The stock market’s steep drop at the end of 2018 is good news for value investors. The list of candidates for best stocks under 20 dollars in 2019 just got longer as a result.

Even still, just because a stock is cheap doesn’t mean it’s a bargain.

Only 5% of the companies that comprise the S&P 500 Index trade at less than 20 dollars. Of those, only a handful earns a buy rating from my IDEAL Stock Rating System.

The stock market is moving away from overpriced momentum stocks. So, now may be the perfect time to load up on inexpensive value stocks.

The Best Stocks Under 20 Dollars in 2019

If you’re in a hurry, below are our top picks for best stock under 20 dollars in 2019:

1. Western Union (NYSE: WU). FinTech should expand profit margins while extending global reach.
2. Invesco (NSDQ: IVZ). Global fund manager with expanding asset base.
3. Huntsman (NYSE: HUN). Rapidly improving financial performance has gone unnoticed.

What Are The Best Stocks Under $20 in 2019?

The best stocks under $20 in 2019 may not be names you recognize. That’s because they have not been getting much attention lately from the mainstream media.

Let’s face it, it’s more fun to talk about stocks that are making huge dollar moves every day. When Amazon.com (NSDQ: AMZN) declines by more than $100 in a single day (as it did on four separate days in October, shown below), that’s exciting!

 

Except, of course, if you happen to be an Amazon shareholder. Then all those 5% losses aren’t so much fun.

However, when a $15 dollar stock gains 75 cents in a single day, nobody really cares. Except, of course, for that company’s shareholders who just realized a quick 5% gain.

And that’s our point. It’s the percentage change in value that really matters, not the dollar amount.

The best stocks under $20 in 2019 will be those that can deliver exceptional results on a consistent basis. But to do so, they must possess strong fundamentals.

Therefore, the best stocks under $20 dollars are those that have the following traits:

• Have a long history of paying solid dividends
• Generate strong cash flow
• Are priced at a discount to the overall stock market

Read Also: Five Oversold Stocks to Own in 2019

What Qualifies as One of the Best Stocks Under 20 Dollars in 2019?

The three traits listed above can be quickly measured by my IDEAL Stock Rating System to come up with a short list of candidates as the best stocks under $20 in 2019.

At the end of 2018, only seven stocks under $20 earned an IDEAL score of 8 or higher (on a scale of 0 to 10, higher is better). That’s nearly double the average score of 4.1 for the entire index.

A high IDEAL score is a good place to start, but we also look at how the company is trending. For example, General Electric (NYSE: GE) looks cheap at $8. However, GE’s recent dividend cut disqualifies it from consideration.

What we’re looking for are stocks on the upswing that will attract new shareholders in 2019. That means they will surprise the market with unexpected good news, especially when it comes to exceeding profit estimates.

Below is a list of three companies that we believe will be some of the best stocks under $20 dollars in 2019.

Western Union

What is it?

The Western Union Company began offering its customer the ability to transfer money via telegraph in 1871. At that time, Western Union had a virtual monopoly on the telegraph industry in the United States.

By 1900, the company controlled over one million miles of telegraph lines along with two deep-sea cables connecting the U.S. to overseas markets. Fast forward 118 years to the present and Western Union is still in essentially the same business it was back then, except the technology for executing wire transfers is now primarily conducted online.

Why is it one of the best stocks under 20 dollars in 2019?

At the heart of the Western Union growth story is “FinTech,” or financial technology. FinTech allows a business to scale its revenue at an accelerating pace by leveraging existing hardware infrastructure with software for smartphones and other mobile computing devices as explained in this video:

Western Union has more than 33,000 physical locations in over 200 countries. At this point, the company realizes that it does not need to tie up more capital in additional ATMs and bricks & mortar facilities. Instead, it is investing more of its R&D budget in FinTech to maximize the number of transactions that can be processed through its existing infrastructure.

That should increase the company’s top-line revenue in 2019 while improving its profit margin. At a recent share price of $18, WU is valued at only ten times forward earnings. We believe WU should be priced at an earnings multiple closer to 12, resulting in a 20% gain in its share price in 2019.

Invesco

What is it?

Invesco is one of the world’s largest mutual fund management companies. Its 7,000 employees in 25 countries manage over $900 billion of client assets. That number will jump to more than $1.2 billion when its combination with OppenheimerFunds is completed.

Invesco uses a variety of sophisticated strategies to manage equity (stock) and debt (bond) and alternative (commodities and currencies) funds. That means Invesco offers a fund, and investment style, for just about every type of investor in the world.

Why is it one of the best stocks under 20 dollars in 2019?

Investors are starting to realize that the stock market does not always go up, and momentum stocks are on the way out. For that reason, we believe the type of market-neutral, long/short strategies that many Invesco funds employ will enjoy renewed interest in 2019.

To help attract more of those dollars, Invesco revamped its product mix to reduce costs and focus on its most profitable funds. In addition, Invesco expects that the OppenheimerFunds assets will add about 20% to earnings in 2019.

At a recent share price of $17, Invesco sports a forward annual dividend yield of 7%. That’s sure to get a lot of attention in 2019, especially from yield-hungry investors looking for an alternative to bonds.

Huntsman

What is it?

Huntsman manufactures specialty chemicals used in a wide variety of consumer and industrial products. The company earns revenue through four basic product groups: polyurethanes (55%), performance products (24%), advanced materials (12%), and textile effects (9%).

Okay, that doesn’t sound very sexy, but here’s what is. Through the first nine months of 2018, Huntsman generated $7.1 billion in revenue, easily eclipsing the previous year’s sales of $6.2 billion. At the same time, its adjusted net income improved by better than 60%.

Why is it one of the best stocks under 20 dollars in 2019?

To put it bluntly, Huntsman is cheap. Its forward P/E ratio of less than six times earnings is less than the multiple for the overall stock market. Also, Hunstman’s price/earnings to growth ratio (PEG) of 0.46 is less than half the threshold that legendary mutual fund manager Peter Lynch considered a fair price to pay for a business.

Until recently, Huntsman carried too much debt on its balance sheet. However, in 2017 the company sold off one of its divisions and used that money to pay down debt. Since then, the company’s financial performance has improved markedly but nobody on Wall Street seems to have noticed.

We think that will change in 2019. Apparently, so does the company’s founder and chairman, Peter Huntsman. In December, he revealed that he purchased nearly $300,000 of company stock at an average share price of $18.61. He knows better than anyone else when the price of his stock is about to go up, and now so do you.