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Most investors want to put their money in equities but may not be able to afford large stakes in valuable companies with higher-priced stocks. For them, low-priced stocks could be attractive as these will enable them to buy more shares instead of just a handful of higher-priced shares for the same amount. For example, an investor willing to spend $10,000 can either purchase at least 500 shares of a stock trading under $20 or only 100 shares of a stock trading at $100.
Additionally, stocks under $20 reap huge profits as an increase of as less as a dollar in share price adds 5% to the portfolio. This is in contrast to stocks priced at $100 or above, which see 1% or lower gains if shares move up by $1. Further, most of the low-priced stocks have high levels of liquidity, which give these stocks an added advantage. This means that cash can be converted quickly and investors could easily get their money out of the securities. In fact, trading in higher average daily volumes keeps the bid/ask spread tight and does not lead to extra cost for investors.
And guess what, the recent volatility led by inflation fears has provided investors a great opportunity to tap some of these stocks. The preference is not only limited to the stock world but can be felt in the ETF space as well. In fact, there are only a handful of ETFs that currently trade below $20 out of nearly 2,000 funds, suggesting that the choices are limited for investors who like to get a decent number of shares from their investment.
So, let us dig into some of the ETFs that are below $20 and have AUM of more than $50 million to ensure enough liquidity. These low-priced ETFs could lead to huge gains in the coming months based on encouraging market trends.
Invesco S&P SmallCap Energy ETF (PSCE - Free Report) – Last Closing Price: $7.99
The energy sector has been shining lately on an oil price surge buoyed by a swift global economic recovery and reopening of economies that are spurring demand for energy. The start of the summer driving season in the United States, the world's top oil consumer, has bolstered further optimism over demand. PSCE could be a solid pick to tap this bullish trend.
This fund provides exposure to the U.S. small-cap segment of the energy sector by tracking the S&P Small Cap 600 Capped Energy Index. It holds 33 stocks in its basket with AUM of $187.9 million. The fund trades in an average daily volume of 738,000 shares and charges 29 bps in fees per year. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Small Caps Enjoy Longest Run Since 1995: 5 ETF Winners).
With millions of Americans fully vaccinated and pandemic restrictions being rolled back, the S&P 500 is hovering around its record high on a swift economic rebound. Huge infrastructure spending as well as massive fiscal and monetary stimulus is also instilling strong confidence in the economy, paving the way for a continued rally in the stocks.
This ETF offers exposure to the 500 largest U.S. companies as measured by market capitalization and uses a composite growth score to adjust companies’ weightings. It follows the Solactive SoFi US 500 Growth Index with an expense ratio of zero. Technology and consumer non-cyclical sectors take the largest share at 22.9% and 22.8%, respectively, while financials and communications round off the next two spots with a double-digit exposure each. The fund has amassed $239.6 million in its asset base while trades in an average daily volume of 91,000 shares.
Global X Cannabis ETF – Last Closing Price: $15.53
Cannabis stocks are poised for gains on a wave of wider legalization as well as the growing adoption of marijuana in more states. The Biden government has the friendliest political environment for the cannabis industries in U.S. history, as it will expedite the legalization of marijuana at the federal level. Additionally, the deal activities and robust earnings have strengthened the bullish case for the marijuana stocks (read: Cannabis On a Roll: Guide to ETF Investing).
POTX seeks to invest in companies across the cannabis industry and tracks the Cannabis Index. It holds 25 stocks in its basket, with Canadian firms accounting for 88% of assets while the United States and Australia take 9.3% and 2.6% share, respectively. The product has accumulated $208.4 million in its asset base and trades in an average daily volume of 275,000 shares. Expense ratio comes in at 0.51%.
As the automation and technology advancement is emerging rapidly, the drive for electric vehicles is pushing up demand for lithium. Notably, lithium is used for batteries that power lithium cars. UBS forecasts electric vehicles to account for 40% of new vehicle sales by 2030, driving an eight-fold lithium demand increase.
BATT offers exposure to a portfolio of companies generating significant revenues from the development, production and use of lithium battery technology, including battery storage solutions, battery metals & materials, and electric vehicles. It tracks the EQM Lithium & Battery Technology Index, holding 88 stocks in its basket. The fund has gathered $182.3 million in its asset base and trades in an average daily volume of 163,000 shares.
ETFMG Prime Junior Silver ETF (SILJ - Free Report) – Last Closing Price: $17.44
Silver price is expected to pick up as the global economic recovery in the post-pandemic world is boosting manufacturing and industrial activities. Notably, silver is used in a wide range of industrial applications. About half of the metal’s total demand comes from industrial applications, while 30% comes from jewelry/silverware/coins and medal manufacturers. Additionally, rising inflation will lead to higher demand for silver as an inflation hedge (read: 5 Sector ETFs That Gained Double-Digits Last Week).
SILJ provides direct exposure to the small-cap silver mining exploration and production industry by tracking the Prime Junior Silver Miners & Explorers Index. It holds 49 stocks in its basket with Canadian firms taking the lion’s share at 74.8%, while the United States takes a double-digit 12.3% exposure. The fund has managed assets worth $1 billion and trades in a good volume of nearly 1.6 million shares a day. It charges 69 bps in annual fees.
Bottom Line
The above-mentioned ETFs should draw the attention of investors seeking to accumulate a larger number of low-priced funds that are poised to outperform. Even small investors could add a decent holding of some of these names with a modestly sized investment. These products could fetch higher returns.
