5 Stocks on Wall Street's New Dollar Menu

A buck can go a long way at a fast-food joint these days. Whether you're craving a double cheeseburger or a side salad, the burger chains are priced for penny-pinching times.

The same goes for Wall Street.

There are plenty of household names trading for roughly a dollar a share. They're not just reporting four quarters, they're worth it.

Buck the trend
This isn't necessarily a buy list. Some of these marked-down companies may be on their way to zero. Whether it's a lack of profitability or mounting debt, some may have little choice but to file for bankruptcy reorganization, wiping out their common shareholders along the way.

However, if just one manages to wiggle its way out of the penny-stock gutter and back into the single digits, it will be more than enough to offset the losses elsewhere.

Vonage (NYSE: VG  ) -- $1.14
Remember when Vonage was going to kill the telcos? Its broadband-tethered digital phone service was priced -- and marketed -- aggressively. Unfortunately, the stock overstayed its welcome on the hype bandwagon. By the time the company went public two years ago, conventional carriers had similar products available. True spendthrifts resorted to Skype, while 911 hiccups tarnished the niche's reputation.

By the time Vonage went public in May of 2006 at $17, the glory was over. Two days later, the stock was down to $13, and many Vonage customers who were given access to the IPO were refusing to pay for their stock.

Losses have narrowed and churn has improved in the latest quarter, but subscriber growth has hit the wall with the current 2.6 million accounts. As long as the subscriber count doesn't start heading in reverse, Vonage has a chance. Unfortunately, it also has pesky debt to tackle.

Chances of going to zero: 60%. Vonage is hoping that marketing sizzle will help differentiate it from the competition, but this is a commoditized market. The company added just 2,000 net new subs this past quarter, and it's unlikely to recover once it pulls into reverse.

Sirius XM Radio (Nasdaq: SIRI  ) -- $0.89
With 18.6 million subscribers, there's a good chance that you -- and/or someone you know -- subscribes to satellite radio. Now that Sirius and XM have completed their merger, the stand-alone company is positioned to cash in on the synergies.

The rub? Well, Sirius XM is still far away from profitability. It also has three huge debt-refinancing speed bumps to get past next year. Thankfully, the subscriber count keeps growing. Even with a moribund auto market, more new cars are coming with factory-installed satellite radio receivers.

Chances of going to zero: 30%. If credit markets continue to tighten, Sirius XM may find it advantageous to restructure its debt in bankruptcy court.

Rite Aid (NYSE: RAD  ) -- $0.98
With 5,000 drugstores around the country, you have probably stepped inside a Rite Aid before. Unfortunately, Rite Aid isn't as healthy as some of its customers after they have their prescriptions filled.

The company reports earnings on Thursday, and there's little hope for a profit. The company has posted a loss in each of the four previous quarters. Drugstores are supposed to be recession-resistant, but Rite Aid's debt load keeps growing.

Chances of going to zero: 40%. Investors holding out for a buyout need to recognize that the company's hefty debt balance will make an acquisition costly for a potential buyer. Rite Aid will have to dig itself out of its own hole, and that won't be easy in a climate with better-financed drugstore rivals and discount department stores ramping up their marked-down prescriptions.

Citadel Broadcasting (NYSE: CDL  ) -- $0.78
Things seemed to be going Citadel's way when the terrestrial radio operator agreed to combine with Disney's (NYSE: DIS  ) ABC radio operations last year. It's been nothing but static ever since.

If you think Sirius XM and overseas satellite radio peer Worldspace (Nasdaq: WRSP  ) have a tough road ahead of them to get off the dollar menu, at least they're growing. Terrestrial radio is struggling against several digital outlets competing for eardrums.

Chances of going to zero: 20%. Terrestrial radio may be a dying breed, but Citadel isn't going down without a fight. It is still generating free cash flow and has been paying down its debt. These are welcome signs that will find the company digging itself out of this gutter if a hungry private equity firm doesn't snap it up first.

Six Flags (NYSE: SIX  ) -- $0.92
The regional amusement-park operator is on the cusp of a breakthrough. During last month's quarterly conference call, CEO Mark Shapiro noted that the company is on track to deliver its first quarter of positive free cash flow. Attendance has actually picked up during the current quarter, as of the company's mid-quarter update.

That's great, but even after selling a few of its smaller parks, the company's debt is clocking in at a stingy $2.3 billion. Turning the cash flow corner is one thing, but appeasing the creditors is another.

