There’s a natural attraction to having cheap stocks. Nobody wants to overpay for an equity in their portfolio. And if you have $10,000 to invest it’s a lot easier – and more satisfying – to buy a lot of shares of a company than just a handful priced at $500 or so.
But cheap stocks don’t mean bottom-of-the-barrel picks. You can find some amazing values with the right cheap stocks if you know how to identify the ones that have the best potential to outperform the market in the coming months.
That’s where the Portfolio Grader comes in. My free tool gives an “A” through “F” rating to every stock, based on earnings history, stock performance, sentiment, buying momentum and other factors. Investors can look for cheap stocks with a good “A” or “B” grade and have some assurance that there’s muscle behind those low, low prices.
But here’s a word of warning – some of these stocks have a pretty low market capitalization and are classified as penny stocks. That means they don’t have the resources as big large-cap names have to buy their way out of trouble. And for better or for worse, when you’re an up-and-coming stock with a low market cap, you’re always at risk of a bigger company snapping you up.
So consider these cheap stocks carefully and understand that they may have some additional volatility that you won’t see with other names. But if you’re willing to ride it out, these cheap stocks have good potential.
BigBear.ai (NYSE:BBAI) is an up-and-coming defense contracting company that appears to be punching above its weight. The Maryland-based company has a market capitalization of less than $300 million, but it’s already secure a $900 million contract to be a prime contractor for the Air Force.
BigBear’s end-to-end data analytics platform harnesses artificial intelligence and machine learning to provide insights for clients. Investors are betting that BigBear will be able to provide superior strategic solutions with AI, helping it grow its government portfolio and keep profits rolling in.
Holding BBAI stock can be a wild ride, however. The stock fell nearly 40% in the last month, but the first two months of the year saw huge profits. BBAI is up about 200% in 2023. If you’re taking a new position, you’re hoping there’s plenty more where that came from.
Ocean Biomedical (OCEA)
Based in Providence, Rhode Island, Ocean Biomedical (NASDAQ:OCEA) is focused on developing treatments for lung cancer, brain cancer, pulmonary fibrosis and malaria.
The company is funding its research through $123.9 million in grants. OCEA stock made a big jump in the second week of March, gaining more than 32% after the company announced progress in its drug candidate to treat malaria.
That pushed the stock price out of penny stock territory and over $7 per share. And there’s a lot of optimism that it’s going to go higher. Both EF Hutton and Fundamental Research Corp. initiated coverage on OCEA stock in March, with both firms giving it a “buy” rating.
The Portfolio Grader, meanwhile, gives OCEA a “B” grade.
Cardio Diagnostics (CDIO)
Cardio Diagnostics (NASDAQ:CDIO) just started trading in October following a blank-check merger with special purpose acquisition company Mana Capital. Unfortunately for investors so far, the stock has been a disappointment with shares trading at less than half of where they opened less than a year ago.
The company’s working with its Integrated Genetic-Epigenetic Engine to create personalized treatment options for patients suffering from or at risk of cardiovascular disease. Its patents were already recognized in the U.S. and Europe, and just recently China agreed to recognizing one of Cardio Diagnostic’s intellectual properties, allows it to extend patent protection in that country.
Cardio Diagnostics is positioned for growth, particularly with its patent protections. If it the company can start building on its momentum and charge out some solid quarters, the company’s current price will seem extremely cheap.
CDIO stock has a “B” rating in the Portfolio Grader.
Castor Maritime (CTRM)
Global shipping company Castor Maritime (NASDAQ:CTRM) stands as an outlier in this list of cheap stocks, which are dominated by companies at the cutting edge of biotech and machine learning.
Instead, Cyprus-based Castor Maritime represents an industry that’s straight out of the 20th century. The company specializes in the ocean transport of dry-bulk vessels and ships products around the world.
The importance of a solid supply chain came to the forefront of many people’s awareness during the Covid-19 pandemic – if manufacturers can’t get raw products from their suppliers, then consumers face a long delay of getting their retail goods.
The shipping company produced a strong fourth quarter with significant gains in both earnings and revenue. Revenue for Q4 was $69.3 million which was better than year-ago revenue of $60 million. EPS of 36 cents was double the EPS of the fourth quarter of 2021.
Full-year 2022 results were also solid, leading investors to pile back on board.
Castor Maritime stock can be had today for less than $1 per share. It gets a “B” rating in the Portfolio Grader.
MMTec (NASDAQ:MTC) caters to the financial industry. Based in Hong Kong, the company operates platforms that used by Chinese-language hedge funds, mutual funds, investment advisors and brokerage firms.
Through MMTec’s systems, these firms can participate can trade and move securities around on exchanges around the world.
Be warned – this is an exceptionally small publicly traded company. It carries a market cap of just $3.5 million. Earnings for the fourth quarter included revenue of just $366,000 – that that was a 41% increase from a year ago.
And its burning through cash as it tries to ramp up the business. Operating income over the last 12 months was a loss of just more than $7 million.
With a company this small, you’re going to see some tremendous volatility. Just over the last month investors have seen days with one-day gains of 49% and one-day losses greater than 35%.
This company is not for the risk-adverse investor, but the potential for gains are intriguing. MTC stock has a “B” rating in the Portfolio Grader.
Ambrx Biopharma (AMAM)
Another biotech stock makes our list. Ambrx Biopharma (NASDAQ:AMAM) uses precision engineering and a powerful genetic code platform in an attempt to create specialized treatments for cancer patients.
Candidates in its pipeline are designed to treat prostate, lung and ovarian cancer, multiple myeloma, non-Hodgkin’s lymphoma and leukemia.
While this is a business with a worthy mission, Ambrx runs into the same problems that many biotechs have. Research and development of new drug treatments is an expensive business, and smaller companies need to dig deep to fund the research and clinical trials even when there’s no revenues coming in. Ambrx recently raised $78 million by selling 16.5 million shares of its stock, which it says will provide capital it needs through 2025.
Also, if you’ve been following Ambrx, you’ve likely noticed that it’s a newcomer to the Nasdaq exchange. AMAM stock previously traded on the New York Stock Exchange, but the Nasdaq seems to be a better fit for this biotech component.
AMAM is up more than 300% so far this year, and had a “B” rating from the Portfolio Grader.
With its headquarters in Gaithersburg, Maryland (just outside Washington, D.C.), Altimmune (NASDAQ:ALT) is a clinical-stage biopharmaceutical company that’s working on potential treatments for obesity, non-alcoholic steatohepatitis and hepatitis B.
Its three drug candidates are all in Phase 2 trials, so revenues are a ways down the road for this company. Penvidutide, the company’s treatment for obesity, just finished a Phase 2 trial of 320 subjects that the company called “extremely promising.” Patients who took the drug reported a weight loss between 7.3% and 10.7% in a 24-week trial.
Obesity continues to be a growing problem in the U.S. and leads to all sorts of health issues, including diabetes. If Altimmune can crack the code and develop a treatment that can help patients lose weight safely, then this stock won’t remain a penny stock for long.
Altimmune stock is down about 70% so far this year, but you’d be buying this one for the potential, not its recent performance. ALT stock has a “B” rating in the Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.