The May inflation readings showed cooling consumer and producer prices. However, in 2024, it’s important to define the meaning of words. In this case “cooling” doesn’t mean prices are going down. Rather, the rate at which they’re going up is slowing. That thesis is causing some analysts to believe stocks could be ready for a summer rally. If so, why not get more bang for your buck with the best under $20 stocks to buy?
An important thing to remember about Investor psychology is that experienced investors have a long-term outlook. That doesn’t mean everyone is a Warren Buffett. Rather, they look past today’s headlines and take educated guesses about what those headlines will mean for stocks 6 to 12 months down the road — or further.
Right now, it means inflation is at a point that will keep interest rates, at worst, where they are. But as long as they know the next move is lower, stocks could be a good buy. Here are seven of the best under $20 stocks to buy.
DigitalBridge (DBRG)
A common characteristic of the companies on this list of the best under $20 stocks to buy is a price-to-earnings (P/E) ratio below the S&P 500 average of around 25x. But I’m making an exception with DigitalBridge (NYSE:DBRG), which trades at about 40x forward earnings.
The reason is that this real estate investment trust (REIT) specializes in data centers. According to the research firm Dell’Oro Group, data center physical infrastructure revenue grew by 16% year-over-year (YOY) in 2023. And the group notes that much of this growth is coming as pandemic-fueled backlogs are being filled, not from generative AI…yet.
DigitalBridge plans to build five times the number of data centers it’s built in the last 30 years to keep up with this explosive demand. It’s important to note that the company already has the third-largest independent global data center footprint.
So, why is DBRG down 25% in 2024? That comes from the company’s March earnings report that showed net losses growing and high executive compensation. This is an issue of scale, but if the company achieves that, its Fee-Earning Equity Under Management (FEEUM) business model makes the business and the stock very attractive.
Nintendo (NTDOY)
I was reminded of Nintendo (OTCMKTS:NTDOY) when I put together a list of the best under $20 stocks to buy in May. The recent hubbub around GameStop (NYSE:GME) compels me to keep it on this list.
I’m aware that many investors holding GME stock with diamond hands don’t want to hear about fundamentals. But it has to be said that GameStop is analog in a digital world.
A better speculative investment is Nintendo. The company has delayed the launch of its next version of its popular Switch console until 2025. That’s why NTDOY stock has been under pressure recently.
That may be a disappointment for gamers hoping to have a new device for the holidays. However, the company is still anticipating sales of over 15.5 million units in 2024. Nevertheless, with the current version being seven years old, now is an opportunity for investors to buy shares before the refresh cycle hits.
The consensus price of the 20 analysts that have issued a price target for Nintendo stock is $58.43. That’s a 340.63% gain from the stock’s closing price on June 13.
Kinder Morgan (KMI)
Yet another stock that I’m reprising from my May list is Kinder Morgan (NYSE:KMI). At the risk of sounding like a broken clock, the bullish thesis remains the eventuality of rising oil prices. OPEC+ is pledging to maintain its output cuts. Meanwhile, in the United States, the Biden administration has been drawing oil from the Strategic Petroleum Reserve (SPR) it has only recently begun to replenish.
Neither one of those issues has anything to do with steady consumer demand, which is likely to remain in place as an electric vehicle (EV) infrastructure is not in place on a national scale. And there’s also the demand increase that will come when the Federal Reserve cuts interest rates.
All this oil has to move around the country and that means it will likely flow through the company’s 80,000 miles of pipelines and approximately 180 terminals throughout the United States and Canada.
And while you’re waiting for the oil market to turn around, taking a long position in KMI stock lets you collect the company’s high-yield (5.82%) dividend that currently pays $1.15 annually per share.
Kenvue (KVUE)
Kenvue (NYSE:KVUE) is the company formed when Johnson & Johnson (NYSE:JNJ) spun off its consumer products division. The company is now home to many of the iconic JNJ brands, including the baby powder that was the subject of a long-running lawsuit.
While Kenvue’s indemnity agreement, secured from J&J as part of the spinoff, shields it from talc liability that arises in North America, it’s not entirely off the legal hook. Still, it does mean that recent settlement orders won’t hit Kenvue’s bottom line.
The key reason why KVUE stock is down 28% in the 12 months since the spinoff is its miss on the top line in its last two earnings reports. There is some evidence that consumers, particularly low- to middle-income consumers, are switching to private-label store brands.
However, approximately two-thirds of those consumers are doing so to offset inflation. As long as that’s the case, this could be a headwind that will resolve itself. Analysts seem to believe that and are offering a consensus price target of $22.38 for KVUE stock. And while you wait, you can collect a dividend with a 4.44% yield.
Barrick Gold (GOLD)
The last of the stocks that I had on a list of best under $20 stocks to buy in May is Barrick Gold (NYSE:GOLD). My thesis remains the same. Inflation is cooling, but disinflation is not deflation, and therefore, the bull market in gold should continue to roll on.
To date, mining stocks such as Barrick Gold haven’t been participating in gold’s surge. Much of that is because, like oil drillers, gold mining companies have to ramp up operations to meet production targets.
Barrick is pledging to ramp up production by 30% by 2030. To do that, it must have confidence that the underlying metal, in this case gold, is going to stay at elevated levels. And you also shouldn’t forget about copper, which will be required for the electrification economy being built around the world.
GOLD stock has been range-bound for the last year and is down 6% overall as of the market close on June 13. But analysts see GOLD stock moving up to 36% higher with a consensus price target of $21.91.
Cleveland-Cliffs (CLF)
The Biden administration announced it would protect the U.S. steel industry by maintaining and increasing tariffs on steel and aluminum put in place by the Trump administration. That will be bullish for domestic steel manufacturers such as Cleveland-Cliffs (NYSE:CLF).
CLF stock is down approximately 27% in 2024. Much of that has to do with the noise around the company. It made a bid to buy U.S. Steel (NYSE:X) that was rejected. It missed the top line when it reported first-quarter revenue. And the company still has an acquisition itch to scratch, which it may have done for now by buying the U.S. plants of NLMK, Russia’s largest steel producer.
Steel prices have been elevated as inflation has increased. With demand expected to rise due to the need for infrastructure, the short-term outlook for CLF stock is strong. Trading at around 18x forward earnings, the stock isn’t overly valued compared to the broader market.
Joby Aviation (JOBY)
For purely speculative investors, one of the best under $20 stocks to buy may be Joby Aviation (NYSE:JOBY). The company recently achieved a key milestone when the Federal Aviation Administration (FAA) issued its final airworthiness criteria for Joby.
It’s not an approval, but it provides clarity on what Joby must do to receive that approval. It also keeps Joby ahead of its competition in the United States. Plus, the company already has deals in place that could have it begin commercial operations in the UAE as soon as 2025.
And from an investment standpoint, investors have to be encouraged by the $900 million in cash on Joby’s balance sheet. That all but ensures it can make it into production without diluting shareholder value.
JOBY stock is down 36% in the last 12 months and 24% in 2024 alone. At a price of $5 per share as of June 13, the stock is still a penny stock. It doesn’t appear it will be that way much longer. There’s time to scale into JOBY stock gradually, but it’s one you may need to act on sooner rather than later before the biggest gains fly away.
On the date of publication, Chris Markoch did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.