Not every brokerage gives its account holders the option of buying fractional shares, and when you're just starting, buying a stock that's valued at $200 per share or more can overweight your portfolio drastically toward that one company. As a result, focusing your portfolio on stocks with lower share prices can be an attractive strategy to help you stay properly diversified.
If you're in that situation (or even if you're not), here are two tech stocks under $20 that should be on your radar.
Palantir
Palantir (PLTR 0.51%) is one of the market's poster child stocks for investing in artificial intelligence (AI). Palantir is a leader in its space because of its AI-first approach to data processing software. The general idea behind its product is that you feed mounds of data into it, and it kicks back recommendations and displays the information on easy-to-read dashboards.
One example of a use case for Palantir is a hospital bed manager who may direct emergency service vehicles to one hospital or another based on bed capacity, distance, and staff availability.
Image source: Palantir.
Although Palantir's software is impressive, it is quite expensive, putting it out of reach of many potential clients. That's why Palantir's growth rate isn't as high as one may expect.
In Q2, Palantir increased its revenue by 13% to $533 million. Government contracts provide more than half of Palantir's revenue, and its revenues from those clients grew at a 15% pace, compared to commercial revenue that grew by 10%. This shouldn't surprise anyone, as governments don't jump to control spending when they feel an economic downturn is near.
Another key part of the Palantir investment thesis is its increasing profitability. In Q2, it posted its second consecutive profitable quarter. Although its profit margin was just 5.3%, it's a positive sign when a tech company prioritizes profits.
Palantir's stock has seen a pullback in August, and is down nearly 30% from its recent highs. This pullback was caused by a wider sell-off on AI-focused stocks, but the stock is still up nearly 140% year to date. Although the stock is still a bit pricey trading at 15 times sales, it remains a top AI pick, and can be purchased for around $15 per share.
dLocal
While many commerce companies have made fortunes by selling their products to a wide audience, a significant customer base in emerging economies still has difficulties purchasing products. This problem concerns payment infrastructure, as not every country uses standard payment methods like mainstream credit cards. However, dLocal (DLO -1.64%) has a solution for that.
dLocal's products allow merchants to process payments in 37 countries like India, Mexico, Thailand, and Egypt. Depending on the country, this could be through a bank transfer, cash deposited at a local repository, or non-mainstream credit cards. dLocal's clients include some of the most dominant brands in commerce such as Nike, Amazon, Uber, and Booking.com.
As you can imagine, dLocal's products are seeing rapid adoption. Its total processed payment volume rose by 80% year over year to $4.4 billion in Q2. This helped drive revenue 59% higher, although margins saw some impact as its gross profit only rose 43%, indicating that its take rate is decreasing. Still, dLocal is a highly profitable company with a trailing 12-month profit margin of 25%.
The day after dLocal reported its solid Q2 results, its stock jumped by nearly 40%. However, the stock can still be bought for under $20 per share and only trades for 33 times forward earnings, making dLocal an excellent buy now.
