- Hands-off investors often turn to a buy-and-hold strategy, picking up solid and undervalued stocks and keeping them for extended periods of time.
- Key to the success of this approach is choosing companies with excellent fundamentals.
- Enovix, Innodata, and AT&T offer cases for future growth and remain at or below $20 per share.
Investors looking to minimize their day-to-day involvement in portfolio management—or to reduce their inclination to make impulsive trades—frequently turn to a buy-and-hold strategy. This approach to investing typically involves identifying target securities that are likely to provide solid returns over an extended period of time based on their fundamentals, adding them to a portfolio, and leaving them untouched even as share prices might experience local volatility. Warren Buffett is among the most famous investors who subscribe to this strategy.
An ideal scenario for a buy-and-hold investor may be to select a stock that is both low in price and undervalued by the market, then sit back while shares gradually accumulate value. Targeting stocks under $20 per share with exceptional fundamentals is one way to aim to achieve this.
1. Enovix - Leader in the Lithium Battery Space
Lithium has rapidly become one of the most sought-after metals across the automotive and technology spaces for its importance in rechargeable battery applications. With it, there has been a race among battery developers to advance the technology, allowing for higher energy density, better safety prospects, and longer charges. Enovix Corp (NASDAQ:ENVX) has emerged as a leader in this area, given its advantageous battery design.
Enovix's business advantage is also due to its early presence in the lithium battery development race, which has allowed it to produce batteries for a wide range of applications. This has contributed to surging top-line growth, with $3.8 million in sales for the most recently reported quarter. The company is thoughtfully managing costs by moving its California manufacturing operations to Malaysia, anticipating $35 million in annualized savings as a result.
Investors are optimistic that growth will continue and have assigned Enovix a consensus price target of $21.33, for upside potential of more than 82%.
2. Innodata - Major Growth in AI Data Engineering
Innodata (NASDAQ:INOD) is a data engineering firm utilizing AI to help companies make their operations more efficient and valuable. The company recently reported impressive metrics for its second quarter, including 66% year-over-year improvement to revenue and an improving cash position relative to the end of 2023.
Importantly for an early-stage and small company—Innodata's market capitalization is under $450 million—the firm has also recently increased its credit facility with Wells Fargo (NYSE:WFC) from $10 million to $30 million, with the potential for further expansion up to $50 million.
The potential for AI in the data engineering space is tremendous, with businesses across industries and sectors likely to benefit from these services. Innodata has already capitalized on this by securing an expansion of its agreement with an unnamed major tech customer to include $44 million in new annual contracts. This is another reason why analysts expect INOD shares to skyrocket by more than 78%.
3. AT&T - Streamlining Wireless Operations
AT&T (NYSE:T) is a very different company from the others above in that it is a legacy telecommunications giant rather than a more recent firm focused on new technology. Its shares also trade just above $20 and have had an impressive bull run of almost 45% in the last year.
There may still be room for growth, however, as AT&T recently sold off its 70% stake in television services outfit DirecTV. This is the latest move by the firm to streamline its operations, reduce its focus on media, and return to its core wireless business. The sale of the DirecTV position is expected to provide AT&T with $2 billion in the coming year and a total of almost $8 billion through 2029, a key cash influx to help pay down debt and build out its infrastructure.
Risks of Low-Cost Stocks
Though not always the case, oftentimes low-cost shares represent companies with low market capitalizations as well. These micro- or small-cap stocks may pose heightened risks for investors if they are not well-established, their trading volumes are not robust, or they experience significant volatility. It's important to consider a company's underlying strengths and long-term trajectory when looking for a buy-and-hold target. Still, a well-placed investment in this space can yield significant returns for patient investors.