When markets start to get choppy, investors typically look for the most affordable stocks that promise some upside potential for the coming quarters. After the S&P 500 had a small version of a “flash crash” triggered by the unwind of the so-called “carry trade” between the Japanese yen and U.S. dollar, a quick recovery signaled markets that things might be better than they seem.
Because of this, investors might want to start looking into stocks that aren’t too high in price so that any rally in their niches will represent a larger percentage gain due to price alone. Today, a list of stocks that currently trade below $10 a share all bring a set of fundamental tailwinds to make this upside potential a reality. One of them even has Warren Buffett’s blessing behind it.
Making this list is cryptocurrency farmer and holder Riot Platforms Inc. (NASDAQ: RIOT), which could see better days after investors take on a risk-on attitude that could boost the price of cryptocurrencies like Bitcoin. Now that Buffett has bought – and boosted – his position in Occidental Petroleum Co. (NYSE: OXY) with a bullish view on oil prices, shares of Transocean Ltd. (NYSE: RIG) also promise some upside. Finally, a construction play is found in shares of Cemex (NYSE: CX) to catch the bottom of the mortgage cycle.
Riot Platforms Stock Poised for a Rebound as Bitcoin Enters a Risk-On Cycle
With the Federal Reserve (the Fed) promising interest rate cuts over the market, some are getting ready to load up again on Bitcoin, just like the last cycle of interest rate cuts. According to the CME’s FedWatch tool, these cuts might be here as soon as September 2024.
This gives investors a more realistic timeline for expecting to see a few gains Riot Platforms stock could hold for them. Analysts at Cantor Fitzgerald think the stock could be worth up to $23 a share, which calls for up to 187% upside from where the stock trades today, below $10 a share for $8.
The most recent Bitcoin holdings data reported by the company’s investor relations website drives this upside. It shows up to 9,704 Bitcoin as of July 2024. Today’s average price of $60,000 per Bitcoin means up to $582.4 million worth of assets held in Bitcoin alone.
If the price of Bitcoin were to surge starting—or leading up to—September, then investors could likely see the potential upside in this cryptocurrency stock. Knowing that this could be the future for the company, bears decided to bail out of their short positions, as judged by the 6.4% decline in short interest over the past month alone.
Buffett's Bullish Oil Outlook Could Propel Transocean Stock Higher
The downside of being a mega investor like Buffett is that he cannot buy a significant share of a small company, one that could be enough to move the needle for his entire fund. Since Transocean is so cheap and small in market share, Buffett's bullish oil view has to be exercised through a bigger company like Occidental Petroleum.
One benefit for retail investors is that size is no issue. Transocean is set to get paid and generate earnings before companies like Occidental do since it operates in the energy sector's contract and drilling equipment leasing niche. Knowing this, one of the company's directors bought up to 2 million shares as of August 2024.
More than that, analysts at Benchmark agreed on a price target of up to $8 a share for Transocean stock as recently as August. To prove these analysts right, the stock would need to rally by as much as 53.8% from where it trades today, and the same September rate cut timeline applies to this stock as well.
Goldman Sachs analysts predict that oil prices could reach up to $100 a barrel this year, pushed by the ensuing demand for oil as the business cycle bottoms and runs back up on lower interest rates and more flexible financing environments.
Likewise, Transocean stock's short interest declined by 2% over the past month, showing early signs of bearish capitulation.
Real Estate Demand Cycle Boom Poised to Lift Cemex Stock
Looking at the current state of the real estate sector, potential rate cuts from the Fed could spark a new wave of demand and help construction materials stocks like Cemex rally from their current levels.
The Mortgage Market Index is at a level not seen since 1997, and building permit data have been contracting for a few months now. Many would-be buyers are sitting on the sidelines, waiting for better mortgage rates to help them make a new purchase.
Knowing that the risk-to-reward scale is so beneficial now, Wall Street analysts forecast up to 17.6% earnings per share (EPS) growth in the next 12 months for Cemex stock, helping those at Morgan Stanley land on a $12 a share price target as recently as July 2024.
To prove these analysts right, the stock would need to rally by 79.1% from its current price, realizing the higher percentage returns that come with operating in a sock that trades below $10 a share.
