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
Source: Yahoo! Finance. *Bare Escentuals was acquired for $18.20 a share last year.
The average gain of 496% in two years is remarkable. Shares of Sirius XM Radio (Nasdaq: SIRI ) have popped 11-fold, as the once cash-strapped and profitless satellite radio operator is thriving. These days the company is hinting at a potentially lucrative rate increase.
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.
Elan (NYSE: ELN ) -- $8.46
Shares of the Irish drugmaker have soared 40% since making the cut in this monthly column seven months ago. Elan returned to profitability in its latest quarter, far sooner than analysts were expecting.
There are risks here. Tysabri is Elan's popular treatment for multiple sclerosis and Crohn's disease, but rival drugs are inching closer. Elan isn't asleep at the wheel, though. It also has a pipeline of new treatments that bears watching.
LDK Solar (NYSE: LDK ) -- $9.60
Welcome back to the single digits, LDK.
The maker of wafers that go into solar energy cells and modules closed below $10 on Friday for the first time since October.
It's not just LDK feeling the pain. Niche bellwethers are getting knocked around these days as pricing pressures and waning demand in cash-strapped countries threaten to cool off the once red-hot sector.
Calling a bottom on LDK in this iffy climate isn't for the weak, but it's hard to resist the value. Analysts see LDK earning $2.60 a share this year and $2.54 a share come 2012. Flattish bottom-line growth may not sound very savory, but LDK at less than four times this year's projected profitability already has too much of the pessimism baked into its share price.
Strategic Hotels & Resorts (NYSE: BEE ) -- $6.62
As a real estate investment trust targeting high-end hotels, Strategic's 17 properties are bouncing back stronger than the rest of the industry.
Same-store revenue per available room -- or RevPAR -- in the U.S. soared 16.6% in its latest quarter, fueled by higher occupancy levels with overnight guests paying higher rates.
Strategic's strategy of retreating from Europe and emphasizing luxury hotels closer to home is coming together nicely. It recently closed on the purchase of the Four Seasons Jackson Hole and Four Seasons Silicon Valley resorts.
Obviously, Strategic's pricey properties will take a hit if the economic recovery is dealt a setback. However, those who believe that good times are ahead in terms of both leisure and corporate travel can make a strategic bet through Strategic.
Jamba (Nasdaq: JMBA ) -- $2.39
The company behind the Jamba Juice smoothie chain reports earnings next week.
I'm not trying to get you in ahead of the report. It's going to be crummy one. This is a seasonal business, with smoothie sales peaking during the upcoming summer season. Jamba has also come up woefully short on the earnings front relative to analyst guesstimates over the past year.
However, Jamba has been striking some cool licensing deals lately. Jamba's strong brand is gaining some retail muscle through products including frozen fruit bars, coconut water, and energy drinks.
Jamba's efforts to move company-owned stores to franchisees may sting the top line, but this is just one more way that Jamba will be able to milk more out of its brand's income-generating power.
AirMedia (Nasdaq: AMCN ) -- $3.69
Marketing is a very visual sport in China, and Beijing-based AirMedia runs an advertising network of digital frames and TV monitors with a presence in airplanes and most of the country's largest airports.
An improving economy means more travelers flying through China, making AirMedia's eye candy that much more compelling for advertisers. Revenue climbed 26% in its latest quarter.
Profitability has its seasonal lumps, but Wall Street is banking on a profit of $0.15 per ADS this year and $0.22 per ADS next year. Back out the company's healthy cash balance that accounts for nearly half of its market cap and you get attractive earnings multiples on an enterprise value basis with the bonus of a cash mattress to keep downside in check.
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 half a dozen active stock recommendations in the growth stock research service trading for less than $10 at the moment, including Elan. Check those out, and I'll be back with more on the third Monday of next month.