Everyone's shopping for bargains this holiday gift-giving season. A lot of investors might be taking a similar approach to picking new investments. There are a lot of stocks that have fallen sharply this year, and once the wave of tax-loss selling is complete it could be a feeding frenzy. Shoppers and investors alike are looking for stocking stuffers.
I took a look at a couple of stocking stuffer stocks trading for less than $10 a share earlier week. Let's go lower. Shares of Redfin (RDFN +0.00%) and SoFi Technologies (SOFI 4.48%) closed below the $5 mark on Tuesday. Here's why I think these are attractively priced investments for fans of low-priced stocks.
Image source: Getty Images.
1. Redfin
Redfin has been a bit of a home-wrecker for portfolios. Shares of the high-tech provider of services for buyers and sellers of residential real estate have plummeted 95% since peaking early last year. It was trading near $100 in February of last year, and now it has fallen below $5 a share.
It's easy to see why investors aren't walking into this open house. Interest in buying properties has cooled with the spike in borrowing costs. Mortgage rates have declined for five consecutive weeks, but they are still roughly double where they were a year ago. This is making sellers hesitant to pull the trigger. Home flippers are also left pondering a career change, and that's a point that isn't lost on Redfin.
Redfin initially launched as a disruptive real estate platform, arming itself with local agents who worked on salaries instead of sales commissions. Redfin also discounts the percentage it takes from a property sale. With the real estate market rocking in 2017 Redfin got into the iBuying market. It became a flipper of homes itself, but it recently announced that it would be winding down its RedfinNow business in the coming months.
It's the right move, and focusing on its core real estate services should provide a clearer path to profitability. Redfin will suffer along with the real estate market if it continues to worsen in 2023, but it should gain market share as its cost-saving platform attracts smart buyers and sellers looking to keep more in a potential transaction.
NASDAQ: RDFN
Key Data Points
2. SoFi Technologies
A year ago there was no shortage of analysts and market watchers arguing that banking and fintech stocks would hold up well in a mild inflationary and recessionary environment. Higher rates offer the opportunity for lenders to cash in on the net interest spread. A soft recession means more financing charges on carrying over credit card debt, as long as defaults don't surge.
Things haven't played out that way. Traditional bankers haven't rallied. Fintech stocks are getting crushed. Things have gone even worse for online banks. SoFi Technologies is trading 84% below the all-time highs it hit early last year.
The digital banking platform itself is thriving. Member accounts have soared 61% over the past year to hit 4.7 million. Revenue rose 56% in SoFi's latest quarter. SoFi is benefiting from higher interest rates boosting its net interest income on loans, but things are far from perfect. The cost of expanding its reach means more red ink, and net loss more than doubled in the third quarter. Surging mortgage rates are scaring away potential property buyers, as SoFi's home loan volume has plummeted 73% over the past year. There's also the student loan moratorium that was recently extended through next summer.
NASDAQ: SOFI
Key Data Points
There is still value in picking up a thriving online banking platform at a deep discount to its initial trades last year, and I'm not alone in seeing things that way. CEO Anthony Noto turned heads when he purchased $5 million of his own company's shares. When a top-ranking executive that is routinely receiving stock-based compensation digs deeper into his own pocket to buy more of an already outsize position in his portfolio you have to pay attention. One can even say that you need to pay interest.
