People have always been attracted to stocks selling cheap in the market. This is because they wish to buy them at lower levels and then expect them to double or triple their price after a few months. The history of the stock market shows that there are many stocks which have shown a great rise in a very short period, giving phenomenal and unbelievable returns to investors.
The returns, in these cases, were much more than those in stocks of very large companies. If you search for top 10 stocks under $5 on the Internet, you will get names of many stocks which have been given very ambitious targets in the time to come. But, would you really benefit from these stocks? Let's find out.
Buying Stocks Below $5
Stocks below $10 or $5 are generally termed as penny stocks and they are believed to be highly volatile. Actually, the stock price of these companies has decreased quite substantially due to the lack of demand, or potential buyers, in the stock market.
There can be many reasons for this drop in share price, like poor financial results, losses in business operations, poor company management and lack of visibility of future earnings. From this, we understand that investing in the so-called best stocks under $5 is very risky, because we buy these stocks with the only hope that these companies will post good sales and growth numbers in the time to come.
Top rated stocks under $5 can be those which have shown considerable growth in their volumes of shares being traded over the past few trading sessions. The volume growth indicates the increasing interest of stock traders in the stock. You should also study the technical charts of the stocks on a daily and weekly basis.
From careful observation, find out whether the stocks have given a breakout on weekly charts or not. A break out with good volumes can be an indicator of fat future movement in the stock price. You should also compare stocks under $5 and pick the best one from them. Best stocks under $5 can be those which have some good news expected in relation to their business, because it creates a positive sentiment in the stock market.
Best Stocks Under $5 for 2012
Here is a listing of some of the top stocks being traded under $5, chosen by Wall Street experts. Evaluate each of these stocks independently and only invest if you personally find growth potential in them.
- Samson Oil & Gas Limited
- Gastar Exploration
- MEMC Electronic Materials
- Abraxas Petroleum
- Tengasco Inc.
- Sprint Nextel
- Hercules Offshore
- PostRock Energy Corporation
- U.S. Airways Group
- MEMC Electronic Materials
- Sirius XM
Choosing best stocks to invest in under five dollars is indeed a daunting task due to the high risk associated with them. Though this article has guided you well, you should take your investment calls only after good research and realizing your risk-taking abilities. All the best for your trading!
DISCLAIMER: This article is just for reference purposes and does not recommend any stock market transactions