The Motley Fool

5 Top Stocks Under $5

It’s not easy to find bargain-priced securities, but there are still some deals floating around if you know where to look.

Screening through stocks trading under $5 can be a great source of investment ideas. After all, it’s a lot easier for a share price to surge from $2 to $4 than from $100 to $200. And because of their cheap prices, small investors are able to buy a larger number of shares.

Even better, because the price tags on these stocks are so tiny, they don’t tend to draw much attention from Bay Street money managers. In fact, most mutual funds are restricted from buying stocks that trade under $5. That gives retail investors who can tread where they please an edge.

The good news is that the recent market turmoil has turned some of these sub-$5 stocks into outright steals. Here are five of my favourites:

Name

Stock Price

Market Cap

Denison Mines $1.07 $551.38 million
Athabasca Oil $2.21 $885.89 million
Bombardier $2.43 $5.54 billion
Kinross Gold $2.98 $3.42 billion
Sandstorm Gold $4.25 $885.89 million

Source: Yahoo! Finance

Let’s say a few words about these companies.

These are hard times in the uranium business. Following Japan’s Fukushima disaster in 2011, many countries have scaled back or even scrapped their atomic power programs entirely. As a result, uranium spot prices are hovering near a 10-year low, sitting around $35/lb today.

Here’s the problem: the average cost to produce uranium is more than twice that figure. Eventually, rates must rise to meet the cost of production. In that event, producers like Denison Mines Corp. (TSX:DML)(NYSEMKT:DNN) could see their profits soar.

It’s a similar story in the oil patch. Low crude prices have crushed the energy sector. However, the industry is heading toward a supply crunch as producers delay new projects and consumers ramp up demand. If that happens, marginal names like Athabasca Oil Corp. (TSX:ATH) will be one of the hottest stocks on the Toronto Stock Exchange.

Bombardier Inc.’s (TSX:BBD.B) sagging aerospace division has been a big drag on the stock, but it looks as though the worst-case scenario has already been priced in. Issues surrounding the company’s CSeries aircraft are starting to be resolved and its project backlog is approaching $50 billion—enough to keep management busy for two full years. Those catalysts could lift shares in the months ahead.

Kinross Gold Corporation (TSX:K)(NYSE:KGC) is another troubled stock. As a result of falling gold prices, the company has been forced to write off millions of dollars in reserves. Compounding these problems, investors are worried that Kinross’s two Russian mines could be nationalized.

While those are valid concerns, the market is awarding almost no value to the company’s properties in Russia. If these assets are not seized as feared, this company could be worth substantially more.

Finally, royalty companies like Sandstorm Gold Ltd. (TSX:SSL)(NYSEMKT:SAND) are like the loan sharks of the mining industry. These resource firms are unique because they don’t actually operate any mines themselves. Rather, they finance new projects and earn royalties on future output. This business model has proven to be a far more profitable way to invest in gold mines than traditional resource stocks.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.