The best ASX shares to buy for under $5

Let’s say you have $1,000 to invest in ASX shares. If you were to buy S&P/ASX 200 Index (ASX: XJO) biotech giant CSL Limited (ASX: CSL), your $1,000 would buy you the grand total of precisely three shares, along with around $120 in change.

That’s because CSL shares currently trade a little shy of $300 a pop — the highest individual share price of any company on the ASX.

If the thought of being the proud owner of just three shares doesn’t exactly rock your world, perhaps you’d prefer to invest in some ‘cheaper’ options. Obviously, a smaller share price doesn’t necessarily mean ‘cheap’, since a company’s overall valuation is based on market cap. But companies trading at the lower end of the individual-share-price spectrum can certainly be more accessible (and indeed appealing) for many investors.

Furthermore, there are lots of high-quality companies trading on the ASX with share prices going for under a fiver. With that in mind, we asked our Foolish contributors to pop their thrifty thinking caps on and let us know which ASX shares they reckon are the best buys under $5 right now.

Here is what the team came up with:

8 best ASX shares under five bucks (smallest to largest)

  • Volpara Health Technologies Ltd (ASX: VHT), $166.36 million
  • Adairs Ltd (ASX: ADH), $385.46 million
  • Imdex Limited (ASX: IMD), $875.67 million
  • Core Lithium Ltd (ASX: CXO), $2.57 billion
  • HomeCo Daily Needs REIT (ASX: HDN), $2.64 billion
  • Harvey Norman Holdings Limited (ASX: HVN), $5.12 billion
  • South32 Ltd (ASX: S32), $17.94 billion
  • Telstra Group Ltd (ASX: TLS), $45.52 billion

(Market capitalisations as of 18 November 2022)

Why our Foolish writers love these ASX $5 finds

Volpara Health Technologies Ltd

What it does: Volpara “makes software to save families from cancer”. Healthcare providers use Volpara’s product to better understand a patient’s cancer risk and guide recommendations on additional imaging, genetic testing and other interventions. The software can help radiologists perform their duties faster and more effectively.

By Tristan Harrison: Volpara continues to grow at an impressive pace. In the first quarter of FY23, cash receipts were up 23% to NZ$8.8 million. The healthcare company’s annual recurring revenue (ARR) also continues to rise and is now above US$19 million.

Client retention rate remains high, and Volpara is hoping to grow its average revenue per user (ARPU) by selling more software modules to customers.

The gross profit margin is currently around 90% (which is high), so any extra revenue is highly beneficial to the bottom line. Volpara has the opportunity to reinvest extra gross profit into driving more growth by spending on further product development and marketing. The company is now focused on profitable growth.

Motley Fool contributor Tristan Harrison does not own shares in Volpara Health Technologies Ltd.

Adairs Ltd

What it does: Adairs is home furniture and decor retailer. It has an established network of more than 170 stores across Australia and New Zealand as well as an established and growing online channel.

By Matthew Farley: After plunging by around 44% year to date, I believe Adairs shares are now selling at an attractive discount. And at $2.25 as of Friday’s close, the Adairs share price is also sitting substantially below its 52-week median price of $2.88 for its 52-week range, which makes it even more attractive to me right now.

One thing I like about the company is its revenue growth over the past couple of years. Adairs’ group sales have grown from $388.9 million in FY2020 to $564.5 million in FY2022. The company expects sales revenue to grow further this fiscal year to between $625 million and $665 million.

Due to the market sell-off over the past year, Motley Fool’s chief investment officer Scott Phillps recently highlighted the fact that some ASX retail shares are now trading at low valuation ratios. With a current price-to-earnings (P/E) ratio standing at just 8.7, arguably, Adairs is one of them.

Motley Fool contributor Matthew Farley does not own shares in Adairs Ltd.

Imdex Limited

What it does: Founded 42 years ago, Imdex has grown into a truly global tech company with sales in more than 100 countries. The business provides software solutions to the mining industry for optimising drilling and providing ore insights and actionable analytics.

By Mitchell Lawler: Imdex shares were perched at $2.20 apiece at the close of trade on Friday, amounting to a market capitalisation of around $875 million. The profitable tech company is a minnow relative to the broader Australian share market.

However, I believe the financial history of Imdex should speak volumes. Since the end of 2015, the company has evolved from a barely profitable biz raking in $145 million in revenue, to a profit printer with $341.8 million in revenue in FY22.

Despite its historical success, Imdex is still tinkering with new technology. Recently, Fortescue Metals Group Limited (ASX: FMG) entered a joint venture to implement the first commercial use of Imdex’s Blast Dog tech.

Motley Fool contributor Mitchell Lawler does not own shares in Imdex Limited or Fortescue Metals Group Limited.

