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Five great stocks trading under $20

Before we really start to jump in to our discussion on five great stocks that you can buy for less than $20 per share, it is important to point out that you simply can not judge the value of a stock simply by looking at its share price.

It is tempting to look at a stock that trades at $15, and reach the conclusion that the stock is less valuable than another stock that is trading in excess of $100 per share. It may very well be true, but you can not reach that decision simply by looking at a stock’s trading price.

You have to take into consideration where the stocks trade in relation to their earnings power, and just as importantly in relation to where analysts see earnings rising, or falling, in the not-too-distant future.

It is not all that uncommon to find a stock that trades at a lower price is actually more expensive than a stock that trades at much higher share price. It all comes down to valuation, and that is where you have to really make your opinion on a stock and its current value to your overall portfolio.

Another reason why you sh$ould not pay too much attention to a stock’s price, is that you are rarely buying just a fixed number of shares in a security. You go into a trade with X amount of dollars to invest, and you buy however many shares you are able to purchase with that money. If you have $10,000 to invest, you can either purchase 100 shares of a $100 stock, or 1,000 shares of a $10 stock. Either way you are left with a $10,000 investment in the security in question.

Where stock price does come into play, is if your intention is to set up covered call trades on the stocks you like. In this situation, you typically (but not always) have to purchase 100 shares in the underlying security in order to sell a call against the position. In this case, the lower the stock price, the easier it is to enter into the trade.

It really all comes down to your investment goals and strategies, but if you are looking for stocks you can buy that trade with a low share price, here are five stocks you can pick up today for under $20/share.

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Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.