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If you only had $ 20 to invest in a stock, where would you put that money? Sure, you could invest in fractions of a much more expensive stock, but if you wanted to buy full shares of a cheap stock and just sit back and watch it grow over the next 10-20 years or more, what would be your Best option?
Stocks in this price range are usually small companies, but there are also larger companies that are priced below $ 20 and are priced low for a reason – they may be new to the market. or have lost value for some reason.
Image source: Getty Images.
Startups or unproven small businesses in high-flying industries are tempting investments for their potential; but if I only had $ 20 to invest in a stock, I would focus on established companies that have a track record of success and a strategic direction that gives them an edge, namely Rocket companies (NYSE: RKT) and Ford (NYSE: F).
Rocket, a great value at around $ 17 a share
Rocket Companies haven’t ignited the stock market since its high-profile IPO last August. It started trading at around $ 18 per share and fluctuated wildly, peaking at $ 41 in March before dropping back down to its current price of around $ 17 per share. Since the start of the year, it has fallen by around 12% until September 13.
While the market has been ambivalent towards Rocket, there is a lot to like about this title in the long run. For starters, Rocket is the nation’s largest mortgage lender; it had a market share of around 9% at the end of last year.
It had a record-breaking year in 2020 in terms of loan origination, and that may have hurt Rocket’s share price this year as it failed to match the ridiculously high numbers of 2020, which were fueled. by an increase in refinancing from historically low interest rates. But still, the numbers are strong, as Rocket achieved a closed loan volume of $ 84 billion in the second quarter, double the amount achieved in 2019 and more than all of 2018. Rocket CEO Jay Farner , expects a strong second half and expects 2021 to surpass the record amount of mortgage originations in 2020, he said during the second quarter earnings call.
The big advantage of Rocket is its technology. It was among the first mortgage companies to adapt a fully digital platform for obtaining loans and it continues to invest heavily in this platform. This allowed Rocket to reduce overhead and increase efficiency as measured by an above-average profit margin on sales. It’s a competitive space, subject to market fluctuations, but Rocket has carved out a leadership position and continues to gain market share.
Ford, at $ 13 a share, bets on the future of electric vehicles
Ford was trading at less than $ 5 a share last spring; its recovery hampered by the pandemic. But since then, the share price has nearly tripled to $ 13 a share, and the automaker has a bright future, brightened by its focus on electric vehicles (EVs).
Ford plans to invest around $ 30 billion in electric vehicles and battery cells by 2025 as it accelerates its transition to electric vehicles. The automaker plans to release 30 new models of electric vehicles over the next five years, and by 2030 it expects 40% of its sales to come from electric vehicles, said Jim Farley, president and chief executive officer. from Ford’s management in the second quarter earnings call.
The Mustang Mach-E, released last year, is the second best-selling electric SUV. It, along with the F-150 Hybrid Powerboost, drove a 67% increase in electric vehicle sales in August. In 2022, EV versions of two of its most popular vehicles, the Ford F-150 truck, America’s best-selling vehicle, and the Transit van, the best-selling van, will be introduced. The all-electric F-150 Lightning already has 130,000 reservations.
Ford is incredibly cheap right now, with a futures price-to-earnings (P / E) ratio of around six and a price-to-earnings-growth (PEG) ratio of around 0.12. With electric vehicles as a catalyst, Ford is expected to continue to grow from this low valuation throughout this decade and beyond.
Investors would be well advised to take this opportunity to purchase these two top brands at bargain prices. Ford and Rocket are both cheap and undervalued, and they have the potential for steady, long-term growth.
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.
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