10 Best Cheap Stocks to Buy Under $10

The undervalued stocks of these companies with economic moats trade for less than a couple of fivers.

Susan Dziubinski 11 March, 2024 | 4:39AM
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In theory, buying low-priced stocks seems to make sense. If a stock trades for less than, say, US$10 per share, it’s much easier for an investor to accumulate a meaningful position in a stock with relatively few dollars. The hope, of course, is that the position will explode in value over time, because small fluctuations in the stock price can result in sizable gains.

In practice, however, buying low-priced stocks can be hazardous. The low-priced stock landscape is cluttered with untested upstarts, companies that have fallen on tough times run by managers who’ve made poor capital decisions, and shaky balance sheets. Low-priced stocks are often thinly traded, which only adds to their volatility. And of course, you can’t have the potential for sizable gains without the other side of the coin: the potential for sizable losses.

For investors nevertheless interested in buying low-priced stocks, we recommend sticking with higher-quality companies whose shares trade on major exchanges, whose stocks are trading below $10 and are also undervalued relative to their intrinsic worth. Why? For starters, quality companies generally have better staying power and stronger balance sheets, and buying stocks below what they’re worth helps to damp the price risk that often accompanies investing in low-priced stocks.

The names on our list of the best cheap stocks to buy under $10 therefore share two qualities:

All these low-priced stocks earn Morningstar Economic Moat Ratings of at least narrow. That means we think these companies have established advantages that should allow them to fend off competitors for a decade or longer.

These stocks look undervalued, which means they’re trading below Morningstar’s fair value estimates. Price risk is reduced when investors can buy the low-priced stocks on the cheap.

10 Best Cheap Stocks to Buy Under $10

These narrow-moat low-priced stocks all look undervalued, and their share prices are below $10 as of the market close on Feb. 23, 2024.

Lithium Americas (Argentina) NYSE:LAC/TSE:LAC
Altice USA ATUS
Hanesbrands HBI
Arcadium Lithium ALTM
Bayer BAYRY
Sabre SABR
Lloyds Banking Group LYG
Sirius XM Holdings SIRI
Grifols GRFS
Melco Resorts and Entertainment MLCO

Here’s a little bit about each of the best cheap stocks to buy under $10, along with some key Morningstar metrics. All data is through Feb. 23, 2024.

 

Lithium Americas Corp

Last Closing Price: US$4.05
Morningstar Price/Fair Value: 0.16
Morningstar Uncertainty Rating: Very High
Morningstar Economic Moat Rating: Narrow
Industry: Other Industrial Metals & Mining
Market Capitalization: $653.55 million

The cheapest stock on our list of the best stocks to buy below $10, Lithium Americas is trading 84% below our fair value estimate of $25. Lithium spot prices plummeted in 2023, but we expect lithium demand to grow at a double-digit pace in 2024, says Morningstar strategist Seth Goldstein.

Lithium Argentina is a pure-play lithium producer with two assets in Argentina. The company was created as a result of the former Lithium Americas separation, which separated the firm’s Argentina and North America businesses.

Cauchari-Olaroz is Lithium Argentina’s first and largest project. The firm owns a 44.8% interest in the project, while Ganfeng, one of the world’s largest lithium producers, owns 46.7%. The remaining 8.5% is owned by JEMSE, an Argentinian state-owned mining company. The project recently entered production in 2023 and is in the process of ramping up production volumes to the project’s first-phase annual capacity of 40,000 metric tons. Additionally, management is planning to begin construction on a second phase for at least an additional 20,000 metric tons of annual lithium capacity. On a cost basis, Cauchari-Olaroz will be one of the lowest-cost producers in the world, and will have a cost position similar to that of other Argentinian brine assets in operation.

Lithium Argentina is also developing a second project in Argentina. This project will be in the Pastos Grandes basin, where Lithium Argentina is combining two projects that were in the early development phases into a single project. The two projects are Lithium Argentina's 100%-owned Pastos Grandes project, and its 65% owned Sal de la Puna project, which are directly adjacent to one another. Lithium Argentina's Cauchari-Olaroz partner, Ganfeng, owns the remaining 35% of Sal de la Puna, so the development team from Cauchari-Olaroz should be able to advance the combined project in the Pastos Grandes basin. We forecast the project to enter production early next decade and will likely have a low cost position relative to the global cost curve, but slightly higher than other Argentina brine projects, as early development studies indicate brine in the Pastos Grandes basin has a lower lithium concentration.

