2 Stocks to Buy With Less Than $40

Some think investing in stocks requires substantial start-up capital, but that's false. Even with a modest sum, like $40, investors can acquire shares of companies whose long-term prospects look exciting, and all for the price of a few breakfast items. As long as investors hold on to these companies' shares for a while and add to their positions regularly, strong returns await them.

That said, let's discuss two stocks, each of which is trading for less than $40, that are worth investors' serious consideration: Viking Therapeutics (NASDAQ: VKTX) and Exelixis (NASDAQ: EXEL).

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1. Viking Therapeutics: $31 per share

Viking is still just a clinical-stage drugmaker. It hasn't even started a phase 3 study yet. But don't underestimate this rising star in the biotech industry. It has delivered better mid-stage results than most in the sea of prominent (and not-so-prominent) drugmakers looking to dip their toes in the fast-growing weight loss market. The company's VK2735 produced excellent data in phase 2 clinical trials.

There is still some work to do, but now might be a good opportunity to get in on what can still be considered the ground floor. Viking will soon start late-stage studies for VK2735. The biotech will do the same for another successful mid-stage candidate, VK2809, a potential therapy for metabolic dysfunction-associated steatohepatitis, a liver disease.

It is also developing an oral formulation of VK2735 and a potential medicine for X-linked adrenoleukodystrophy (a rare genetic brain disease) called VK0214.

Among the company's other candidates, the most notable is a weight loss medication that mimics two hormones: Amylin (it controls blood sugar levels and satiety) and calcitonin (a calcium-regulating hormone). Dual receptor agonists are all the rage these days among pharmaceutical giants looking to develop the next big thing in weight loss. Viking is working on its own version. There is no guarantee it will succeed, but the company's willingness to continue innovating should matter to investors.

True, as long as the stock has no commercialized products and is unprofitable, it will remain somewhat risky. But initiating a small position for less than $40 per share might be worth it. Viking Therapeutics could skyrocket in the coming years as it makes solid clinical and regulatory progress.

2. Exelixis: $34 per share

Exelixis specializes in developing cancer medicines, a highly competitive market dominated by some of the largest and most successful drugmakers.

Yet, the little-known company has carved out a small niche for itself thanks to Cabometyx, a medicine that treats forms of liver and kidney cancer, among others. Cabometyx has long been the top-prescribed tyrosine kinase inhibitor (a kind of therapy that specifically targets, attacks, and kills cancer cells) in renal cell carcinoma, the most common form of kidney cancer.

The drug has continued to grind out new indications. And last year, Exelixis settled an important patent infringement case that will keep a generic version of Cabometyx out of the market until 2031. This significant risk had been hovering over the company's head for a while. Once it got rid of it, its mid-term prospects became even stronger.

Meanwhile, Exelixis' financial results remain strong. The company has yet to release its earnings for the fourth quarter and full fiscal year, but it recently gave investors a sneak peek. Management expects revenue of about $2.2 billion for the year, representing year-over-year growth of about 18%.

Cabometyx could earn more indications that will help boost its sales, and Exelixis is developing several other medicines. The company is following the same blueprint it did with its current crown jewel -- and that is to target areas in the oncology market with high unmet needs.

Its zanzalintinib is undergoing a phase 3 study in patients with metastatic colorectal cancer. This form of cancer is highly treatable as long as it is caught early. Once it has metastasized, five-year survival rates drop substantially. There is a significant opportunity here, considering colorectal cancer is the second leading cause of cancer deaths in the world.

The company has several other candidates in its pipeline. Between Cabometyx, which is still driving revenue growth (and should do so until the end of the decade), and the company's pipeline programs, Exelixis looks like a great pick to buy and hold.

Should you invest $1,000 in Viking Therapeutics right now?

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Prosper Junior Bakiny has positions in Exelixis and Viking Therapeutics. The Motley Fool has positions in and recommends Exelixis. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.