Reader Mailbag: “Can you recommend any good stocks less than $15 per share?”

Dear DTA,

I’m retired, but I still need to work to survive. Can you recommend any good stocks for less than $15 per share?

-Mitchell D.

Hey, Mitchell. Thanks so much for writing in.

The first thing I’d ask is, why are you looking at stocks priced at less than $15 per share?

The price of a stock doesn’t in and of itself indicate value.

Said another way, a $15 stock can be a lot more expensive (based on value) than a stock priced at $100 per share.

Conversely, a stock priced at $1,000 can be a much better investment than a $10 stock.

However, the same could also be true in reverse.

The bottom line is that a stock’s price is simply the market cap of a business divided by the number of shares outstanding.

If a $1 billion company has 100 million shares outstanding, each share would cost $10.

But if that company decided to reverse split its shares by a ratio of 1:4, the number of shares outstanding would be reduced down to 25 million. And that would mean, all else equal, each share would then be priced at $40.

Nothing changed here. It’s still a $1 billion company (which came about through the market valuing the business at $1 billion). The company is still worth $1 billion.

However, the price of each share, in this example, jumped from $10 to $40.

If it’s mostly price you’re focused on, I’m afraid you’re going to run into trouble when it comes time to invest your money.

That’s because looking at the share price of a stock alone is not a very good way to go about investing.

One should instead be concentrating on business fundamentals, competitive advantages, and valuation.

I tend to recommend dividend growth investing as the investment strategy for most investors because it’s so robust and tangible.

And personal success has led to some bias, as I’ve benefited tremendously by investing in high-quality dividend growth stocks.

By living below my means and regularly investing my excess capital into dividend growth stocks like those that can be found on David Fish’s Dividend Champions, Contenders, and Challengers list, I’ve been able to build a six-figure stock portfolio that generates enough passive income to essentially render me financially independent in my 30s.

I certainly have shares in some businesses where their stock is priced at less than $15 per share.

However, I also have shares in some businesses where their stock is priced at well over $100 per share.

And guess what kind of impact that kind of pricing difference has had on my success?

None at all, because it doesn’t mater.

But if I were to continuously pay $15 for stock only worth $5, you can bet your bottom dollar I’d be in the poorhouse pretty quickly.

I’d definitely recommend reading through Dave Van Knapp’s lessons on dividend growth investing, which is a great collection of articles that discuss dividend growth investing from a high level, why the strategy works, and how to value dividend growth stocks.

That last part – valuation – is especially critical, as I think you’ll realize in time that it’s value (not price) that really matters when it comes time to buy stock.

Value gives context to price. Without knowing value, price means almost nothing.

It’d be like me telling you I have an object in each hand. In my right hand, the object will cost you $10. In my left hand, the object will cost you $100.

Which is the better deal?

You couldn’t possibly know without knowing the object and the value of said object.

While I never make investment recommendations based solely on the price of a stock, I do highlight an undervalued dividend growth stock every Sunday.

These are what I believe to be fairly compelling long-term investment ideas that can help investors increase their passive income and wealth over the long haul.

Some of these stocks may occasionally end up being down in the $15/share range.

But that would only be coincidence, as it’s value (not price) that I’m focusing on for the pieces.

I believe that if you take the time to follow up on some of these resources, you’ll find that focusing on stocks priced at $15 or below likely won’t be helpful for your long-term financial goals.

The key, Mitchell, will be taking the time to follow up on some of this great content and using that information to your advantage.

And getting started as soon as possible will almost surely benefit you.

I wish you luck and success.

Jason Fieber

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Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.