It can be tough to build a strong investment portfolio if you lack deep pockets, especially if your broker doesn't offer the option of buying fractional shares. However, there are still a handful of investments on the market that won't break the bank. Here are three strong companies trading for under $20 per share.
1. Levi Strauss
Levi Strauss (LEVI 0.19%) is an iconic clothing brand with annual sales above $6 billion. The company sells products across the globe through direct-to-consumer and wholesale channels. Despite its high-profile brand and $5.5 billion market cap, shares are only trading around $14 in August.
Global macroeconomic weakness and difficult consumer conditions contributed to a 9% decline in sales in the company's most recent quarter. Some temporary strategic initiatives also had an impact on the quarterly figures, but those aren't expected to continue.
Image Source: Getty Images.
Despite its recent struggles, Levi Strauss has delivered promising operational trends across recent years. Revenue has generally grown despite periods of weakness, while its gross profit margin has expanded materially. This has resulted in net profits trending higher.
LEVI Revenue (TTM) data by YCharts.
Management forecasts a return to modest growth over the next year, with profit growth outpacing sales growth. In the meantime, this stock's dividend at its current share price yields 3.4%, and its payout ratio of less than 50% is sustainable. The stock is not very expensive, with a forward price-to-earnings ratio below 11, so that limits the downside risk for prospective buyers. The stock may not be attractive to growth investors due to its limited potential, but it's worth a look for income and value investors.
2. Target Hospitality
Target Hospitality (TH 0.36%) is an under-the-radar company in the hospitality industry that's achieving record results amid a strategic pivot. It builds modular housing communities and provides a variety of services to them. These are often temporary communities associated with government activities, natural resource extraction, infrastructure, civil construction, and humanitarian issues. After facilities are constructed, the company delivers value-added services such as food management, security, laundry, concierge, and recreational activities. This helps it to generate more profit from each project, and it creates more predictable, stable cash flows for the business as a whole.
TH Revenue (TTM) data by YCharts.
The small-cap company reported 31% revenue growth in its most recent quarter, along with a new all-time high gross margin of 55%. That growth was driven in part by the company's contracts with the federal government to help provide humanitarian aid to migrants crossing the U.S. border. Ongoing need for those assets and services is expected to continue driving demand for the company for the near future. The rapid growth led to quarterly earnings per share nearly doubling year over year, and the company is on pace to generate more than $50 million in free cash flow this year despite investing heavily in expansions. The recent cash generation has also changed the company's capital structure -- it has paid down debt while increasing net shareholder equity, reducing financial leverage.
With a forward price-to-earnings ratio under 9, the stock has an attractive valuation for buyers.
3. Physicians Realty Trust
Physicians Realty Trust (DOC) is a real estate investment trust (REIT) that owns 288 outpatient medical facilities. It has especially high concentrations of facilities in the Great Lakes region, the Northeast, the Gulf States, and the Southwest. The REIT's portfolio has a high concentration in offices for high-acuity specialists, which are generally considered more desirable tenants with a reliable demand for their services. These include oncology, radiation, orthopedics, and ambulatory surgery centers. Its portfolio also boasts a nearly 95% occupancy rate, which is a strong indicator of demand for these properties.
Physicians Realty has delivered slow and steady growth of earnings and cash flows. It has expanded its portfolio without taking on excessive debt. Its 0.7 debt-to-equity ratio is manageable, which is an especially important factor for some REITs in the current elevated interest rate environment.
DOC Revenue (TTM) data by YCharts.
As a REIT, Physician's Realty is a bit different from traditional companies. REITs are required to distribute 90% of their taxable income to shareholders every year in the form of dividends, so they typically have above-average yields. Those payouts are also subject to different tax treatment than normal stock dividends. Physician's Realty has a strong 6.8% dividend yield, and its funds from operations have covered its recent quarterly payouts.
I'd expect demand to keep rising for healthcare services, thanks to demographic trends, which should keep cash flowing to the owners of specialized medical properties. Physician's Realty isn't likely to become a growth play, but it's an interesting opportunity for income investors.
