Fractional investing gives small investors an opportunity to consider exposure to large-cap stocks that trade well above $1,000. However, it’s a good idea to also consider buying cheap stocks that could provide multi-fold returns. Investors can buy a decent lot size and these stocks can be potential portfolio catalysts.
For example, one year ago, Marathon Digital (NASDAQ:MARA) stock was trading at $2.38. Currently, the stock trades for more than $40. Of course, not all stocks will give 5-fold or 10-fold returns. However, even if only a few cheap stocks double, it’s likely to have a meaningful impact on the overall portfolio.
Let’s talk about seven cheap stocks that are trading for less than $10. Their low price isn’t their only appeal; these stocks seem to be undervalued and positioned for a strong rally in the next few quarters. The stocks highlighted below are from diversified sectors that might have multi-year positive tailwinds.
With that in mind, these seven stocks whose shares are trading for less than $10 look promising right now:
- Kinross Gold (NYSE:KGC)
- Hecla Mining (NYSE:HL)
- Cronos Group (NASDAQ:CRON)
- Transocean (NYSE:RIG)
- Paysafe Limited (NYSE:PSFE)
- Bitfarms (NASDAQ:BITF)
- Electrameccanica Vehicles (NASDAQ:SOLO)
Cheap Stocks: Kinross Gold (KGC)
Among gold mining stocks, KGC stock looks attractive after underperforming in the current year. While there are talks about a relatively early rate hike, I am bullish on gold for two reasons.
First and foremost, the delta variant and its economic impact might delay the rate hike. Furthermore, even if interest rates trend higher, real rates are likely to remain negative for an extended period. Gold can therefore remain in a long-term uptrend.
Specific to Kinross Gold, I like the fact that the company is positioned for production growth in the coming years. Kinross has guided for production of 2.1 million ounces for 2021. However, production is expected to increase to 2.7 million ounces in 2022 and further to 2.9 million ounces in 2023.
Therefore, Kinross will benefit from higher gold prices coupled with incremental production.
It’s worth noting that the company has a total liquidity buffer of $2.2 billion as of the second quarter of 2021. Further, for the last quarter, the company reported free cash flow (FCF) of $183 million. This indicates Kinross has ample financial flexibility to finance capital expenditures.
KGC stock also offers an annualized dividend of 12 cents, which translates into a dividend yield of 2%. Dividend growth is likely in the next few years as production upside translates into higher free cash flows.
Hecla Mining (HL)
Hecla Mining has the largest reserve and resource of silver in the United States. Additionally, the company is into gold mining.
Hecla has been reporting robust financials. For Q2 2021, the company clocked sales of $218 million and an EBITDA of $84 million. Importantly, the company also reported $54.4 million in free cash flow for the quarter. This implies an annualized FCF potential of more than $200 million.
From a credit perspective, Hecla reported cash and equivalents of $181 million. With a total liquidity buffer of more than $400 million, the company is well-positioned to accelerate exploration and production investments. The company’s net-debt-to-adjusted-EBITDA ratio has also declined to 1.2 as of June 2021.
It’s also worth noting that Hecla Mining has an attractive all-in-sustaining-cost for gold and silver. If precious metals trend higher, the company’s FCF is likely to swell further. Even at current levels of gold and silver, healthy cash flows are likely.
Another important point to note is that between 2013 and 2020, the company’s silver reserves have surged by 250% to 188.4 million ounces. For the same period, gold reserves have increased by 645% to 2.4 million ounces. Clearly, with a healthy reserve life, the company is positioned for sustained growth.
Cheap Stocks: Cronos Group (CRON)
With a potential Federal-level legalization of cannabis on the horizon in the United States, the sector is appealing. According to estimates, the U.S. cannabis industry is expected to be worth $41 billion by 2026. Additionally, there are opportunities for growth in Canada and Europe.
In that context, CRON stock is worth considering. Its shares have remained almost sideways in 2021, and an upside seems inevitable from current levels around $6.60.
One factor that makes Cronos attractive is its wide portfolio of products. Currently, different brands focus on wellness, adult-use and CBD. The company is already present in the United States, Canada, Germany, Israel and Australia. These markets have the potential for high growth in the coming decade.
In the medicinal cannabis segment, Cronos has partnered with Technion to conduct pre-clinical research on skin treatments that use cannabinoids. A new, evidence-backed medicinal cannabis application can be a long-term game changer for the company.
For the first half of 2021, Cronos reported healthy revenue growth of 54% year-over-year (YOY) to $28.2 million. For the same period, the company reported an adjusted EBITDA loss of $86.3 million.
Cash burn is unlikely to be a continuing concern if the company’s growth accelerates further. Cronos has a robust cash buffer and the backing of Altria (NYSE:MO).
