Cheap stocks provide an opportunity for investors to generate a strong return over a long stretch of time, even though that comes with risk too.
Marqeta (MQ): This fintech company is fresh off strong earnings, but sold amid the bear market in growth stocks.
Southwestern Energy (SWN): Riding the boom in energy and utility stocks higher while sporting a low valuation.
Jumia (JMIA): Building out the e-commerce future of Africa. High risk, high reward.
Ford (F): Legacy automaker looking to bolster its electric-vehicle offerings with the most popular vehicle in the U.S.
Smiling piggy bank against stock chart background. Represents cheap stocks and stocks selling at a discount
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Cheap stocks are often cheap for a reason: because there aren’t enough buyers for them. However, that’s not always the case. We can have a million-dollar stock or a $1 stock and they can have the same value depending on the share count. Investors are typically looking for cheap stocks in order to jump in ahead of a large move. And, overall, it’s based more on the quality of the underlying company.
That said, investors simply can’t help themselves sometimes. They see stocks like Nio (NYSE:NIO) or Advanced Micro Devices (NASDAQ:AMD), which traded below $2 to $3 at one point not long ago. Nio did it in 2019 and 2020, and AMD did so in 2016. They went on to explode higher, with Nio and AMD sporting all-time highs near $67 and $164.50, respectively.
So, are any of the stocks above the next Nio or AMD? They could be! While it’s hard to believe one of these stocks could generate such a strong return while we’re in the midst of a bear market, keep in mind that these environments are where opportunities are created. And while cheap stocks are higher risk and more speculative, the long-term potential is there.
Online banking businessman using smartphone with credit card Fintech and Blockchain concept
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Marqeta (NASDAQ:MQ) is a unique and innovative company, but its stock is being roiled in a bear market. Unfortunately, this bear market in growth stocks has crushed investors in stocks like this. According to the company:
“The Marqeta platform lets you develop and launch innovative, global, and trusted payment solutions at unprecedented speed…Marqeta’s horizontal architecture, with built-in redundancy and failover, is designed to support the exponential growth of successful card programs.”
The company has issued more than 500 million cards, and despite market-wide turmoil, it continues to grow. Moreover, the company recently partnered with MasterCard (NYSE:MA), a company that had previously invested in Marqeta.
Marqeta is not profitable at the moment, but it’s forecast to grow its revenue more than 30% in 2022 and 2023. Thus, there’s clear potential with this company, particularly if its revenue can continue to power high.
Southwestern Energy (SWN)
Several natural gas tanks with a sunrise in the background
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Shifting gears to Southwestern Energy (NYSE:SWN), this natural gas exploration and production company is one to keep an eye on. Obviously energy prices have been explosive, which has thrust energy and utility stocks into the spotlight for the first time in a long time.
While energy stocks have been the best-performing group over the last three, six and 12 months, utility stocks have been the second-best performing group in that span. As it pertains to Southwestern, the company has some strong merits.
Despite estimates calling for a 1% decline in revenue this year, analysts expect more than 28% earnings growth this year for Southwestern. In 2023, estimates call for acceleration to 32% earnings growth alongside mild, single-digit revenue growth.
If those estimates come to fruition in 2022, it leaves Southwestern Energy stock trading at about 5.5 times earnings.
Cheap Stocks to Buy: Jumia (JMIA)
The Jumia (JMIA Stock) logo on a laptop.
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We need a lot more than a few paragraphs to break down what Jumia (NYSE:JMIA) is doing in Africa. However, to put it simply — and perhaps most bullishly — it’s trying to be the Amazon (NASDAQ:AMZN) of Africa.
However, Africa is a tough continent for an online marketplace like Jumia. While there is economic growth, there is a lot of disparity in that wealth. Furthermore, there are not the same logistical developments that other countries and continents take for granted. As a result, Jumia has had to build a lot of this on its own, and it’s been a slow and expensive task.
However, it’s beginning to make strides, while growth remains solid. Analysts expect 26% revenue growth this year, followed by a jump up to 30.6% growth in 2023 and another jump to 33% growth in 2024. If those accelerations take place, then look out. Jumia could be a dangerous rebound play if the market finds its footing.
Lastly, the company recently partnered with United Parcel Service (NYSE:UPS). The hope is that this will take some of the logistical burden off of Jumia and help improve its cost structure.
Ford (F)
Ford (F) logo on a steering wheel
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Last but certainly not least is Ford (NYSE:F). This is a well-known name that doesn’t need much of an introduction. However, for the first time in what seems like ages, this stock actually had some pretty strong bullish momentum before the recent market selloff.
That’s as the company continues to pour resources into its EV business.
Ford already has the Mustang Mach-E on the road but is bringing other models into the mix. Some are popular and some are practical, but both make sense. The company is also electrifying the F-150, the country’s most popular vehicle — not just most popular truck — as well as its Transit van.
Due to robust demand, Ford stopped taking reservations for the F-150 Lightning and then planned to double production up to 150,000 units annually in 2023. Combined with its recently reinstated its dividend and plans to further electrify its fleet, Ford is one to keep an eye.
On the date of publication, Bret Kenwell held a long position in JMIA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