Chances of going to zero: 40%. This is the third season under Six Flags' current management team, and delivering favorable results is critical. It would help sway creditors into giving the company a break. As a consumer-facing company, filing for bankruptcy reorganization could be fatal. Unsophisticated investors and lay consumers may interpret it as a sign that the company is going under, and that's not going to make turnstiles click any faster. The company needs to pull itself out of this on its own, but there may come a time when creditors with carving knives have had enough.

Here are some other ways to chase a buck:

Walt Disney is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz is such a big satellite-radio fan that he subscribes to both XM and Sirius. He does own shares in both Disney and Six Flags. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (29)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 23, 2008, at 5:05 PM, SIRIUSLYLONG wrote:

    Sirius XM has Content, Content and more content! Read the financials they have over 60% in cash to pay the first traunch of $300 million and lets not forget that a rights offering at these prices would take the debt out completly! They are adding new subscribers and the alacarte pricing should do well for the Xmas season. They are cheap as a takeover cadidate for Comcast as well as others that are looking at thier growing subscrition base. Lets face it, at under a dollar the downside is small compared to the potential of $5.00 - $40 over the next few years. saying that their is a 30% chance of them going bankrupt is Motley foolish of this writer. Where can you find an option today that will still be good through next year and give you this much upside potential. Wait when the large mutual funds realize that thiscould change the performance of their drifting media mutual funds and start buying at these levels, How about when David Frear, Chief Financial Officer and EVP, presents at the 2008 Deutsche Bank Leveraged Finance Conference in Scottsdale, AZ on Thursday, September 25, 2008 to the institutional community. What happens when volume explodes to the upside at over 100 million shares a day? What happens when the last of the shorts have to cover in a hurry. The stock is in an accumulation stage as the market has its attension pointed elsewhere. ACCUMULATE AT THESE LEVELS. It won't be a long time that we will be back over $1.50 - $2.50

  • Report this Comment On September 23, 2008, at 8:23 PM, Fredlee009 wrote:

    This stock is almost out of accumulation stage. I would look to buy at these levels. Manipulation of this stock is atrocious and unacceptable. Whoever is putting up a wall of shares from an private trading window is to blame. They are trying to get you to sell, so they can buy. They will refinance(why would they merge if they couldnt) and I think they know already the deal. Mel worked with the banks to drop the price to screw XM stockholders, and to make them pay for the merger. Dropped more so his buddies could get in. Did you hear what he said"Everyone who wants to buy this stock I know can") From Jim Cramer show. His hint. He tanked the conference call on purpose, and released ridiculously low guidance. When a stock is manipulated one direction, you can pretty much guarantee is going the other way real soon.

  • Report this Comment On September 24, 2008, at 12:34 PM, phojes10 wrote:

    Another positive going The Citadel's way - it will carry the NBA's new Oklahoma City Thunder games this season, which should add some good advertising revenues. I was surprised to not see any news on this on the stock/finance sites. Also the Thunder sold out their season tickets in 5 days, so they should gain a nice radio/TV audience. This stock trades in a nice channel, from .75 to 1.05. I don't know about the long-term investment, but short-term this one can make you some money if you track it closely.

  • Report this Comment On November 21, 2008, at 9:06 AM, doctordave77 wrote:

    Sorry to be a party pooper, but look at the results of the "Recommendations?";

    From article date 9/23/08 to 11/21/08 (this a.m.)

    Vonage - was $1.18, now 0.88.

    Sirius - was 0.89, now 0.14 (yikes!).

    Rite Aid - was 0.98, now 0.30.

    Citadel - was 0.78, now 0.21.

    Six Flags - 0.92, now 0.19.

    I only state the above because I am interested in buying stocks such as these, low price with recognizable name and possible turnaround. And who could have predicted on 9/23 where we now stand? No-one I suspect. But all the above have performances amongst the worst in the two month period.

    It might be good to skip articles like these, and focus on companies that have no debt. Believe me, there any plenty of low priced stocks where the LT debt is zero, plus plenty of cash on hand, and the company is profitable and expanding sales y-o-y and sequentially.

    Smart Pros (SPRO) - 3.23, down a few pennies.

    Landec (LNDC) - 5.81, was 9.24.

    Double-Take Software (DBTK) - 6.22, was 11.09.

    Ceragon (CRNT) - 4.78, was 8.09.

    China Fire & Security (CFSG) - 5.75, was 10.95.

    Brazil Fast Food (BOBS) - 3.80, was 5.40.

    Now I admit that these aren't penny stocks, a bit above that level. However, that's my point. Better to drop imaginary thoughts about on-the-brink companies that sell for pennies, and focus on relatively safe investments that at the same time offer potentially equal bang for the buck in terms of upward advancement.

    David (long SPRO/LNDC/DBTK/CRNT/CFSG/BOBS).

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