services, always-on customer relationships and user experiences that keep improving. And it’s already happening — there are great examples everywhere you turn at Ford, and the benefits for our customers and company will really stack up over time.”
Also in late July, Ford announced its cooperation with Argo AI to deliver self-driving vehicles for Lyft (NASDAQ:LYFT) by end of 2021. Looking forward, the company raised full-year 2021 adjusted EBIT expectations to between $9 billion and $10 billion and adjusted free cash flow to between $4 billion and $5 billion.
So far this year, F shares are up nearly 48%, and hit a multi-year high in June. Consensus forward P/S and P/B ratios are 0.38 times and 1.49 times respectively. Potential investors could consider investing around these levels.
Cheap Stocks to Buy: KeyCorp (KEY)
52-Week Range: $11.33 – $23.65
Dividend Yield: 3.69%
Today’s final stock is the Cleveland, Ohio-based bank holding group KeyCorp. The company provides deposit, lending, money management and investment services to both individuals and businesses under the name KeyBank National Association in 15 states with over 1,000 branches.
KEY announced record Q2 financial metrics in mid-July. Total revenue was $1.8 billion and increased 3% YOY. Net income totaled $703 million, and diluted EPS was 73 cents, compared with previous year’s income of $161 million and 16 cents. Cash at end of the quarter stood at $792 million.
On the results, CEO Chris Gorman said, “Our positive credit trends reflect our strong risk culture and disciplined underwriting practices. Our capital position also continues to be one of our strengths, with a Common Equity Tier 1 ratio of 9.9% at the end of the quarter.”
The company also announced the approval of a share buyback plan for up to $1.5 billion and a possible increase in Q4 dividends.
KEY stock currently trades at 2.8 times current sales. So far in 2021, the shares have returned over 20% and saw multi-year highs in mid-May. The current stock price supports a dividend yield of over 3.6%. Long-term investors could consider buying below $20.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
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