It's not hard to find stocks priced below $5 right now. The COVID-19 crisis hamstrung Wall Street as a whole in 2020, and there are lots of inexpensive stocks on the market even after the dramatic recovery we saw over the summer.
Luck favors the prepared, though. With great risk comes great potential returns but some low-priced stocks are trading at a discount for good reasons. You need to avoid these landmines while searching for strong companies that will survive and thrive in 2021 and beyond.
On that note, here are three great companies trading at minuscule share prices. All of them look like great buys at these low prices.
You can't buy McDonald's (NYSE:MCD) stock for a fistful of dollars since it's priced above $200 per share today. But you can pick up a share of Arcos Dorados (NYSE:ARCO), Mickey D's largest master franchise operation, for about the price of a Big Mac.
Arcos Dorados operates more than 2,200 McDonald's restaurants across 20 countries in Latin America and the Caribbean. That's about equal to the number of McDonald's locations you'll find in Florida and California combined. We're talking about a large organization here but Arcod Dorados also has a lot of room for further growth.
The stock crashed hard in the spring of 2020 as the COVID-19 pandemic closed down most of Arcos Dorados' locations in April. When the company reported second-quarter results in August, it was running 40% of its locations at full speed and 91% of all restaurants were at least open for drive-through and takeout sales.
Armed with brand value and know-how from McDonald's, Arcos Dorados has improved its operations in many ways during the coronavirus downturn. Mobile ordering is in wide use, wait times at the drive-through windows are significantly shorter, and Arcos Dorados now offers delivery options in 15 of its 20 markets.
The important Brazilian market is still a raging hotspot for coronavirus infections but key markets like Mexico, Argentina, and Ecuador are doing better. Arcos Dorados will face serious headwinds from the pandemic for several more quarters but the company is incredibly well-run and financially equipped to make it through this difficult time.
Buying Arcos Dorados at these affordable prices will also lock in an effective dividend yield of 4% while you wait for the light at the end of the COVID-19 tunnel. The ride may be rocky for a few months but you should be handsomely rewarded in the long run if you just hang on to the shares you found in Wall Street's bargain bin.
ASE Technology (NYSE:ASX), also known as Advanced Semiconductor Engineering, is a world-leading provider of test and assembly services for semiconductor manufacturers. The stock is trading at roughly $4.50 per share these days but your average analyst firm expects ASE shares to gain at least 20% over the next year.
The company is not only firmly profitable but also showing healthy growth in the difficult COVID-19 era. ASE's third-quarter sales rose 5% year over year while earnings jumped 17% higher.
ASE is in the process of moving many of its customers over from on-demand services to longer-term contracts. This lets management plan ASE's infrastructure investments in a more efficient way and also gives investors better visibility into the company's revenue streams.
As a leading provider of third-party services to the generally healthy semiconductor sector, ASE should benefit from several macroeconomic trends over the next few years.
"I do believe there is an upgrade cycle because of 5G, because of Wi-Fi, because of the electric car," COO Tien Yu Wu said in last week's third-quarter earnings call. "As a matter of fact, if you look at the 8-inch wafer demand, it's going through the roof."
Despite this powerful market position, you can buy ASE shares for a song. The stock is trading for just 12 times trailing earnings and 3.5 times free cash flows, and the 3% dividend yield is just another reason to pick up a few shares right now.