As electric vehicle adoption increases, we expect maintained double-digit annual growth for lithium demand. Lithium Americas should benefit as there should be more than enough demand for the company’s two resources to enter production and expand capacity over time.

-Seth Goldstein, Morningstar strategist

 

Altice USA

Last Closing Price: $1.83
Morningstar Price/Fair Value: 0.20
Morningstar Uncertainty Rating: Very High
Morningstar Economic Moat Rating: Narrow
Industry: Telecom Services
Market Capitalization: $834.48 million

Altice USA stock is undervalued, trading 80% below our $9 fair value estimate. Although the small company earns a narrow economic moat rating based on its efficient scale and cost advantage versus its rivals, we’ve assigned the stock a Very High Uncertainty Rating due to the company’s heavy debt load relative to its peers.

Altice USA has struggled to maintain revenue growth recently—more than cable peers Comcast and Charter—as it battles stiff competition from Verizon in the New York market and faces the broader incursion of fixed-wireless players into the home broadband business. The firm has also taken a different approach to the business in recent years than other cable operators, with lackluster results. A new management team, largely hailing from Comcast, has slowly been improving the firm’s performance. We expect the firm’s networks will remain vital pieces of infrastructure that will generate strong, albeit slow-growing, cash flow over the long term. However, Altice USA also carries a very large debt load, leaving it little room for error.

Around 60% of Altice’s business is in the New York metro area, where favorable demographics have historically enabled the firm to claim high customer penetration rates and revenue per customer. The market is also far more competitive than average, though, as Altice faces competition from Verizon’s Fios network across more than half the territory. Altice is upgrading its network in Fios areas to fiber, eliminating any network advantage Verizon enjoys, but this effort hasn't paid off yet in terms of better customer or revenue growth.

The rest of Altice’s territory covers mostly smaller markets and rural areas where demographics aren’t as favorable but competition is also more limited. Customer penetration and revenue per customer were both below average before Altice acquired the operation, and we believe these areas still provide some growth potential.

Like its cable peers, Altice has used its network advantage to steadily increase data speeds in recent years and claim more than half the internet access market in the territories it serves, providing a solid foundation for the business. If anything, the pressure Altice has already faced in New York and the smaller markets it serves elsewhere should limit incremental competition relative to that which other cable firms will face as AT&T and other phone companies ramp up their own fiber network construction.

-Mike Hodel, Morningstar director

 

Hanesbrands

Last Closing Price: US$4.81
Morningstar Price/Fair Value: 0.26
Morningstar Uncertainty Rating: Very High
Morningstar Economic Moat Rating: Narrow
Industry: Apparel Manufacturing
Market Capitalization: $1,688.76 million

Hanesbrands stock looks 74% undervalued according to our metrics. Hanes’ key apparel brands have leading market shares in their categories in the United States, which helps the company earn a narrow economic moat rating. The company recently issued disappointing 2024 guidance; however, Morningstar senior analyst David Swartz argues that the company is making progress on its key initiatives, including product enhancements and reductions in debt, inventory, and costs.

Narrow-moat Hanesbrands is the market leader in basic innerwear (about 60% of sales) in multiple countries. We believe its key innerwear brands like Hanes and Bonds (in Australia) achieve premium pricing. While the firm faces challenges from inflation, slowing demand for apparel, higher interest rates, and a highly competitive athleisure market, we think Hanes’ share leadership in replenishment apparel categories puts it in position for improving results after 2023. In May 2021, the firm unveiled its Full Potential plan to expand global Champion, bring growth back to innerwear, improve connections to consumers (through greater marketing and enhanced e-commerce, for example), and streamline its portfolio.

