U.S. inflation surged to new 40-year highs of 8.5% in March. The fresh data out Tuesday might put even more pressure on the Fed to lift interest rates in order to tackle soaring prices. The yield on the benchmark 10-year U.S. Treasury is already hovering at three-year highs around 2.8%.

The possibility of a more hawkish Fed has seen the market give up a decent amount of its recent gains in the last week. The market was initially pleased by the Fed’s decision to lift its core rate by just 0.25%. The Fed opted for a small first hike amid the ongoing uncertainty caused by the Russian invasion of Ukraine. But the central bank might be left with no other choice but to start hiking rates by 0.50% at its next meeting, while shrinking its balance sheet.

The S&P 500 is back below its 200-day moving average and the Nasdaq has dropped lower after it found resistance at that level once again on April 4.

The market does have a chance to start to bounce back if companies are able to impress Wall Street with strong first quarter 2022 results and guidance. And the heart of earnings season begins this week with the big banks such as JPMorgan.

All that said, investors could be left chasing returns in stocks no matter what since bond yields are still historically low and inflation sits at 8.5%. Plus, the broader outlook for S&P 500 earnings, margins, and revenues remains strong for 2022 and 2023.

Investors with long-term horizons should also remember just how difficult is to time the market, with the first several months of 2022 acting as a microcosm. Taking this all into account, we used one of our Zacks screens to help show investors how to find strong, highly-ranked stocks that are trading for under $10 per share to consider buying in the second quarter and beyond…

Penny Stocks

One dollar or less used to be the common threshold for what we call “penny stocks.” Today, the SEC has expanded penny stocks to securities that trade for less than $5 a share. Many investors avoid these stocks because they are speculative in nature.

Meanwhile, penny stocks often trade infrequently and hold wide bid/ask spreads. These stocks also carry many other traits that, in many cases, cause excessive volatility. With that said, some penny stocks perform incredibly well, which helps them remain attractive.

Stocks Under $10

Moving on, let’s briefly discuss the next class of cheap stocks. Stocks that trade in the $5 to $10 range are generally less risky than their penny stock counterparts. Investors might be more likely to have heard of these companies or seen the tickers. They are, however, still inherently more speculative than many other higher-priced stocks.

Investors can obviously find winning stocks for under $10 if they are extremely selective. So today, we narrowed the list of thousands of these more speculative stocks down to a more manageable group of $10 and under stocks that might help boost your portfolio.

Screen Parameters

• Price less than or equal to $10

• Volume greater than or equal to 1,000,000

• Zacks Rank less than or equal to 2

(No Holds, Sells or Strong Sells.)

• Average Broker Rating less than or equal to 3.5

(Average Broker Rating of a Hold or Better.)

• # of Analysts in Rating greater than or equal to 2

(Minimum of at least two analysts covering the stock.)

• % Change F1 Earnings Estimate Revisions -- 12 Weeks greater than or equal to 0

(Preferably upward earnings estimate revisions, but definitely no downward revisions.)

Here are two stocks of the roughly 45 highly-ranked names trading under $10 a share that made it through the screen today…

Kosmos Energy (KOS Quick QuoteKOS - Free Report)

Kosmos is a full-cycle deepwater independent oil and gas exploration and production firm focused on the Atlantic Margins. The company’s revenue climbed 49% in 2021 and Zacks estimates call for another 61% revenue expansion in 2022 to climb from $1.33 billion all the way to $2.14 billion.

Kosmos is also projected to swing from an adjusted loss of -$0.06 per share last year to +$1.15 in FY22 and then jump another 14% in 2023. KOS shares have skyrocketed 182% in the last year to outpace its industry’s 100% run. The company’s strong performance includes a 120% jump in 2022 alone.

Centennial Resource Development, Inc.

Centennial Resource Development is an independent oil producer focused in the Delaware Basin, which is a sub-basin of the Permian Basin in West Texas. CDEV has easily topped our quarterly earnings estimates in three out of the last four periods, including a 30% beat in Q4. The company also announced a $350 million stock buyback program on February 23 when it reported its fourth quarter results.

Centennial Resource Development’s management team said the repurchase plan is “supported by robust two-year outlook and resilient through commodity price cycles.” CDEV stock has soared from under $0.50 a share during the initial covid selloff to roughly $9.00 on Tuesday. Zacks estimates call for more top and bottom-line growth in 2022, and the stock could benefit from surging oil and energy prices.

Both stocks offer solid growth potential. Yet, it isn’t wise to pack your portfolio full of cheap, $10 or less stocks. Still, these stocks are certainly worth further investigation because grabbing a few of the top names from this list might bolster your returns. And let’s not forget that picking a few cheap stocks can also be quite fun.

Get the rest of the stocks on this list and start screening for the best stocks under $10 for yourself. And don't forget to backtest your strategy so you'll know how successful it's been before you put any of your money at risk.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance/.