Most investors want to invest in equities but may be unable to afford large stakes in valuable companies with higher-priced stocks. Lower-priced stocks could be attractive for them as they enable them to buy more shares instead of just a handful of higher-priced shares for the same amount. For example, an investor willing to spend $10,000 can either purchase at least 500 shares of a stock trading under $20 or only 100 shares of a stock trading at $100.
Additionally, low-priced stocks often have the potential for significant percentage gains. For example, if a stock is priced at $20 and increases by $1, that’s a 5% gain. This is in contrast to stocks priced at $100 or above, which see 1% or lower gains if shares move up by $1.
Further, low-priced stocks have high levels of liquidity, giving these stocks an added advantage. This means that cash can be converted quickly, and investors could easily get their money out of the securities. In fact, trading in higher average daily volumes keeps the bid/ask spread tight and does not lead to extra costs for investors.
However, low-priced stocks can be much more volatile than higher-priced stocks, thereby leading to significant losses if the stock price decreases. These are more susceptible to price manipulation, such as “pump and dump” schemes, which can lead to significant losses. Further, low-priced stocks, especially penny stocks, belong to smaller and less-established companies. These companies may not be required to file with the SEC, making it harder to find reliable information (read: Bull Run at Risk? Shield Your Portfolio With These ETFs).
Still, low-priced stocks are affordable and allow greater diversification rather than investing in higher-priced stocks. The recent volatility has provided investors with a great opportunity to tap some of these stocks. The preference is not only limited to the stock world but can be felt in the ETF space. In fact, there are only a handful of ETFs that currently trade below $20 out of nearly 2,000 funds, suggesting that the choices are limited for investors who like to get a decent number of shares from their investment.
So, let us delve into some of the ETFs below $20 that could lead to huge gains in the coming months based on market trends.
SoFi Next 500 ETF (SFYX) – Last Closing Price: $14.19
Wall Street has shown a remarkable rally this year. The artificial intelligence (AI) craze and rate-cut optimism have been the major driving factors amid recession fears, geopolitical tensions and the sell-off in tech stocks that weighed on investors’ confidence.
SoFi Next 500 ETF follows the Solactive SoFi US Next 500 Growth Index, focusing on the 501st through the 1000th largest domestic companies. It currently holds 494 stocks in its basket and has accumulated $96.3 million in its asset base. SoFi Next 500 ETF charges 6 bps in annual fees and trades in a volume of 31,000 shares per day on average. It has a Zacks ETF Rank #3 (Hold).
Range Cancer Therapeutics ETF (CNCR) – Last Closing Price: $14.73
Though biotech firms are racing toward weight loss treatment, cancer is going to create potentially substantial market demand for new, novel and effective therapeutics. Being the leading cause of death globally, cancer remains one of the most worrying public health issues and will remain at the forefront of investment and technological innovation.
Range Cancer Therapeutics ETF offers exposure to a wide range of cancer therapeutic modalities. It follows the Range Oncology Therapeutics Index and holds 76 stocks in its basket, with each accounting for less than 2% of the assets. Range Cancer Therapeutics ETF has AUM of $12.4 million and charges 79 bps in annual fees. The fund trades in an average daily volume of 4,000 shares and has a Zacks ETF Rank #2 (Buy).
First Trust Energy AlphaDEX Fund (FXN) – Last Closing Price: $16.89
The energy sector is grappling with concerns over slowing demand and fears of a surplus next year. This is especially due to waning demand from China and the planned increase in output by the Organization of the Petroleum Exporting Countries (OPEC) starting in December. However, stimulus in China will result in an improving economy, thereby leading to an increase in oil demand. Additionally, Fed rate cuts and escalating tension in the Middle East will continue to provide support to oil price and the sector (read: Middle East Tensions Lift Energy ETFs: Will the Rally Last?).
First Trust Energy AlphaDEX Fund follows the StrataQuant Energy Index, which employs the AlphaDEX stock selection methodology to select stocks from the Russell 1000 Index. It holds 40 stocks in its basket, with none accounting for more than 4.4% share. Crude producers take the largest share at 59.3%, followed by double-digit allocation each in oil refining and marketing, and oil equipment and services. First Trust Energy AlphaDEX Fund has amassed $442.6 million in its asset base while trading in an average daily volume of 2 million shares. It charges 62 bps in annual fees and has a Zacks ETF Rank #2.
Global X SuperDividend U.S. ETF (DIV) – Last Closing Price: $18.41
The dividend-paying securities are the major sources of consistent income for investors when returns from the equity market are at risk. This is especially true as these stocks offer the best of both worlds — safety in the form of payouts and stability in the form of mature companies that are less volatile to large swings in stock prices. The companies that offer dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis (read: Best-Performing Dividend ETFs of the First Nine Months of 2024).
Global X SuperDividend U.S. ETF provides exposure to 49 highest dividend-paying equities in the United States, potentially increasing a portfolio’s yield by tracking Indxx SuperDividend U.S. Low Volatility Index. It has key holdings in energy, utilities, real estate and consumer staples. Global X SuperDividend U.S. ETF has amassed $648.8 million in its asset base and sees a good trading volume of about 133,000 shares a day on average. It charges 45 bps in annual fees and carries a Zacks ETF Rank #3.
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Range Cancer Therapeutics ETF (CNCR): ETF Research Reports
First Trust Energy AlphaDEX ETF (FXN): ETF Research Reports
Global X SuperDividend U.S. ETF (DIV): ETF Research Reports
SoFi Next 500 ETF (SFYX): ETF Research Reports