Expert reveals 5 shares under $5 to watch

The Motley Fool’s Scott Phillips nominates five companies with share prices under $5 that he thinks have good prospects for long-term success.

Imagine getting CBA shares, now over $100, when they were only $4.90. Or CSL, currently selling for more than $300, for less than a fiver. Those are the sorts of gains that can really make a portfolio and the stuff that financial dreams are made of.

Of course, there’s nothing particularly magical about the per-share price of a company. After all, CBA could do a 20-for-1 share split, and you’d have 20 times as many shares, each trading for $5 again. The same is true in reverse, too. AMP shares are trading for just over $1 each, but the company could do a 1-for-100 ‘share consolidation’, and it’d magically be a $100 stock.

If you’re struggling, imagine a $20 pizza. If you cut it into two slices, that’s $10 a slice. Cut into 20 pieces instead, and they’re $1 each. Same pizza, same value… just different sized slices for different prices.

Now, all of that said, if you’re looking for life-changing returns, they’re probably going to come from companies that are small today but have a big future ahead of them. Here are five companies that have share prices under (an arbitrary) $5, and that I think also have good prospects for long-term success.

Adairs (ASX:ADH)

Closing price on October 29: $3.70

If your experience of Adairs is like mine, you might be imagining a sleepy homewares retailer with only moderate growth prospects. But that veneer hides a much more exciting business – and one whose online businesses grew sales by almost 100% last year. A COVID-enhanced result, to be sure, but it demonstrated that its customers like shopping at Adairs online, that it has good brand recall and strong online marketing. In total, around one-third of the company’s sales are online, and its future is bright. (Disclosure: I own shares in Adairs)

Aussie Broadband (ASX:ABB)

Closing price on October 29: $4.87

The NBN reseller has made huge strides against the 400lb gorillas in its industry by innovating everything from branding, systems and – perhaps most importantly – company culture. Unusually for an internet business, its customers rave about it, and that love is helping Aussie win over customers by the bucketful. I think it can grow for many years, as long as it remains nimble and laser-focused on the customer.

Marley Spoon (ASX:MMM)

Closing price on October 29: $1.02

Marley Spoon has had a rough ride recently, battling growing pains as it builds out its meal-kit delivery business across Australia, the US and Europe. But the long-term potential of the company remains bright, if higher-risk than many, as it takes advantage of changing trends around the world. If the trend continues and Marley Spoon can continue to execute, this could be a long-term winner.

Nearmap (ASX:NEA)

Closing price on October 29: $2.21

Taking and selling aerial photos isn’t new. But when you bring technology to bear in the collection, processing and access, it can be a gamechanger, and that’s just what Nearmap has been doing. Originally only in Australia, it’s expanding into North America, taking its efficient and clever image capture and processing and overlaying cloud software specific to individual industries (think government, solar, real estate and construction). Nearmap is on a growth trajectory which, if successful, could create meaningful value for shareholders.

Tyro Payments (ASX:TYR)

Closing price on October 29: $4.04

If you’ve paid by card at a small retailer recently, there’s an increasing chance you used a Tyro terminal. An area usually dominated by banks, Tyro offers a cheaper alternative for retailers looking to save a few bob every time someone taps to pay at a retail terminal. The banks have the problem of not wanting a competitor, but also not wanting to slash fees to really take Tyro on, meaning there remains plenty of space for the disruptor to keep winning.

Cover image source: taffpixture/Shutterstock.com

About Scott Phillips

Scott Phillips is Chief Investment Officer at The Motley Fool (AFSL 400691) and runs the Motley Fool Share Advisor, Million Dollar Portfolio and Everlasting Income services. Scott holds a Bachelor of Commerce, a Graduate Diploma in Accounting. Follow him on X, Facebook or LinkedIn.