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5 ETFs Under $20 Set to Outperform
Most investors want to put their money in equities but may not be able to afford large stakes in valuable companies with higher-priced stocks. For them, low-priced stocks could be attractive as these will enable them to buy more shares instead of just a handful of higher-priced shares for the same amount. For example, an investor willing to spend $10,000 can either purchase at least 500 shares of a stock trading under $20 or only 100 shares of a stock trading at $100.
Additionally, stocks under $20 reap huge profits as an increase of as less as a dollar in share price adds 5% to the portfolio. This is in contrast to stocks priced at $100 or above, which see 1% or lower gains if shares move up by $1. Further, most of the low-priced stocks have high levels of liquidity, which give these stocks an added advantage. This means that cash can be converted quickly and investors could easily get their money out of the securities. In fact, trading in higher average daily volumes keeps the bid/ask spread tight and does not lead to extra cost for investors.
And guess what, the recent volatility led by inflation fears has provided investors a great opportunity to tap some of these stocks. The preference is not only limited to the stock world but can be felt in the ETF space as well. In fact, there are only a handful of ETFs that currently trade below $20 out of nearly 2,000 funds, suggesting that the choices are limited for investors who like to get a decent number of shares from their investment.
So, let us dig into some of the ETFs that are below $20 and have AUM of more than $50 million to ensure enough liquidity. These low-priced ETFs could lead to huge gains in the coming months based on encouraging market trends.
Invesco S&P SmallCap Energy ETF (PSCE - Free Report) – Last Closing Price: $7.99
The energy sector has been shining lately on an oil price surge buoyed by a swift global economic recovery and reopening of economies that are spurring demand for energy. The start of the summer driving season in the United States, the world's top oil consumer, has bolstered further optimism over demand. PSCE could be a solid pick to tap this bullish trend.
This fund provides exposure to the U.S. small-cap segment of the energy sector by tracking the S&P Small Cap 600 Capped Energy Index. It holds 33 stocks in its basket with AUM of $187.9 million. The fund trades in an average daily volume of 738,000 shares and charges 29 bps in fees per year. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Small Caps Enjoy Longest Run Since 1995: 5 ETF Winners).
SoFi Select 500 ETF (SFY - Free Report) - Last Closing Price: $15.42
With millions of Americans fully vaccinated and pandemic restrictions being rolled back, the S&P 500 is hovering around its record high on a swift economic rebound. Huge infrastructure spending as well as massive fiscal and monetary stimulus is also instilling strong confidence in the economy, paving the way for a continued rally in the stocks.
This ETF offers exposure to the 500 largest U.S. companies as measured by market capitalization and uses a composite growth score to adjust companies’ weightings. It follows the Solactive SoFi US 500 Growth Index with an expense ratio of zero. Technology and consumer non-cyclical sectors take the largest share at 22.9% and 22.8%, respectively, while financials and communications round off the next two spots with a double-digit exposure each. The fund has amassed $239.6 million in its asset base while trades in an average daily volume of 91,000 shares.
Global X Cannabis ETF – Last Closing Price: $15.53
Cannabis stocks are poised for gains on a wave of wider legalization as well as the growing adoption of marijuana in more states. The Biden government has the friendliest political environment for the cannabis industries in U.S. history, as it will expedite the legalization of marijuana at the federal level. Additionally, the deal activities and robust earnings have strengthened the bullish case for the marijuana stocks (read: Cannabis On a Roll: Guide to ETF Investing).
POTX seeks to invest in companies across the cannabis industry and tracks the Cannabis Index. It holds 25 stocks in its basket, with Canadian firms accounting for 88% of assets while the United States and Australia take 9.3% and 2.6% share, respectively. The product has accumulated $208.4 million in its asset base and trades in an average daily volume of 275,000 shares. Expense ratio comes in at 0.51%.
Amplify Lithium & Battery Technology ETF (BATT - Free Report) - Last Closing Price: $16.99
As the automation and technology advancement is emerging rapidly, the drive for electric vehicles is pushing up demand for lithium. Notably, lithium is used for batteries that power lithium cars. UBS forecasts electric vehicles to account for 40% of new vehicle sales by 2030, driving an eight-fold lithium demand increase.
BATT offers exposure to a portfolio of companies generating significant revenues from the development, production and use of lithium battery technology, including battery storage solutions, battery metals & materials, and electric vehicles. It tracks the EQM Lithium & Battery Technology Index, holding 88 stocks in its basket. The fund has gathered $182.3 million in its asset base and trades in an average daily volume of 163,000 shares.
ETFMG Prime Junior Silver ETF (SILJ - Free Report) – Last Closing Price: $17.44
Silver price is expected to pick up as the global economic recovery in the post-pandemic world is boosting manufacturing and industrial activities. Notably, silver is used in a wide range of industrial applications. About half of the metal’s total demand comes from industrial applications, while 30% comes from jewelry/silverware/coins and medal manufacturers. Additionally, rising inflation will lead to higher demand for silver as an inflation hedge (read: 5 Sector ETFs That Gained Double-Digits Last Week).
SILJ provides direct exposure to the small-cap silver mining exploration and production industry by tracking the Prime Junior Silver Miners & Explorers Index. It holds 49 stocks in its basket with Canadian firms taking the lion’s share at 74.8%, while the United States takes a double-digit 12.3% exposure. The fund has managed assets worth $1 billion and trades in a good volume of nearly 1.6 million shares a day. It charges 69 bps in annual fees.
Bottom Line
The above-mentioned ETFs should draw the attention of investors seeking to accumulate a larger number of low-priced funds that are poised to outperform. Even small investors could add a decent holding of some of these names with a modestly sized investment. These products could fetch higher returns.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>