A low price tag on a stock doesn't mean that it's cheap. Patrolling your metal detector over a stock screen of investments selling in the single digits doesn't mean that you will find gold. However, there are still some promising stocks that continue to trade below $10 a share.
SmileDirectClub (SDC 23.12%), Annaly Capital Management (NLY -0.44%), and Sirius XM Holdings (SIRI -0.15%) are three interesting stocks that are currently trading in the single digits. They do pack a beefy amount of risk, but they are some of the top stocks trading for less than $10 right now. Let's take a closer look.
Broken IPOs can still be fixed, and the same can be said about your smile. SmileDirectClub is a leader in clear dental aligners, a less cumbersome and unsightly way to straighten teeth without resorting to old-school braces and brackets. SmileDirectClub isn't the leader in this niche, but it is a rising player with a promise to save folks money with its consumer-direct model leaning on teledentistry to size up your aligners.
SmileDirectClub was rolling before the COVID-19 crisis. Revenue rose 77% in 2019 after nearly tripling the year before. The pandemic may have been a great time for home-based corrective dental work -- with people stuck at home and away from social settings -- but we had other things on our mind. Revenue took a 13% hit last year.
Business finally started to turn positive in the first quarter of this year, and it's easy to see the positive momentum building up again. Between the economy bouncing back and the return of in-person work, classes, and social events, it will be a lot easier to justify springing for clear dental aligners now. SmileDirectClub's guidance calls for 20% to 30% annualized top-line growth through the next five years.
Annaly Capital Management
A low price doesn't always translate to low or no yield. Annaly Capital Management is a leading mortgage REIT, snapping up mortgages and mortgage-backed securities. The lion's share of its investments come in the from of government-guaranteed mortgages. This helps trim some of the credit risk exposure for Annaly, but there's no free lunch here.
Annaly borrows money to enhance its returns, and right now that's translating into a juicy yield of 9.6%. There's risk in leveraging when the market doesn't comply, and Annaly has been increasing its exposure to situations that pack credit risk to keep its payouts growing. Annaly can get tripped up in two different ways, but it's hard to ignore the appetizing yield in a climate where the traditional REITs are yielding so much less in this low interest rate climate.
Sirius XM Holdings
Satellite radio is a bigger market than you think. Despite the plethora of streaming apps and connected cars, folks still don't mind paying up for coast-to-coast coverage of premium audio content. Sirius XM was servicing 34.5 million subscribers at the end of March.
Despite its low stock price Sirius XM has historically been a market beater. The investment has delivered positive returns in 11 of the past 12 years. The one down year was 2020, and understandably so with driving habits held in check during the pandemic. However, now that we're getting behind the wheel again we'll be leaning on Sirius XM once more. Churn should improve. Ad rates should inch higher. In short, it won't just be the volume knob getting turned up on your satellite radio receiver.
SmileDirectClub, Annaly Capital Management, and Sirius XM Holdings are not penny stocks. They are promising investments that just happen to have single-digit price tags right now.