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.
Dec. 16, 2011
March 13, 2009
|Sirius XM Radio||$1.77||$0.198||794%|
*Bare Escentuals was acquired for $18.20 a share last year.
The average gain of 346% in less than three years is remarkable.
Sirius XM Radio (Nasdaq: SIRI ) is the top performer here. The satellite radio giant has been one of the market's biggest winners since bottoming out in early 2009. Last week's development -- where Howard Stern was tapped to join the celebrity judges on NBC's America's Got Talent while continuing to do his satellite radio show -- should provide yet another boost to Sirius XM's subscriber numbers.
Focus Media (Nasdaq: FMCN ) has been rocked in recent weeks. A report by noted worrywart Muddy Waters questioned the size of the Chinese advertising giant's network of monitors that broadcast ad-rich content. Focus Media countered the allegations, but investors don't like uncertainty.
Let's go over this month's picks.
KIT Digital (Nasdaq: KITD ) -- $8.76
We live in a digital world, and KIT Digital helps content creators manage their digital video assets.
The Prague-based company posted better-than-expected quarterly results last month. After several quarters of red ink, KIT Digital finally broke into profitability.
It will only get better from here. Analysts see KIT Digital's positive earnings continuing, and they're targeting a profit of $0.79 a share next year. Picking up a dynamic company that's in the right place at the right time -- as more media companies seek to manage their digital assets across various platforms --for just 11 times forward earnings is a steal.
Rentech (NYSE: RTK ) -- $1.49
It's hard to argue with Rentech's model. The company is knee-deep in the fertilizer business that's booming today, but it's also toiling away in the more promising biofuels that will define tomorrow.
Unfortunately, the sum of Rentech's parts isn't all that encouraging right now. Revenue grew by a mere 6% in its latest quarter. It has missed Wall Street's bottom-line expectations in three of the past four quarters, and it's posted quarterly deficits in all but one period over the past two years.
However, Rentech is the kind of stock that investors will have to buy early -- long before the fundamentals begin to turn positive -- to score optimal returns.
E*TRADE (Nasdaq: ETFC ) -- $7.72
The discount broker behind the E*TRADE Baby ads made this list two months ago. I normally like to wait a bit longer before repeating a pick, but I'm surprised to see the financial services company back in the single digits.
When E*TRADE executed a 1-for-10 reverse split last year -- catapulting the low-priced stock into the teens -- it seemed as if the discounter would be kissing its single-digit days goodbye. Weak trading activity in this low interest rate environment stung brokerage stocks, and E*TRADE worked its way back into the single digits. It began to claw its way out, only to fall back after revealing that it was done exploring strategic alternatives that could have resulted in a buyout.
Despite weak trading trends in November and a problematic loan portfolio, it's hard to resist E*TRADE at current prices.
Giant Interactive (NYSE: GA ) -- $4.06
Online gaming remains a booming industry in China, even if the share prices of many of its leading players have been smacked around over concerns of Chinese regulators clamping down on cyberspace usage.
Three of the five players handily beat Wall Street estimates in their latest quarters, and Giant was one of them.
Giant has been able to grow its empire of titles beyond its ZT Online franchise that continues to be popular. Giant is also cheap, fetching just seven times this year's projected earnings, a little more than five times next year's profit forecast.
Logitech (Nasdaq: LOGI ) -- $7.61
When Merrill Lynch analyst Jonathan Tseng downgraded shares of Logitech two months ago -- slashing his price target on the stock from $9.80 to $7.30 -- I wholeheartedly agreed. Logitech's rich lineage of accessories is being threatened by the growing popularity of tablets and smartphones. Instead of buying keyboards, optical mouse controllers, and webcams for their PCs, tablets and phones pack cameras and touchscreen interfaces.
However, now that shares are close to Tseng's target, it's time to approach Logitech as a value play. Logitech remains profitable, and it's rolling out accessories for the "good enough" computing hardware of choice.
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.