The best cheap stocks belong to companies that are fundamentally strong but experiencing a brief, temporary setback, says Steven Conners, founder and president of Conners Wealth Management in Scottsdale, Arizona. What you want to avoid are cheap stocks that don’t have a “catalyst to improve their valuation.”
The bottom line on low-priced stocks – like the five highlighted here – is that investors can see exceptional total returns from relatively modest price increases, but they fall into a riskier category that isn’t suitable for conservative investors. With the right approach, however, these cheap stocks can be a rewarding part of a diversified portfolio.
This post originally appeared at U.S. News & World Report.