The stock market fell again in September, adding to this year’s big losses for the major indexes. This has driven a lot of stocks below the $5 level as prices continue to fall across the board. That means there is a larger pool of cheap stocks to consider heading into the fourth quarter. As always, a lower stock price does not necessarily mean a bargain. Many low-priced stocks reach this point because of severe problems with their balance sheets, business models, or future economic outlook. As a result, it is important to use a strict filter when looking for cheap stocks to buy for under $5 per share. These nine stocks are the most promising stocks in October this year.
Cheap Stocks of Alto Ingredients Inc. (ALTO)
Alto Ingredients is a great story about the evolution of companies. Until a few years ago, it was primarily an ethanol producer seeking to turn corn into a renewable energy fuel. Unfortunately, the ethanol-for-energy market has been very cyclical and has not been particularly profitable over time. The company, then known as Pacific Ethanol, struggled to make steady profits.
However, it has now exited from ethanol for energy and has centered around making ethanol for consumer products such as food, cosmetics, and alcoholic beverages. And the company has made huge profits recently thanks to unusually high demand for hand sanitizers, which use ethanol, during the pandemic. The market appears skeptical that Alto’s recent surge in profitability will continue. However, the stock is still heading about 12 times the expected earnings for 2022, and the business model is much better than it was in the Pacific ethanol days.
Cheap Stocks of AvePoint Inc. (AVPT)
AvePoint is a software company that helps organizations manage installations and data in Microsoft Corp.’s cloud ecosystem. (MSFT). AvePoint is vital for Fortune 500 companies looking to monitor and protect their data across Office, Teams, Azure, and other Microsoft platforms in one place. Historically, concerns about AvePoint have been that it became public via a Special Purpose Acquisition Company or SPAC and that it was too closely tied to Microsoft’s fortunes.
However, with the Azure cloud continuing to grow at a rapid pace, it seems increasingly clear that there is enough room for preferred Microsoft partners like AvePoint to thrive as well. The stock is also considered attractive on the basis of valuation. It has a large cash reserve, which insulates it from current market conditions, and the company is currently experiencing revenue growth of over 20%.
Cheap Stocks of Matterport Corporation (MTTR)
Matterport is another SPAC tuned. The stock hit $30 at one point, but is now trading around the $4 mark. However, investors should not conclude that the company is a loser. The company modernizes real estate by allowing landlords and landlords to create virtual 3D representations of buildings. This allows potential clients to take a virtual tour of the property without having to stand there. This is useful for all kinds of things, from showing off office buildings to letting people see places like wedding halls or luxury hotels digitally. With the adoption of virtual and augmented reality solutions, there will be more and more ways to profitably use 3D building models in Matterport.
The company generates about $130 million in revenue annually, which isn’t a huge number yet, but it shows that there is a real commercial demand for the product and gives it room to expand if and when the metaverse takes off.
Cheap Stocks of Grupo Aval Acciones y Valores SA (AVAL)
Grupo Aval is one of three major banking and financial groups in Colombia. The industry is attractive due to limited competition; These three companies make up nearly 70% of the country’s banking assets. This keeps profit margins strong. Besides being just a bank, Aval owns diversified holdings through its subsidiaries across construction, infrastructure assets, pension and asset management, and insurance, among other areas. It’s a one-stop shop for learning about the Colombian economy. At the moment, this has been invalid thanks to the significant appreciation of the US dollar, which has led to problems in emerging markets.
However, Colombia’s primary export is oil, and the price of oil is rising again thanks to lower inventories and OPEC supply cuts. Aval shares are currently selling for less than 4 times the expected forward earnings.
Cheap Stocks of Ambev SA (ABEV)
Ambev is the Latin American operating division of global beer giant Anheuser-Busch Inbev SA (BUD). Amber’s core business includes the manufacture and distribution of parent brands in Brazil, Argentina and other South American countries. This has traditionally been a decent job. South America has been much slower to adopt handcrafted beer and other alternatives rather than developed markets. There is also a window of opportunity for Ambev this fall as the 2022 World Cup kicks off. This presents a huge opportunity to break out for key markets such as Brazil and should finally end the decline caused by the pandemic seen in workplace beer consumption in South America.
Ambev shares have underperformed in recent years, in part due to investor alienation from the parent company. However, unlike Anheuser-Busch, Ambev has a strong balance sheet and is well positioned to take advantage of growth opportunities in the coming years.
Cheap Stocks of Aenza SAA (Stock ticker: AENZ)
Aenza is the largest construction and engineering company in Peru. It also has operations in Chile and Colombia. The company is widely diversified – it operates the Lima metro line, builds tunnels and airports and has a real estate construction arm as well. The company fell into disrepute a few years ago when it was linked to a Brazilian company, Odebrecht, which used unscrupulous tactics to obtain contracts. In addition, the emergence of leftist politics in Peru reduced the appeal of Ainza. However, the company has replaced the previous management and the political situation in Peru is improving. Meanwhile, a sharp rise in commodity prices is likely to trigger a major boom in South America.
The company’s market capitalization is only $230 million today against annual revenues of approximately $1 billion and a backlog of $2 billion. Ainza could have an explosive uptrend with any improvement in global economic sentiment.
Cheap Stocks of Cemex SAB de CV (CX)
CEMEX is a building materials company. It is primarily known for its cement and is the fifth producer of this product worldwide. While the company is headquartered in Mexico, it has extensive operations in the United States and internationally and derives the majority of its revenue from outside Mexico. The company’s share price fell sharply in 2022 due to economic concerns.
The demand for new homes and other construction projects is likely to fall due to the sharp rise in interest rates. This will act as a drag on the demand for cement and other building materials. Regardless, Cemex remains solidly profitable; The company is currently trading at less than 5 times forward earnings. The company’s manufacturing base is ideally located as Mexico benefits from lower labor costs. Cemex’s extensive operations in Texas also benefit from that state’s low-cost structure and abundance of cheap natural gas and other material inputs.
Cheap Stocks of Rackspace Technology Inc. (RXT)
Enterprise infrastructure solutions company Rackspace is once again publicly traded. Private equity firm Apollo took private ownership in 2016, but Rackspace re-emerged with an initial public offering of 2020. The shares started trading around the $20 mark, but are now trading at less than $5 thanks to a massive sell-off in the tech industry this year. Rackspace is at a crossroads today. Legacy cloud hosting and management operations are very profitable but have limited growth potential.
This field has become something of a commodity as the differentiation between vendors has matured and diminished. Rackspace is now experiencing exponential growth in its multi-cloud division, which helps businesses with the most complex setups across various public clouds. This provides long-term growth but implementation will be vital. If it can evolve with the times, Rackspace’s current stock price is a bargain.
Cheap Stocks of GrafTech International Ltd. (EAF)
GrafTech is a manufacturer of graphite electrodes. The company’s primary mission is to help advance the adoption of steel made in electric arc furnaces instead of in blast furnaces. By exchanging coal for electricity, carbon can be removed from a large part of the steelmaking process. This is desirable, given the push to reduce carbon emissions and environmental damage from heavy industrial processes. GrafTech is also vertically integrated and produces much of its own input materials, which in part shields it from the current commodity price boom. GrafTech is currently very profitable and has a price-earnings ratio of less than 3.
This is partly due to the long-term agreements that have allowed the company to sell the product at prices well above current market prices. The current threat of recession also weighs on the future outlook. Regardless, this appears to be a very cheap stock with a double-digit free cash flow return.