Famed investor Warren Buffett has a lot of popular quotes for average investors to make money in the stock market. One of the most prominent is to invest in what you know. In many cases, the general approach has justified the Oracle of Omaha’s investment thesis into companies like Coca-Cola and McDonald’s. But does this same idea apply to penny stocks?
Whether it’s worth it for you to buy penny stocks comes secondary to if you can find household names trading for pennies. Believe it or not, the sell-off in the stock market this year brought plenty of company shares back below the $5 level. Is it time to buy on this dip, or will new lows continue? Let’s look at some of the household names trading for pennies on the dollar right now.
Penny Stocks To Buy For Under $5
- Party City Holdco Inc. (NYSE: PRTY)
- ContextLogic Inc. (NASDAQ: WISH)
- SmileDirectClub Inc. (NASDAQ: SDC)
- Clear Channel Outdoor Holdings Inc. (NYSE: CCO)
- Express Inc. (NYSE: EXPR)
Party City Holdco Inc. (NYSE: PRTY)
Anyone with children, those who celebrate significant holidays, or even people who like to buy costumes for whatever reason have probably heard about Party City. The company was founded in the 1980s and has been one of the cornerstones of Americana, especially around Halloween.
But there haven’t been many celebrations in the stock market this year. PRTY stock is back in penny stock territory thanks to the latest stock market sell-off. It hasn’t traded this low since Q4 of 2020. Reopening last year was a big boon to the company as shoppers came back to physical retail. This was great during the first half of 2021, as optimism helped drive retail stocks. Missed earnings and the resurgence of new virus strains put pressure on the sector. Fast-forward to this month, and PRTY stock has traded below $4.85 as the market pulls back.
What is there to watch with Party City in the immediate future? Earnings will be next on the list, and preliminary Q4 revenues have been released. The company affirmed its guidance in a range of $685 million to $700 million and an adjusted EBITDA in a range of $100 million to $110 million. Party City also expects its brand comp sales percentage to jump in the high teens versus the same quarter in the prior year.
ContextLogic Inc. (NASDAQ: WISH)
You may not know “ContextLogic” as a household name, but if you surf the web, you’ve likely come across an advertisement for its retail platform, Wish. Speculation ran wild last year as some saw the Wish platform as a viable competitor to some of the largest eCommerce giants in the industry.
Concern over China-based stocks, in addition to some uncertainty surrounding the core growth directive, brought doubt. As a result, WISH stock has plummeted from highs of $32.85 shortly after the official IPO to lows this week of $2.41. Companies like Google have also had issues with the international eCommerce company. Last quarter, Google pulled the plug on Wish due to product safety issues. However, as social sentiment remains high, WISH stock continues as a top meme name among retail traders.
SmileDirectClub Inc. (NASDAQ: SDC)
The teledentistry company, SmileDirectClub has followed a similar trend to ContextLogic. Following a brief gleam of bullishness from its IPO, shares have failed to trade higher. In fact, this week, SDC stock reached fresh record lows. Despite its market performance, things like invisible braces remain popular. With the addition of things like teeth whitening coming into the mix, SmileDirect seems to offer a solution for “new year, new me” shoppers.
One of the most significant contributing factors to the popular company has been sales performance. SmileDirectClub has failed to meet expectations quarter over quarter. Last quarter the company reported much lower expectations for the end of the year than estimates.
“We are disappointed with our third-quarter results driven by the macroeconomic headwinds that are influencing the spending of our core demographic…While we could not have anticipated the rapidly evolving nature of this impact on our consumer, we have responded quickly to focus our marketing on helping support them during this time, while we also move upstream with higher income demographics through the Challenger Campaign and investments in our Dental Partner Network.”
With another round of earnings on the way, this household name is likely one that will be watched closely for any sign of a turnaround story in 2022.
Clear Channel Outdoor Holdings Inc. (NYSE: CCO)
If you drive on most major highways, you’re probably familiar with Clear Channel Outdoor in some form. The company’s model focuses on outdoor advertising using billboards, bus stops, and wallscapes.
Unlike the others on this list, Clear Channel has made a solid move since the depths of the 2020 pandemic. CCO stock rose from under $0.50 in 2020 to as high as $3.70 last year. The resurgence of retail and other public gatherings breathed life back in the advertising industry. Clear Channel was a clear beneficiary.
CCO stock has weathered the storm better than many other companies despite the recent market sell-off. With a new CEO in place, Scott Wells wants to “accelerate momentum and new growth” Clear Channel aims to pursue. Furthermore, earnings are coming on February 24th, which should give some deeper insight into just how well Clear Channel Outdoor could turn things around in 2021 vs. 2020.
Express Inc. (NYSE: EXPR)
Clothing and accessory retailer Express Inc. is also on this list of penny stocks. It had a brief stint as one of the 2021 meme stocks to watch. Then the market reset, and investors focused specifically on the growth and recovery plans of the company as economies reopened.
Express ultimately saw a robust first half of the year last year. But since then, EXPR stock’s performance has been less than stellar. Like Party City and others on this list, Express has fallen short of expectations into the new year. For instance, third-quarter results showed the company missed sales estimates even after beating on EPS by a wide margin. Same-store sales also surged during the quarter. Tim Baxter, Chief Executive Officer, explained in a December update, “Our results provide tangible evidence that the versatility, quality, and value of our product is resonating with consumers. I am confident that we will continue to deliver positive comparable sales and gross margin expansion versus 2019 in the fourth quarter.”
Indeed, the next round of Q4 and full-year financials will give the market a better idea of what to expect in early 2022.
Penny Stocks & Household Names
Investing in what you know isn’t the end-all for making money in the stock market. It’s also essential to understand specific trends that are in place that could impact certain stocks. In the case of these household penny stocks, there are many other instances to factor into an investment thesis. The biggest question is will they be able to recover in 2022 or not? With earnings season in full swing, guidance could be something to pay close attention to if any of these are on your list right now.