Please ensure Javascript is enabled for purposes of website accessibility

3 Top Stocks Under $5

By Dan Caplinger – Updated Sep 22, 2016 at 1:22PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Find out why these stocks have done well despite their low share prices.


Image source: Wikimedia Commons.

Many investors think of stocks with low share prices as being inferior to higher-priced stocks. Yet even though you'll find plenty of penny stocks that have no realistic probability of becoming successful, some promising companies simply keep their share prices relatively inexpensive. Below, we'll take a look at three stocks you can pick up for $5 or less per share that have produced market-beating returns over the past year to see whether they still have any potential gains left for the future.

GNW Chart

GNW data by YCharts.

Genworth Financial bounces back

Genworth Financial (GNW 6.57%) has seen its share of volatility this year. After having lost more than half of its value in the first couple of months of 2016, Genworth has subsequently tripled, producing an overall net gain of more than 30% so far year to date. Genworth just barely makes it into this list with a share price a few pennies below the $5 mark.

Genworth has seen huge ups and downs in the years since the financial crisis, with the company's traditional line of mortgage insurance products almost causing its downfall. More recently, though, CEO Tom McInerney has worked hard to have Genworth divest itself of non-core assets and discontinue unprofitable business like traditional life insurance and fixed annuities. Now that the housing market has recovered and continues to boom, Genworth's fundamental exposure looks more favorable than ever, and that could keep driving excitement for the stock in the future.

You wanna own Yamana?

The precious metals markets have found new life in 2016, and Yamana Gold (AUY 6.18%) has been a big winner in the space. Since the beginning of the year, Yamana has soared by more than 150%, easily outpacing not only the rise in the price of gold but also the majority of most of its gold-mining peers as well.

Yamana has benefited from fundamental strength in its mining operations as well as from favorable market trends. Earlier this month, Yamana said that its exploration program at its key Chapada site suggests a much larger system of valuable gold and copper assets than previously believed, and positive results at its Jacobina and Gualcamayo sites are also encouraging. Combined with low-cost advantages that include all-in sustaining costs of less than $1,000 per ounce, Yamana has the ability to thrive even when other miners find it difficult to turn a profit.

AK Steel looks forward

The steel industry has gone through tough times for years. Yet even though construction activity has been weak for a long time, AK Steel (AKS) has climbed back recently, with its stock doubling since the beginning of 2016.

After a long period of low steel prices, AK Steel is finally starting to see the potential for a market bottom. Low raw material costs have helped the company hold its own even in tough times, but now, the steel industry appears to be seeing more favorable trends emerge. Skeptics still point out that demand for sheet metal and other steel products could stay under pressure into 2017. Yet AK Steel had seen its stock fall so far in past years that its shares finally represented a good value. Longer term, barring a more extensive disruption hitting the entire steel industry as a whole, AK Steel is in a good position to benefit from the next cyclical upturn.

Many investors avoid all stocks that trade at low share prices. Yet by separating out solid companies from penny-stock scams, you can drill down on stocks that deserve your consideration and could easily climb out of the sub-$5 range in the near future.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Genworth Financial, Inc. Stock Quote
Genworth Financial, Inc.
GNW
$3.73 (6.57%) $0.23
Yamana Gold Inc. Stock Quote
Yamana Gold Inc.
AUY
$4.81 (6.18%) $0.28
AK Steel Holding Corporation Stock Quote
AK Steel Holding Corporation
AKS

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.