If you walked into 2020 not knowing if you had the courage to be a stock investor, your question has almost certainly been answered. That’s because we’ve witnessed record equity volatility this year, including the fastest bear market decline in history, as well as the strongest quarterly rally in decades.
The problem with volatility is that it opens the door to long-term investors to buy cheaply in large companies. While I’m not saying the road to wealth won’t be filled with speed bumps, investors who look beyond the short term are often generously rewarded for their patience.
What’s more, what is remarkable about investing in the stock market is that you don’t have to be rich to get rich. Even starting with $ 500 can be more than enough to put you on the road to financial freedom.
The question is, where do you put your $ 500 to work? While tech stocks with triple digits have proven unstoppable for months, the most intriguing bargains can be found in stocks with a stock price below $ 10. Below are three great stocks that you can buy right now, all of which feature a single-digit share price.
One of the smartest stocks investors can buy right now is the satellite radio operator Sirius XM (NASDAQ: SIRI), which can be purchased for just $ 6 per share.
As some of you may know, Sirius XM is the only satellite radio company. That’s not to say it’s completely devoid of competition, as terrestrial and online radio operators are still fighting for listeners, all the same. But having a satellite system in space means Sirius XM has relatively fixed transmission and operating expenses regardless of how many new net paying subscribers the company signs up. Over time, it is a formula for slow but steady expansion of the margin.
What’s even more exciting for Sirius XM shareholders is the way the company generates its revenue. Despite the acquisition of Pandora, an advertising-based streaming content provider, in February 2019, the vast majority of Sirius XM’s revenue is generated through subscriptions.
During the second quarter impacted by coronavirus disease 2019 (COVID-19), advertising revenue fell 31% compared to the period of the previous year, but subscription sales actually increased by 3%. Since subscribers are less likely to cancel their plans in the event of an economic problem, the fact that they accounted for 83% of Sirius XM sales in 2020 (year-to-date) suggests that Sirius XM is occupying a unique position among radio operators to survive a recession and come out stronger than before.
Sirius XM has exceptional pricing power, so shareholders should expect consistent single-digit growth.
Annaly Capital management
While Mortgage Real Estate Investment Trusts (REITs) haven’t exactly been on anyone’s shopping list in recent years, Annaly Capital management (NYSE: NLY) should be.
Mortgage REITs like Annaly borrow at lower short-term interest rates, then acquire assets or lend at higher long-term yields. The difference between this long-term yield and the short-term borrowing rate is the net interest margin, and the larger the spread the more profitable mortgage REITs are generally.
In the case of Annaly, the inversion of the yield curve last August was the worst thing that could have happened, as it meant short-term borrowing costs overshadowed long-term yield opportunities, at least for a brief period. However, history has shown that as the US economy recovers from a recession, this gap between long-term and short-term returns tends to widen significantly over time. This means that Annaly’s net interest margin should widen quite noticeably over the next two years.
Additionally, mortgage REITs typically buy two types of assets: agencies and non-agencies. Agency assets are guaranteed by a government agency in the event of default, but generally have lower returns, while non-agency assets do not have federal backing but offer higher returns. Annaly invests almost exclusively in mortgage-backed securities of more secure agencies. It means it is protected in the event of a fault, which allowed the company to use leverage to its advantage.
Having averaged nearly a 10% dividend yield over the past two decades, Annaly is an income seeker’s dream stock.
Another great stock under $ 10 that investors can buy with confidence is the mobile technology solutions provider. CalAmp (NASDAQ: CAMP).
Like most cyclical businesses, CalAmp has faced great challenges due to the coronavirus pandemic and the threat of trade war instability between the United States and China. The good news is that many of these issues are being addressed, which will pave the way for steady growth and profitability for the company. Internet of things the new CalAmp.
On the production side of the equation, CalAmp has been aggressively reduce its dependence on China for its telematics equipment. At one time, Chinese imports accounted for between 70% and 80% of the company’s telematics solutions. This figure has now dropped to almost 50%. With CalAmp able to outsource beyond China, the potential for geopolitical risk to disrupt its results has been significantly reduced.
Additionally, we have (finally) seen CalAmp’s leadership team transition from automotive financing to businesses with significantly higher margins and constant cash flow. Specifically, the company’s Software as a Service (SaaS) subscriptions help companies better manage and track their fleets, as well as improve supply chain visibility.
Even with the company’s sales down 10% to $ 80 million in the quarter ending May, SaaS revenue grew 10% from the previous year period to $ 28 million. . As SaaS becomes a bigger piece of the pie, CalAmp’s margins will climb.
In short, connected devices are a huge opportunity this decade, and CalAmp is right at the heart of it.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.