Buying stocks simply because they trade for less than $10 remains one of the "lowest" -- but most tempting -- forms of investing out there.
After all, nothing trounces Mr. Market quite like a $2 stock that moves into double digits over just a short period of time. Unfortunately, thanks to the numerous risks that low-priced stocks carry, these mega-multi-bagger returns don't occur as frequently as one would hope.
Price means nothing
Here at the Fool, we do our darnedest to diagnose and prevent the critical stock affliction known as "cheap-osis" -- the belief that a stock's per-share price, on its own, tells you whether a stock is cheap or expensive; attractive or unattractive; a winner or a loser.
Through the use of splits and reverse splits, management can make the price of its shares literally anything they want. That's the reason a $100 stock like Lockheed Martin (NYSE: LMT ) might very well be a great opportunity, while most penny stocks are too wild to buy at any price.
Alleviate symptoms with CAPS
Sadly, though, some incidents of cheap-osis will never be cured completely. So, with the help of our Motley Fool CAPS intelligence database, we'll screen for stocks trading at less than $10 which also have enough investment merit to earn a four or five-star CAPS rating (out of 5).
Without further ado:
|
Company
|
Price
|
Market Cap
|
Industry
|
CAPS Rating (out of 5)
|
|
Infinera (Nasdaq: INFN )
|
$8.67
|
$804 million
|
Communication equipment
|
*****
|
|
Parker Drilling
|
$8.53
|
$963 million
|
Oil and gas drilling
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*****
|
|
Mueller Water Products
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$8.36
|
$962 million
|
Industrial equipment
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*****
|
|
USEC
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$5.10
|
$567 million
|
Industry metals and minerals
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*****
|
|
Taseko Mines (AMEX: TGB )
|
$4.14
|
$597 million
|
Copper
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*****
|
|
Northgate Minerals (AMEX: NXG )
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$2.84
|
$725 million
|
Gold
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*****
|
|
IMAX (Nasdaq: IMAX )
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$7.76
|
$336 million
|
Movies and entertainment
|
****
|
As always, don't view these stocks as formal recommendations, but rather as ideas you may want to research further. With that said, IMAX might be worth some of your own Foolish due diligence.
Darkest nights ahead
Fools regularly shy away from low-priced stocks for their notoriously frightening financials. IMAX, on the other hand, is a low-priced, high-debt, money-losing outfit that our community is actually quite fond of. In addition to being a Motley Fool Rule Breakers pick, the provider of super-sized movie screen systems has maintained a four-star rating for more than six months straight.
Despite losing $10.3 million in the latest quarter and having been in the red since 2005, some sharp Fools are choosing to look at the company's big picture. The IMAX-ed version of Time Warner's (NYSE: TWX ) The Dark Knight has already generated some buzz in CAPS-land, and with the company steadily signing major theater deals with the likes of AMC and Regal Entertainment, the blockbusters are likely to keep rolling. Of course, IMAX's well-established, digital-boosting relationship with Apple (Nasdaq: AAPL ) has our community just as bullish about its future.
As CAPS member budgallant put it in May, "Deals with Apple, going digital, and moving more and more into the mainstream with real movies ... Things do look good for the long-term."
IMAX's debt-load should certainly cause some pause. But with sky-high gas prices continuing to squeeze wallets, IMAX might be a nice low-priced way to play one of the few affordable entertainment escapes consumers have left.
Just last week, CAPS member JustinSane1 shared this review:
I just saw The Dark Knight in IMAX last night and was blown away. Movies like this, the next Harry Potter, and the Watchmen will undoubtedly increase the amount of movie goers heading to IMAX theatres.
An earlier pitch from alexvb in March extends the IMAX argument:
It has a stellar brand name, superior technology, and is positioned to profit from current trends... It has not had a profitable year since 2005. They probably won't start to make money until the end of this year. Movie goers will drive to a far away cinema and pay a substantial premium to have an "IMAX experience." ... If you are actually interested in investing, watch "Dark Night" at an IMAX theater when it comes out.
The Foolish conclusion
Despite our Foolish attempts to educate the investment public about cheap-osis, the allure of low-priced stocks is simply undeniable. The good news, though, is that there are indeed single-digit wonders out there that can also make great investments.
So, if you really have a bad case of the 'osis and would like to find more good low-priced stocks for yourself, then head over to our Motley Fool CAPS community. It's 100% free -- the lowest price you'll find anywhere.
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