If you've got 10 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 10 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 -- when low-priced stocks bottomed out -- to prove my point.
Nov. 18, 2011
March 13, 2009
|Sirius XM Radio (Nasdaq: SIRI )||$1.78||$0.198||799%|
|Geron (Nasdaq: GERN )||$1.50||$4.36||(66%)|
*Bare Escentuals was acquired for $18.20 a share last year.
The average gain of 367% in less than three years is remarkable.
Sirius XM Radio is leading the way, as the satellite radio provider that was on the brink of bankruptcy in early 2009 is thriving as a healthy and profitable company today. Sirius XM even won an analyst upgrade last week.
Geron hasn't been as fortunate. As the lone dud in the pack, the biotech got slammed last week as it shed 34% of its value after revealing that it's giving up on stem cells. The move will help conserve cash as Geron focuses on its oncology pipeline. However, a single multibagger is enough to offset a handful of losers.
Let's go over this month's picks.
Descartes (Nasdaq: DSGX ) -- $6.87
We live in a world of global trade, and Descartes provides logistics technology solutions in global compliance, supply chain execution, and mobile resource management. Despite hailing from Ontario, just 13% of its business originates in Canada. In fact, Descartes does more business in Belgium -- at 17% of revenue -- than it does in its home country. The United States represents a 43% chunk of the mix.
Descartes reports next week, but revenue and earnings climbed 14% and 30%, respectively, in its previous quarter. Descartes has been a steady grower, even on a sequential basis. In other words, it must be doing something right. Analysts see adjusted EBITDA of $0.51 a share this year after ringing up $0.42 a share last fiscal year.
Infinera (Nasdaq: INFN ) -- $6.96
As the company behind the first commercially viable photonic integrated circuit, Infinera helps clear traffic jams in digital fiber optic networks.
Things haven't gone exactly as planned for the active Rule Breakers recommendation since going public four years ago. Optical networking has been a rough market to thrive in given the weak global economy. Analysts see Infinera posting another loss this year on a 14% decline in revenue.
Why buy Infinera during this lull? For starters, the company has been spending a ton of dough on upgrading its flagship product. It plans to roll out photon integrated circuits with speeds of 100 gigabit per second next year, a tenfold advance since the 10-gigabit product it was championing when it went public. Any signs of an economic recovery will also lead to a spike in demand.
LeapFrog Enterprises (NYSE: LF ) -- $5.11
There was a time when LeapFrog was making the cool electronic edutainment toys that every parent craved. Why not arm your children with fun playthings that actually make them smarter?
Kids can be fickle, though. LeapFrog needs to innovate to stay on top of the curve, and it may have done exactly that with this summer's introduction of a $100 edutainment tablet. LeapFrog's news may have been eclipsed by this month's rollout of the $199 Kindle Fire and the $249 Nook Tablet as more powerful and useful gadgets, but the LeapPad Explorer is made exclusively for kids. It also has a camera and a microphone (which aren't part of the new entry-level tablets for adults).
LeapFrog is on a roll. It posted better than expected quarterly results earlier this month, as earnings growth of 46% flew past Wall Street's projections. It also raised its top- and bottom-line guidance for the entire fiscal year. It's the kind of momentum one loves to see heading into the holiday shopping season.
QuinStreet (Nasdaq: QNST ) -- $9.18
When QuinStreet went public at $15 early last year, it was hard to fathom the company ever falling into the single digits. The online marketer provides vetted leads to advertisers through vertical portals. In other words, it sets up popular websites for niches including Web-based universities and financial services that it uses to hand over richer leads to sponsors than search engines do.
Unfortunately, we know how bad the past year has been for post-secondary educators and lenders. QuinStreet shares got pummeled earlier this month after hosing down its guidance for this fiscal year. The once promising growth stock is now fetching just 10 times this year's projected earnings in a niche that will work once its areas of specialty come back into favor.
MEMC Electronic Materials (NYSE: WFR ) -- $4.35
Cranking out silicon wafers used in both computing and solar technology was a brilliant place to be when green energy stocks were on fire, but there haven't exactly been clear skies in solar lately.
MEMC's stock fell after it recently lowered its near-term outlook, but this remains a profitable company in a niche that will inevitably bounce back in the future.
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 trading for less than $10 at the moment. Check those out, and I'll be back with more on the third Monday of next month.
If you want to follow these five low-priced stocks, consider adding them to My Watchlist.