ETFs
3 Top-Ranked ETFs Under $20 for Your Portfolio – June 7, 2024
Most investors want to invest their money in stocks, but may not be able to afford large stakes in valuable companies whose shares are more expensive. For them, lower-priced stocks could be attractive because they would allow them to buy more shares instead of just a handful of more expensive stocks for the same amount. For example, an investor willing to spend $10,000 can either buy at least 500 shares of a stock trading for less than $20 or only 100 shares of a stock trading for $100.
Additionally, low-priced stocks often offer the potential for large percentage gains. For example, if a stock is valued at $20 and rises by $1, that represents a 5% gain. This contrasts with stocks priced at $100 or more, which see gains of 1% or less if the stock rises by $1.
Additionally, low-priced stocks have high liquidity levels, giving them an added advantage. This means that cash can be converted quickly and investors can easily withdraw their money from the securities. In fact, trading higher average daily volumes keeps the bid/ask spread tight and does not incur additional costs for investors.
However, lower priced stocks can be much more volatile than higher priced stocks, leading to significant losses if the stock price declines. The latter are more susceptible to price manipulation, such as “pump and dump” schemes, which can lead to significant losses. Additionally, low-priced stocks, especially penny stocks, are owned by smaller, less established companies. These companies may not be required to file with the SEC, making it more difficult to find reliable information.
Nonetheless, low-priced stocks are affordable and allow for greater diversification rather than investing in higher-priced stocks. The recent volatility has given investors a great opportunity to exploit some of these stocks. The preference is not just limited to the world of stocks, but can be felt in the ETF space. In fact, there are currently only a handful of ETFs currently trading under $20 out of nearly 2,000 funds, suggesting that choices are limited for investors who want to get a decent number of shares of their investment.
So let’s look at some of the ETFs that cost less than $20 and have a Zacks ETF Rank #1 (Strong Buy) or #2 (Buy). These low-cost ETFs could generate huge gains in the coming months, depending on market trends.
Cancer therapeutic ETF range (CNCR – Free report) – Last closing price: $14.66
Although biotechnology companies are rushing into weight-loss drugs, cancer will create potentially significant market demand for new, novel and effective treatments. As the leading cause of death worldwide, cancer remains one of the most concerning public health issues and will continue to be at the forefront of investment and technological innovation (read: ETFs will benefit from the boom in weight-loss drugs).
Range Cancer Therapeutics ETF provides exposure to a broad range of cancer therapeutic modalities. It tracks the Range Oncology Therapeutics Index and holds 77 stocks in its basket, each representing less than 3.1% of assets. The Range Cancer Therapeutics ETF has $16.3 million in assets under management and charges 79 basis points in annual fees. The fund trades an average daily volume of 17,000 shares.
First Trust AlphaDEX Energy Fund (FXN – Free report) – Last closing price: $18.34
The energy sector has witnessed volatility this year. As the decision by the OPEC cartel and other allies to increase production later this year and rising oil inventories weigh on the price of oil, rate cuts in Canada and Europe as well as new bets on a Fed rate cut are good news for the sector.
The First Trust Energy AlphaDEX fund tracks the StrataQuant Energy Index, which uses the AlphaDEX stock-picking methodology to select stocks from the Russell 1000 index. It holds 37 stocks in its basket, none of which account for more than 5.4 % of shares. Crude producers hold the largest share (50%), followed by a double-digit allocation in pipelines, oil refining and marketing, and oilfield equipment and services. The First Trust Energy AlphaDEX fund has amassed $622.2 million in its asset base while trading an average daily volume of 2.5 million shares.
Global Cloud Computing ETF (NAIL – Free report) – Last closing price: $19.69
Demand for cloud computing will remain high, given the current boom in artificial intelligence (AI). A large number of businesses are adopting cloud computing to leverage AI capabilities. Increased investment in AI is expected to increase the cloud’s share of total IT spending from around 15% in 2023 to around 40% in 2030, as businesses look to capitalize on the flexibility of the cloud model (read: Can NVIDIA’s AI chip dominance continue?).
The Global -forms as a service, infrastructures as a service. a-Service, managed server storage and data center real estate investment trusts, and/or cloud and edge computing infrastructure and hardware. It tracks the Indxx Global Cloud Computing index and holds 36 stocks in its basket. The Global X Cloud Computing ETF has $447.1 million in assets under management and trades an average daily volume of 177,000 shares. The ETF charges 68 basis points in annual fees.
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