As part of Full Potential, Hanes intends to build on Champion’s popularity in North America, Asia, and Europe. Although recent results have been disappointing, we believe Champion has expansion opportunities as it and other activewear apparel have become more than just athletic apparel and are increasingly worn as lifestyle/fashion brands. Moreover, Hanes has plans to improve Champion’s footwear after recently taking control of the product. However, we believe Champion may be sold if it appears that progress is likely to be slow. If Champion is sold, Hanes would likely use the proceeds for debt reduction.

Hanes is also working to improve the efficiency of its supply chain. It has already made progress in this area, having achieved a 15% increase in manufacturing output over the past five years. Hanes, unlike many rivals, primarily operates its own manufacturing facilities. More than 70% of the more than 2 billion apparel units sold by the company each year are manufactured in its own plants or those of dedicated contractors. We believe the combination of strong pricing, new merchandise, and production efficiencies should allow Hanes to return to operating margins above 20% for its American innerwear business by 2026.

-David Swartz, Morningstar senor analyst

 

Arcadium Lithium

Last Closing Price: US$4.81
Morningstar Price/Fair Value: 0.34
Morningstar Uncertainty Rating: Very High
Morningstar Economic Moat Rating: Narrow
Industry: Specialty Chemicals
Market Capitalization: $5,168.32 million

The second lithium company on our list of the best cheap stocks to buy below $10, Arcadium Lithium stock looks 66% undervalued relative to our fair value estimate of $14.

Arcadium Lithium is a pure-play lithium producer created in the Livent-Allkem merger in early 2024. The company is a top five lithium producer globally by capacity on a lithium carbonate equivalent basis. Arcadium’s two lithium carbonate production resources in Argentina are among the world’s lowest-cost lithium sources on an all-in sustaining cost basis.

As electric vehicle adoption increases, we expect high-double-digit annual growth for global lithium demand. Arcadium is looking to expand its Argentine brine-based lithium volumes from around 40,000 metric tons in 2023 to over 130,000 metric tons on a lithium carbonate equivalent basis by 2030. The growth will come from the expansion at its two existing resources, the Salar del Hombre Muerto and Olaroz, and the development of two new brine resources, Sal de Vida and Cauchari.

Lithium carbonate is produced by pumping brine out of the ground (primarily in South America) or via pegmatite mining that produces spodumene, which is later converted to lithium carbonate. Lithium hydroxide can be produced either from the conversion of carbonate or directly from spodumene.

Arcadium's strategy is to produce both hydroxide and carbonate. Hydroxide is a higher-quality and typically higher-priced product. Arcadium is one of the lowest-cost carbonate producers globally but has a higher-cost position in hydroxide due to the additional conversion cost. Fully integrated hydroxide producers that start with high-quality spodumene assets can produce hydroxide at a lower cost than Arcadium, but Arcadium's costs are still on the bottom half of the hydroxide cost curve.

Arcadium also owns lithium hard rock resources. Mount Cattlin produces spodumene, a lithium concentrate that is sold to converters who make the battery chemicals. The company is also developing two hard rock resources in Canada to expand its spodumene volumes over time. Arcadium plans to build spodumene processing capacity to fully integrate some of its spodumene production, while continuing to sell the remaining spodumene to converters.

-Seth Goldstein, Morningstar strategist



Bayer

Last Closing Price: US$7.76
Morningstar Price/Fair Value: 0.38
Morningstar Uncertainty Rating: High
Morningstar Economic Moat Rating: Narrow
Industry: Drug Manufacturers—General
Market Capitalization: $30,641.17 million


Bayer is the first of two drugmakers on our list of the best low-priced stocks to buy; it’s also one of the larger companies on our list. Bayer cut its dividend in February, which will give the company more flexibility to reduce debt, improve operations, and expand innovation, suggests Morningstar director Damien Conover. Bayer stock trades 62% below our fair value estimate of $20.50.

Largely on the basis of the strong competitive advantages of the healthcare group and to a lesser extent the crop science business, we believe Bayer has created a narrow economic moat. Bayer is evaluating the divestitures of the crop science and consumer healthcare businesses, which appear to hold few synergies with the prescription drug business.

