5 Stocks Under $5 for 2015

Some of my favourite stocks will cost you less than a sandwich. Sandstorm Gold Ltd. (TSX:SSL)(NYSEMKT:SAND) and Bombardier, Inc. (TSX:BBD.B) are just two examples.

Have you tried searching through the market’s bargain rack?

Combing through stocks under $5 can be a great source of new investment ideas. Because the price tags on these stocks are so small, they don’t tend to draw much attention from Bay Street money managers. And after all, it’s far easier for a $2 stock to double to $4 than it is for a blue-chip giant to make the same move from $40 to $80.

So for those of you that don’t mind snooping through the equity discount bin, here are five sub-$5 stocks that have big upside potential.

1. Athabasca Oil Corp

Fill up your gas tank now, because oil prices are going back up.

According to Chris Lafakis, a senior economist at Moody’s Analytics and head of the firm’s energy coverage, oil prices could be on the verge of an epic rally. How can he be so optimistic? It’s Economics 101.

Mr. Lafakis believes that the huge drop in prices from more than US$100 per barrel last summer will inevitably lead to higher demand. At the exact same time, supply is falling off a cliff as producers delay drilling projects. The end result could see oil prices rally all the way back to US$80 per barrel, nearly a 75% jump from today’s levels.

It’s the classic resource cycle. But eventually, oil prices are likely to recover, just like they always do. And if that happens, profits at the most marginal producers like Athabasca Oil Corp (TSX:ATH) will soar higher.

2. Sandstorm Gold Ltd.

Royalty companies are like the loan sharks of the mining industry and they’re one of my favourite ways to invest in the resource business.

These companies are unique because they don’t actually operate any mines themselves. Rather, these firms finance new projects and earn royalties on future output. It’s a business model that has proven to be a far more profitable way to invest in gold mines than traditional resource stocks.

However, even top-tier royalty names like Sandstorm Gold Ltd (TSX:SSL)(NYSEMKT:SAND) have been hit hard by the industry doldrums. But now the stock is so cheap, management is backing up the truck and buying shares hand over fist. That’s an incredibly bullish signal.

3. Bombardier, Inc. 

Bombardier Inc (TSX:BBD.B) is off to a rough start in 2015.

Last month, management announced a “pause” for an “indeterminate period” in the Learjet 85 program, interpreted by some market analysts as permanently shelving the project. Even worse, executives acknowledged that the company could be forced to raise more capital this year. This sent shares plunging 35% in January.

Here’s the thing: the worst-case scenario has already been priced into the stock. However, issues surrounding the Bombardier CSeries aircraft are starting to be resolved. In addition, the company’s project backlog is approaching $50 billion, which is enough to keep the company busy for two full years.

Those catalysts could lift shares in the months ahead.

4. Denison Mines Corp. 

These are hard times in the uranium business.

Following Japan’s Fukushima disaster in 2011, nations have been scaling down or scrapping their atomic power programs. Producers, such as Denison Mines Corp (TSX:DML)(NYSEMKT:DNN), have watched their profits dwindle.

But this situation isn’t going to last. Supplies are beginning to tighten. Small producers are going bust. Eventually, the principles of economics dictate that prices will rise to meet the average cost of production, which is around US$75 per pound. That’s more than 50% over today’s levels.

In the meantime, the industry is being forced to consolidate. That could make Denison an attractive buyout target for a larger player like Cameco Corporation. But even if no acquisition occurs, the company still has a huge asset base with giant exploration potential.

5. Kinross Gold Corporation 

There’s no way to sugar coat this: Kinross Gold Corporation (TSX:K)(NYSE:KGC) is in trouble.

As a result of falling gold prices, Kinross has been forced to write off millions of dollars in reserves. Compounding these problems, there are now worries that the company’s two Russian mines could be nationalized.

This is a valid concern. That’s why the market is awarding almost no value to Kinross’s Russian operations. However, if these assets are not seized as feared, this company could be worth substantially more.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robert Baillieul has no position in any stocks mentioned.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »