Investors are scrambling to buy anything with a ticker symbol. And they're even willing to dip into the cheap-stock territory outside the S&P 500 — and it's paying off handsomely so far.
Eleven stocks in the S&P 1500 and S&P Completion Indexes trading for five bucks or less on the market's low of Oct. 12, 2022, including Roivant Sciences, Transocean and Genworth Financial, are now valued at $2.5 billion or more each, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Talk about an impressive run. These stocks are up 71% on average from the lows. That blows away what would normally be an impressive 26% gain in that time by the S&P 500.
What's going on? Investors increasingly think the risk of recession is fading. And they're rushing to buy just about anything. Many speculative assets ranging from meme stocks to cryptocurrencies are also surging. But few gains are as dramatic as low-priced stocks surging higher.
"Generally speaking, the stocks that rose the most in July had a smaller share price, smaller market caps, cheaper valuations, higher dividend yields, high short interest, lower international revenue exposure, and weak performance in the first half of the year," said Bespoke Investment Group.
Stocks With Low Per-Share Prices Perk Up
Investors apparently see value now in stocks they practically left for dead less than a year ago. Cheap stocks are chic with investors again.
"The decile of stocks with the lowest share price rose an average of 9.58% in July versus an average gain of 3.6% for the decile of stocks with the highest share price," Bespoke found by analyzing the Russell 1000 index. And apparently, the smaller, the better. "The same performance divergence was seen for market cap with the smallest stocks gaining 9.16% and the largest gaining 3.4%."
It's important to note that some of the most dramatic examples are lightly traded stocks not in major indexes like the S&P 500.
From Stock Rags To Riches
Perhaps the most dramatic example of a cheap stock finding new love with investors is Roivant Sciences. The early-stage biotech company is working on treatments for inflammatory diseases like ulcerative colitis. Shares traded for just 4.42 a share back in October.
But thanks to a powerful 160% rally since then, the health care company is now trading for 11.49 a share. That awards it with a market value of $8.8 billion. The company is still expected to lose roughly a billion dollars in 2023. But in the March-ended quarter, it lost only five cents a share, which was dramatically better than the 38-cents a share investors feared. Roivant is expected to report a loss of 31 cents a share in the June quarter on Aug. 11.
Who knows? Maybe it'll be better than that.
Epic Bounces From The Depths
Energy stocks including Transocean got trashed last year. And that's making their comeback even more spectacular.
Shares of the Switzerland-based offshore contract driller plunged to just 2.86 last October as oil prices softened. But talk about a comeback. Shares surged nearly 200% since then to 8.50. That gives the company a market value of $6.5 billion.
Investors are looking past a lackluster 2023. The company, formerly in the S&P 500, is seen returning to a profit of $368 million, or 74 cents a share, in 2024.
Most of the sub-5-dollar a share stocks mounting a comeback aren't in a major stock market index, yet. Genworth Financial is the big exception from that. The company maintained it post in the S&P 600 Smallcap index despite shares dropping to 4.08 a share last October. Since then, however, the stock jumped 47% to 6.02 for a market value of $2.9 billion.
Savvy investors know to stick with the growth-stock leaders. But when the market is this crazy for stocks, anything not bolted down is a candidate for a rally.
From A Couple Of Bucks To Billions
Stocks trading for 5 or less at 2022 market low now worth $2.5 billion or more each
| Company | Symbol | Price on Oct. 12, 2022 (and now) | Market value ($ billions) | Sector |
|---|---|---|---|---|
| Roivant Sciences | 4.42 (11.49) | $8.8 | Health Care | |
| Transocean | 2.86 (8.50) | $6.5 | Energy | |
| Joby Aviation | 4.35 (8.24) | $5.6 | Industrials | |
| Aurora Innovation | 2.17 (3.07) | $4.5 | Information Technology | |
| GoodRx Holdings | 4.75 (8.64) | $3.4 | Health Care | |
| Rocket Lab USA | 4.00 (7.03) | $3.4 | Industrials | |
| Hecla Mining | 4.57 (5.21) | $3.2 | Materials | |
| Opendoor Technologies | 2.81 (4.81) | $3.1 | Real Estate | |
| Genworth Financial | 4.08 (5.99) | $2.9 | Financials | |
| BGC Group | 3.70 (5.12) | $2.6 | Financials | |
| Nikola | 3.00 (3.40) | $2.4 | Industrials |
