by Staff Reports Money Morning, Money Morning
Special Report from Money Morning
If you’re looking for cheap growth stocks in the tech industry, good luck.
The valuations in that space are all sky-high for the most part, with price/earnings ratios through the roof (if they’re even profitable in the first place).
But if you’re looking for the best cheap growth stocks under $5 per share that are significantly undervalued, then you’ve come to the right place.
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These are profitable businesses with P/E ratios under 7. Any P/E ratio under 15 generally means the stock is cheap.
And the best part about these stocks is they have a major catalyst that’s about to send them soaring higher in 2021…
The collapse of a certain commodity earlier this year has just registered one group of stocks a strong buy.
They’re so cheap now that growth over the next year is imminent.
I’m talking about the oil industry.
Earlier this year, when oil prices collapsed, many oil tanker stocks soared…
Speculators and energy companies were leasing the ships to serve as floating storage until prices rebounded from negative levels.
With WTI crude oil back at a normal price of $47.50 per barrel, oil tanker stock prices have fallen back to the pre-oil collapse level.
Most oil tanker companies that trade here in the United States are now trading well below $5.
This represents an outstanding cheap growth stock opportunity that could yield enormous profits for patient, aggressive investors.
If you read the conventional Wall Street research and media opinions, the outlook for oil tankers is bleak…
Oil demand is low and will stay low as we see lockdowns begin to spread around the globe once again.
The coronavirus is spreading once again, and this past weekend, we saw the United Kingdom initiate very aggressive lockdowns that will slow its economy.
Most analysts expect to see more lockdowns until the vaccine is widely available.
The short-term headlines for oil prices are ugly. But this is giving low-priced stock investors an opportunity to buy shares of leading oil tanker companies at bargain-basement prices.
Historically buying the oil tanker stocks when everybody hates them has been a winning trade.
The tide will turn for energy prices. And when it does, those aggressive investors who bought the best cheap growth stocks in the oil tanker industry are likely to see an opportunity to sell them well above today’s depressed prices.
By this time next year, the vaccine will have been widely distributed worldwide, and the economy should be roaring. Travel will explode as people who have been locked in their houses for a good portion of 2020 hit the road once again.
Energy demand will be much higher, and oil tankers’ rates will move higher, and so will the best cheap stocks to buy.
My First Cheap Stock to Buy Now
Teekay Corp. (NYSE: TK) is a Canadian company that owns liquefied gas carriers, conventional tankers, and floating storage facilities. The LNG business has remained strong all year, and its ships are already leased at fixed rates for 2021.
The regular tanker business is also doing well despite weak energy markets. In the most recent quarter, TK Tankers had net income of $3 million or $0.09 per share in the third quarter, a significant improvement from an adjusted net loss of $22 million or $0.63 per share in 2019.
TK Corp. is a powerful deleveraging story in addition to being a play on a vaccine-driven global economic recovery. Over the last year, TK has reduced its total debt levels by $940 million, or 22%. The debt reduction has increased the equity value of TK Corp. and reduced interest expense. This should provide a further increase in 2021 earnings.
This Cheap Stock Should See Demand Rise Rapidly
Nordic America Tanker Ltd. (NYSE: NAT) has seen its stock price drop by more than 30% this year as tanker leasing rates have fallen. CEO Herbjorn Hansson is unphased as he points to robust Asian economies and has even ordered new ships.
The company has also changed its dividend policy as part of its debt covenants. Nordic American has to maintain certain liquidity levels and prepay expenses before it can pay out cash to shareholders. While this may result in a lower dividend payment, it will also make Nordic American a financially stronger, more profitable company.
Even with the new policy, the stock still yields almost 5% at the current price.
Insiders are betting on a 2021 price recovery as they have been buying shares throughout 2020. The most recent purchase was earlier this month, when board member Alexander Hansson purchased 45,000 shares of the company at $3.29.
Nordic American owns a fleet of 23 Suezmax crude oil tankers. These large tankers should see demand increase rapidly as the vaccine is deployed around the world in 2021.
The Best Cheap Growth Stock to Buy Now
If you look at the price of StealthGas Inc. (NASDAQ: GASS) shares right now, you would assume that business is horrible.
However, when you read the financial statements and latest earnings report, we find that business is actually pretty good. In the third quarter of 2020, revenue and profits were up year over year.
The stock is trading at a fraction of the value of the 47 LPG carriers, three medium-range product tankers, and one Aframax oil tanker that it owns.
If the company sold everything at half the carrying value in the financial statements, it would bring in three times the current stock price.
As the vaccine gets the global economy back to something resembling normal in 2021, energy demand will pick up. We will probably see pent-up demand create a surge in demand in the early stage of a global reopening. That will lead to higher oil tanker demand and leasing rates.
These low-priced stocks are so undervalued at current prices, it will not take much good news for them to explode higher as we go into 2021.
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