If you've got ten bucks, I have some stock ideas for you.
I've been singling out attractive opportunities in low-priced stocks since my original "5 Stocks Under $10" column nine years ago, and I've seen plenty of stocks with pocket change prices generate incredible gains.
There are risks, and they are readily apparent given the recent volatility. There are often good reasons for stocks to be ignored or beaten down. However, a market rally can work wonders for the unloved with positive catalysts in their pockets.
Let's go over my five picks from March 2009 to prove my point.
|Sirius XM Radio||$1.835||$0.198||827%|
*Bare Escentuals was acquired for $18.20 a share last year.
The average gain of 462% in two years is remarkable. Focus Media (Nasdaq: FMCN ) went from being a desperate advertising player that failed in trying to sell off its flagship business to a growing digital marketing force in China.
Ford (NYSE: F ) and its rival automakers have kept rolling, long after the "cash for clunkers" rebates stopped coming. Emphasizing dashboard technology and more fuel efficient vehicles, the car and truck maker is back on the road.
Let's go over this month's picks.
Infinera (Nasdaq: INFN ) -- $8.01
Infinera's digital optical networking systems have always been at the mercy of the telecommunications industry, but these days it may also be a victim to demands for higher fiber capacity that fall outside of its wheelhouse.
Shares of Infinera also took a hit after posting uninspiring fourth-quarter results, as sequential sales slipped to a prolific customer.
The upside here is that Infinera is backed by a cash-rich balance sheet, and analysts see the company's fiscal performance bouncing back next year. Investors can always wait until that materializes, but Infinera is unlikely to still be trading in the single digits when that happens.
GT Solar (Nasdaq: SOLR ) -- $9.69
Let's play a game that I like to call Price This Stock.
I'm thinking of a company that analysts see profitability nearly doubling to $1.18 a share in its fiscal year that ended three weeks ago. Wall Street is targeting net income of $1.41 a share this new fiscal year. The estimates are probably too low, because it has beaten analyst guesstimates by 17% or better every quarter over the past year.
Did I mention that it's also in the sexy but volatile solar industry?
GT Solar isn't the only solar energy play that's trading at a ridiculously low valuation, but it's the one I'm rolling with this month. Sure, there are concerns that debt-saddled European nations and an overheated Chinese economy may cool on sun power, but that pessimism appears to be baked into current prices.
THQ (Nasdaq: THQI ) -- $4.46
The only thing worse than losing market share is commanding a shrinking slice in a shrinking pie.
THQ's video game world has been rocked over the past two years. Folks just aren't buying games and gear the way they used to. Despite the recent hardware wins by the 3DS handheld gaming system and the Kinect motion-based controller, the industry's in a funk. Market tracker NPD Group claims that year-over-year sales took a 4% hit last month, weighed down by a 16% plunge in physical game titles.
This is unwelcome news for game maker THQ, a bit player largely known for its licensed wrestling games and kid-friendly titles.
I wasn't a fan of THQ's poorly received holiday quarter report. The company's got into a bad habit of talking down guidance that it ultimately barely clears. However, I do like that THQ sold 1.2 million uDraw tablets for the Wii during the quarter, opening the door for future game sales for the scribbling accessory.
This is a risky wager, but the stock's gotten a lot cheaper than it was even after its holiday quarter drubbing. THQ is an interesting play as either a turnaround candidate or a buyout target.
Sirius XM Radio (Nasdaq: SIRI ) -- $1.835
Why revisit a monthly pick that's already nearly a 10-bagger since my March 2009 list? Well, the satellite radio provider is in much firmer footing these days. Revenue, earnings, and subscriber counts are improving, and there are also some meaty catalysts waiting in the wings.
Sirius XM 2.0, initiatives to get more folks to pay up for premium streaming, and new content deals seem more likely to move the stock higher than dashboard technology improvements working against it.
Imperial Holdings (NYSE: IFT ) -- $9.77
Buying structured settlements and providing premium financing for individual life insurance policies can be a controversial practice, though Imperial is there for folks who need money right away.
There are two things attracting me to Imperial. For starters, the stock went public at $10.75 two months ago. Today's investors can buy in for less than what underwriters were charging their prized accounts.
I also like the valuation here. Imperial has posted losses over the past couple of years, but the three analysts putting out estimates on the company see it earning $1.80 a share this year and $2.32 a share come 2012. As long as regulators don't crack down on Imperial's niche, the stock's a steal at five times this year's projected net income and four times next year's target.
Five for the road
These five stocks aren't trading in the single digits by accident. If I'm right about the catalysts, though, they may not be trading in the single digits for too much longer.
Finding promising stocks while they're still cutting their baby teeth is at the heart of the Rule Breakers newsletter that I write for. You can check it out for free this month with a 30-day trial subscription. There are a half dozen active stock recommendations in the growth stock research service that are trading for less than $10 at the moment, including Infinera. Check those out, and I'll be back with more on the third Monday of next month.