In the healthcare division, Bayer's strong lineup of recently launched drugs and solid exposure to biologics should support steady long-term cash flows. Bayer's hemophilia franchise and key ophthalmology drug Eylea are biologics. While competition is increasing in hemophilia and in eyecare, the manufacturing complexity of these drugs helps to deter generic pressure. Also, new formulations of Eylea and hemophilia drugs hold potential to keep competition at bay. Further, strong demand for cardiovascular drug Xarelto should continue to drive growth, but the drug's key 2026 patent loss will likely create growth headwinds.

Bayer's healthcare segment also includes a consumer healthcare business with leading brands Aspirin and Aleve. Brand recognition is key in this unit, as evidenced by the company's iconic Aspirin, which continues to post strong sales even after decades of generic competition.

In addition to healthcare, Bayer runs a leading crop science segment, which includes crop protection products (pesticides, herbicides, fungicides) and the fast-growing plant and seed biotechnology business. Similar to the drug business, this segment is research and development intensive, and Bayer has developed a strong portfolio of products. The downside to this business is that demand is heavily dictated by weather and commodity prices, which will determine how much farmers can afford to spend on crop treatment. The acquisition of Monsanto has significantly expanded Bayer’s competitive position in this industry. On the negative side, the acquisition increased Bayer’s exposure to litigation around potential side effects from glyphosate use. While many studies have shown glyphosate use to be safe, some reports of linkage to cancer drove large class-action legal cases against Bayer and led to a legal settlement of over $15 billion.

-Damien Conover, Morningstar director

 

Sabre

Last Closing Price: US$2.73
Morningstar Price/Fair Value: 0.55
Morningstar Uncertainty Rating: Very High
Morningstar Economic Moat Rating: Narrow
Industry: Travel Services
Market Capitalization: $1,035.98


Sabre stock is 45% undervalued relative to our fair value estimate of $5. The only travel stock on our list of the best cheap stocks to buy under $10, Sabre is seeing improving demand and profits as business and international travel rebound following the coronavirus pandemic, though industry air volume recovery is lagging our expectations, reports Morningstar senior analyst Dan Wasiolek.

Despite near-term economic and credit market and long-term corporate travel demand uncertainty, we expect Sabre to maintain its position in global distribution systems over the next 10 years, driven by a leading network of airline content and travel agency customers as well as its solid position in technology solutions for these carriers and agents. Sabre’s 30%-plus GDS air transaction share is the second largest of the three companies (behind narrow-moat Amadeus and ahead of privately held Travelport) that together control about 100% of market volume. Sabre is also a leader in providing technology solutions to travel suppliers.

Sabre's GDS enjoys a network advantage, which is the source of its narrow moat rating. As more supplier content (predominantly airline content) is added, more travel agents use the platform, and as more travel agents use the platform, suppliers offer more content. This network advantage is solidified by technology that integrates GDS content with back-office operations of agents and IT solutions of suppliers, leading to more accurate information that is also easier to book. The company's platform reach should grow as Sabre continues to revitalize its technology and looks to expand with low-cost carriers and in countries where it previously had only minimal penetration, which are also markets with higher yields than the consolidated North American region.

Replicating Sabre's GDS platform would entail aggregating and connecting content from several hundred airlines to a platform that is also connected to travel agents, which requires significant costs and time. Although we see GDS aggregation, processing, and back-office advantages as substantial, technology architectures like those of Etraveli enable end users to access not only GDS content but supply from competing platforms, which could take some volume from companies like Sabre. Also, GDS faces some risk of larger carriers making direct connections with larger agencies, although we expect these relationships to be the exception rather than the rule and for Sabre to still be the aggregating platform in either case.

-Dan Wasiolek, Morningstar senior analyst


Lloyds Banking Group

Last Closing Price: US$2.26
Morningstar Price/Fair Value: 0.57
Morningstar Uncertainty Rating: Medium
Morningstar Economic Moat Rating: Narrow
Industry: Banks—Regional
Market Capitalization: $36,907.52 million

The largest name by market capitalization on our best undervalued low-priced stocks to buy list, Lloyds Banking Group is trading 43% below our fair value estimate; we think shares are worth $4. Lloyds benefits from cost advantages and switching costs, which underpin the firm’s narrow economic moat rating.