In another important development, PharmaCann seems to be planning a U.S. initial public offering (IPO) at a valuation of more than $1 billion. Cronos has a 10.5% stake in the company, which is focused on medicinal cannabis. There is potential for significant value creation from PharmaCann in the next few years.
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Transocean (RIG)
Source: Shutterstock
Offshore rig service providers were among the worst hit when the pandemic drove oil prices lower. However, with Brent oil remaining firm above $70 per barrel, a gradual recovery is occurring in the sector.
RIG stock is one of the best cheap stocks from the offshore drilling sector. Its shares have already surged by 194% in the last 12 months, and further upside seems likely as order intake accelerates.
As of Q2 2021, Transocean reported an order backlog of $7.4 billion. The front-end loaded backlog ensures clear revenue visibility for the next 12 to 24 months. Additionally, order intake has been robust in the recent past. For example, the company won a $252 million contract for a newbuild ultra-deepwater drillship.
At the same time, as industry conditions improve, new orders are likely to deliver a higher EBITDA margin. For the first six months of 2021, Transocean reported operating cash flow (OCF) of $249 million.
It’s likely that OCF will improve further in the coming quarters. Transocean also has a cash buffer of $988 million and an undrawn credit facility of $1.3 billion. Therefore, the company’s credit metrics seem to be witnessing a gradual improvement.
With a modern fleet and gradually improving industry conditions, Transocean is well-positioned for growth. RIG stock is an appealing buy at current levels around $3.67.
Cheap Stocks: Paysafe Limited (PSFE)
In January 2021, PSFE stock touched a high of $19.57. However, the stock has subsequently been in correction mode. At current levels around $8.80, the stock seems ready for a reversal.
Even as PSFE shares trend lower, the digital wallet solutions provider has been on an acquisition spree. In August 2021, the company has made three acquisitions. The company’s latest purchase is Viafintech, which is likely to accelerate the company’s growth in Germany.
For the current year, Paysafe has guided for revenue of $1.54 billion and an adjusted EBITDA of $488 million. This would imply a healthy EBITDA margin of 32%.
Paysafe is also a proxy-play for the iGaming sector, which is growing at a healthy pace.
The company has a relatively high leverage. As of June 2021, the company reported a net-debt-to-adjusted-EBITDA ratio of 4.3. However, I don’t see this as a concern. Paysafe has been delivering strong profitability at operating level and debt servicing is likely to be smooth.
Another long-term growth driver for Paysafe is likely to be the cryptocurrency segment. The company already has its digital wallet live on 30 crypto exchanges with 37 cryptocurrencies available for trading. Overall, with a big addressable market and visibility for steady growth, PSFE stock is worth a buy.
Bitfarms (BITF)
As crypto is increasingly adopted and Bitcoin (CCC:BTC-USD) trends higher, investors can profit with BITF stock. In the last month, the stock has trended higher by 28% with room for more upside as the company aggressively expands.
Currently, Bitfarms has one of the largest mining operations in North America with 69 megawatts (MW) of built-out capacity. The company expects this to increase to 168 MW in 2021 and further to 210 MW in 2022. This positions Bitfarms for strong growth over the next few years.
For Q2 2021, it reported revenue of $36.7 million and an adjusted EBITDA of $23.8 million. As the number of Bitcoins mined increases on a quarter-to-quarter basis, the company is likely to have ample financial flexibility.
In August 2021, the company also announced an at-the-market offering. Bitfarms intends to raise $500 million through this move, which will further boost its liquidity position.
I also like that Bitfarms is gradually moving toward utilizing renewable energy for mining operations. As of May 2021, the company had mined 1,006 Bitcoins with hydroelectricity.
Overall, BITF looks appealing at current levels around $5.95. I would not be surprised if the stock doubles within the next few quarters.
Cheap Stocks: Electrameccanica Vehicles (SOLO)
SOLO stock looks like an interesting electric vehicle play, as Electrameccanica offers a unique product. The stock has underperformed, declining by 43% in the last six months. However, the stock has remained sideways recently; it seems the worst of the downside is over.
As an overview, Electrameccanica is the designer and manufacturer of a single-seat electric vehicle called the Solo. Currently, it has an asset-light model with manufacturing outsourced to Zongshen Industrial Group. Its annual production capacity is 20,000 Solos.
One of the differentiating factors for the company is a low base selling price of $18,500. Furthermore, micro-mobility options similar to the Solo are gaining traction.
The company has already established a retail presence in several locations in the United States. The coming quarters should be interesting in terms of sales growth.
It’s worth noting that in June 2021, Electrameccanica filed for a $750 million mixed securities shelf offering. This is likely to provide the company with liquidity for sales, marketing, product development and capacity expansion expenses.
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