Core Lithium Ltd

What it does: Core Lithium is the Australian lithium developer behind the Finniss Project in the Northern Territory. Management claims it to be the most capital-efficient lithium project with arguably the best logistics chain to markets of any Australian lithium project.

By James Mickleboro: Core Lithium shares closed of Friday at $1.40 apiece, which is meaningfully lower than the 52-week high of $1.88 it reached just a few days ago. This weakness has been driven by concerns that the Finniss Project could run behind schedule and fears that lithium demand is softening in China.

However, the online lithium auction results from rival Pilbara Minerals Ltd (ASX: PLS) this week appear to demonstrate that demand is as strong as ever. In light of this and the expectation that lithium prices will remain high for some time, I think this is a buying opportunity for investors. Especially given that Core Lithium shares are trading at a reasonably modest 8x FY2024 earnings based on Macquarie’s forecasts.

Motley Fool contributor James Mickleboro does not own shares in Core Lithium Ltd or Pilbara Minerals Ltd.

HomeCo Daily Needs REIT

What it does: HomeCo Daily Needs REIT is an Aussie real estate investment trust (REIT) focused on convenience-based assets. It boasts 53 properties, $4.6 billion of assets under management, and a 99% occupancy rate.

By Brooke Cooper: The HomeCo Daily Needs REIT has had a good run lately. Its funds from operations lifted 30% year on year in the 2022 financial year, while its net tangible assets rose 12%.

The trust has also announced more than $75 million worth of new development projects to be commenced this financial year.

Despite such tailwinds, the ASX 200-listed REIT’s share price has tumbled 20% year to date to now trade at $1.27. Such a fall might have presented a buying opportunity, if Goldman Sachs is to be believed. The broker has a buy rating and a $1.57 price target on the share.

Motley Fool contributor Brooke Cooper does not own shares in HomeCo Daily Needs REIT.

Harvey Norman Holdings Limited

What it does: Harvey Norman Holdings Limited is the franchisor of Harvey Norman, a leading Australia-based retailer that sells home furniture and household goods.

By Bronwyn Allen: Personally, I like investing in the permanent cultural tailwind of Australia’s property mania. We love upgrading our homes when our finances allow. We’re very house-proud and increasingly partial to luxury furnishings, interior design, and the latest electronics.

We love watching The Block and spend millions on home renos annually. These are long-term trends. A strong, short-term trend also underway is that thousands of us are relocating from the expensive capital cities to cheaper regional areas since COVID ushered in the era of permanently working from home.

And when people change homes, they buy new stuff. I believe all of this bodes well for the iconic furniture and household goods retailer, Harvey Norman.

For the hard numbers analysis, let’s look to broker Goldman Sachs. It’s positive on the company with a price target of $4.80 and very healthy forecast dividend yields of 9% in FY23 and a bit below 8% in FY24.

Motley Fool contributor Bronwyn Allen owns shares in Harvey Norman Holdings Limited.

South32 Ltd

What it does: South32 is an ASX 200-listed miner with a focus on uncovering and digging up aluminium, manganese, silver, lead, zinc, and metallurgical coal across three continents. It has a market cap of just under $20 billion.

By Bernd Struben: With its focus on metals critical to a low-carbon future, I believe the outlook for South32 is promising. And I think the price for its met coal (used for steel making) is undervalued today compared to the rocketing price of thermal coal (used to generate electricity).

Katana Asset Management’s Romano Sala Tenna says the miner “has tier-one assets in tier-two commodities”.

South32 shares do run the risk of “some downgrades in the coming months” with cooling commodity prices, he said. However, “They’ve been one of the best companies in terms of capital management.”

Down 2.5% year-to-date, the South32 share price has still outperformed the benchmark in 2022. At current prices, the stock pays a 9.4% trailing dividend yield, fully franked.

Motley Fool contributor Bernd Struben does not own shares in South 32 Ltd.

Telstra Group Ltd

What it does: Telstra is the leading provider of telecommunications, mobile and internet services in Australia

By Sebastian Bowen: Despite being a relatively large ASX 200 company, Telstra asks well under $5 per share. The telco has been going flat out with its restructuring and cost-cutting programs in recent years. After the success of its T22 plan, Telstra is now undertaking its T25 strategy and has just completed its corporate restructuring.

I believe this has the potential to rewrite the valuation Telstra commands. We’ve already seen Telstra secure some generous valuations for some of its underlying assets, such as its mobile towers. I feel there is plenty of potential for the market to place a premium valuation on some of the telco’s other assets too.

As such, I think this is a great company to hold onto going forward, with a nice dividend to keep you company as well.

Motley Fool contributor Sebastian Bowen owns shares in Telstra Group Ltd.

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