Lloyds is a pure UK banking play, with 95% of its assets based domestically. Since its massive restructuring, which started in 2011, the bank has emerged as a low-risk domestic retail and commercial bank. It has shed about GBP 190 billion in runoff assets and GBP 200 billion in risk-weighted assets and has significantly reduced its dependence on wholesale funding. Today, Lloyds operates one of the strongest retail franchises in the United Kingdom.

Mortgage pricing is under pressure in the UK as challenger banks look to gain scale and ring-fencing regulations increase liquidity in the market. Although mortgages constitute the lion’s share of loans to customers (66%), Lloyds has delivered robust net interest margins, speaking to its large deposit funding base and policy to prioritize margins over volume. Additionally, as competitive pressure in this market segment has risen, Lloyds has shifted its focus to building out its financial planning offerings, beefed up its credit card loan book, and targeted loan growth in small and medium-size enterprises. This should allow Lloyds to offer a stronger value proposition to its clients as open banking initiatives take hold.

Niklas Kammer, Morningstar analyst

 

Sirius XM Holdings

Last Closing Price: US$4.76
Morningstar Price/Fair Value: 0.63
Morningstar Uncertainty Rating: Medium
Morningstar Economic Moat Rating: Narrow
Industry: Entertainment
Market Capitalization: $18,290.12 million


Sirius XM trades 37% below our fair value estimate of $7.50. The company earns a narrow economic moat rating due largely to the cost advantage of its satellite radio service. Warren Buffett’s Berkshire Hathaway increased its stake in the company last quarter.

Sirius XM Holdings consists of two businesses: SiriusXM and Pandora. SiriusXM transmits music, talk shows, sports, and news via its satellite radio network, primarily to consumers who pay a subscription fee, often tied to a vehicle as the firm’s radios come preinstalled on a wide range of cars and trucks in the US. Most of the stations on the SiriusXM network are proprietary, differentiating the service from streaming music and terrestrial radio.

Most new cars with SiriusXM radios come with a three- to 12-month trial period for the service. The conversion to self-pay after the trial is 37%, which represents the majority of new paid subscriptions. These customers have a monthly churn of 1.6%, implying a customer life of around five years. SiriusXM does share some of the revenue from self-pay customers with the automakers in the form of loyalty payments. Over the next five years, we expect that the satellite service will continue to expand, albeit slowly, by converting enough new- and used-car owners to self-pay to offset churn losses and by discounting the prices of subscriptions to retain customers.

Pandora, acquired in February 2019, is a streaming music platform that offers an ad-supported radio option and a paid on-demand service. Pandora still generates most of its revenue via advertising to consumers of its “radio” service, who listened to over 10.5 billion hours in 2023. The paid on-demand service only had 6 million paid subscribers in the US at the end of 2023, 4.5% of the estimated 133 million paid music service subscribers in the US, according to eMarketer.

Pandora moved into podcasting to differentiate its offering, but larger competitors like Spotify have already added this content to their services. As a result, the space has become increasingly crowded and we don’t expect the move to generate significant growth or returns. We project that while Pandora will slowly expand its subscriber base over the next five years, the segment will continue to lose money as royalty payments will remain a drag on operating income.

-Ali Mogharabi, Morningstar senior analyst

 

Grifols

  • Last Closing Price: US$9.13
  • Morningstar Price/Fair Value: 0.68
  • Morningstar Uncertainty Rating: Very High
  • Morningstar Economic Moat Rating: Narrow
  • Industry: Drug Manufacturers—General
  • Market Capitalization: $7,539.56

The second drugmaker on our list of the best cheap stocks to buy below $10, Grifols stock trades 32% below our $13.40 fair value estimate. We think this midsize company has carved out a narrow economic moat in the global plasma protein oligopoly, based on the market’s high barriers to entry, rooted in cost advantages and intangible assets, explains Morningstar strategist Karen Andersen.

Market share in the global plasma-derived protein business is concentrated among a small number of global players. Grifols lifted itself to the level of competitors Takeda and CSL with the $3.7 billion acquisition of Talecris in 2011. Over the past several years, the firm has been fighting competition and coronavirus pandemic headwinds with acquisitions and investments to build plasma collection and fractionation capacity, support its portfolio and pipeline, and expand geographically.

Today, Grifols holds more than 20% of a roughly EUR 15 billion immunoglobulin market that is growing at a double-digit rate thanks to demand across multiple types of immune disorders. While IG accounts for more than 40% of Grifols' top line, pulmonary product Prolastin leads the market for alpha-1 antitrypsin deficiency, and Grifols has seen solid albumin growth, owing to Chinese demand. With several products under the same roof, Grifols is able to improve margins, as more of the proteins in plasma are turned into marketed products.

Recombinant and novel hemophilia products have shrunk the plasma-derived factor market, and Grifols is facing new competition in the immunoglobulin market from novel FcRn targeted therapies, as well as recombinants and gene editing therapies that could compete with Prolastin. However, we continue to see immunoglobulin market demand as solid in the near-term to midterm, due to several large indications that are less vulnerable to competition, and gene editing is likely to take years to reach the market. In the meantime, Grifols continues to expand its pipeline, driven by the recent Alkahest, GigaGen, and Biotest acquisitions.

The $1.7 billion acquisition of Novartis’ blood and plasma diagnostics business in 2014, followed by the $1.85 billion acquisition of partner Hologic’s share of this business in 2017, complements Grifols’ plasma business, locking in a dominant market share in blood and plasma testing in the United States. The diagnostics arm represents around 10% of total revenue and offers a steady business that diversifies Grifols’ operations in the long term.

-Karen Andersen, Morningstar strategist


Melco Resorts and Entertainment

  • Last Closing Price: US$8.59
  • Morningstar Price/Fair Value: 0.68
  • Morningstar Uncertainty Rating: High
  • Morningstar Economic Moat Rating: Narrow
  • Industry: Resorts & Casinos
  • Market Capitalization: $3,754.61

Rounding out our list of the best cheap stocks to buy under $10, Melco Resorts and Entertainment stock looks 32% undervalued. We think the company maintains a narrow economic moat; it is only one of six primary concessionaries with a casino license in Macao (the only legal gaming hub in China), which is a valuable intangible asset with a high regulatory barrier to entry, explains Morningstar senior analyst Jennifer Song. We think the stock is worth $12.60.

We believe the gambling market in Macao will enjoy solid growth in the longer term. This structural tailwind is driven by the rising middle class in China and the penetration rate of less than 2% in Macao, compared with Las Vegas’ 13%. New hotel rooms by major operators in the next few years should accommodate increased and extended visits from bigger spenders from these provinces, and drive the top line for integrated resort operators like Galaxy Entertainment. With the gradual ramp-up of traffic allowed on the Hong Kong-Zhuhai-Macao bridge, new Hengqin border, and the Gongbei-to-Hengqin extension rail, Macao’s carrying capacity for tourists should increase. In addition, neighboring Hengqin Island, 3 times the size of Macao, is under rapid development to complement Macao’s growth.

As one of only six concession holders to operate casinos in Macao, Melco Resorts & Entertainment is ideally placed to benefit from this market dynamic, given its portfolio of properties catering to both mass-market and premium patrons. This mitigates Melco's exposure to the volatile VIP segment, which is much more susceptible to regulatory scrutiny as authorities clamp down on corruption, junket activities, and illicit money transfers. We expect the launch of Studio City phase 2 with 900 luxury rooms in 2023 to be the next profit driver.

-Jennifer Song, Morningstar senior analyst

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Altice USA Inc Class A2.26 USD7.62Rating
Arcadium Lithium PLC4.85 USD2.11Rating
Bayer AG ADR7.83 USD0.77Rating
Hanesbrands Inc5.03 USD-1.76Rating
Lithium Americas Corp6.08 CAD0.83Rating

About Author

Susan Dziubinski

Susan Dziubinski  is director of content for Morningstar.com.

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