Are All Stocks Under $10 Broken?

I love singling out attractive stocks trading in the single digits.

Every month I write a column entitled "5 Stocks Under $10," in which I single out a few of the compelling investments that just happen to be trading at low price points.

There are risks, of course. Stocks don't trade for low prices without a reason. However, you would be surprised at the number of profitable and growing companies that are unfairly unloved.

I don't have five new names for you today. My latest monthly list was published earlier this week. However, what I do every month is check on the performance of the five stocks that were singled out when the market was bottoming out three years ago.

Since I sometimes get requests to update the performance of some of the more recent lists, I figured I would check in with how last month's picks are doing.

  2/22/12 1/20/12 Gain
ZAGG (Nasdaq: ZAGG  ) $9.57 $8.56 11.8%
8x8 (Nasdaq: EGHT  ) $4.28 $4.23 1.2%
MCG Capital (Nasdaq: MCGC  ) $4.70 $4.59 2.4%
Nokia (NYSE: NOK  ) $5.56 $5.61 (0.9%)
EnerNOC (Nasdaq: ENOC  ) $9.43 $9.42 0.1%

Source: Yahoo! Finance.

The average gain of 2.9% may seem good for a single month, but I'm not satisfied. The S&P 500 has inched 3.2% higher in that time. Yes, four of the five squeezed out positive returns, but only one of the five actually beat the market.

I'm not a fan of monthly finish lines. This is a snapshot, not the final portrait. However, let's dive in to see how the companies are doing.

ZAGG zigs
The top pick from last month is one that has no shortage of naysayers. The heavily shorted company behind the popular invisibleSHIELD screen protectors for smartphones, tablets, and other third-party accessories gets blasted by critics that judge the company based on its dodgy past -- when it was much smaller -- or the commoditized nature of smartphone screen protectors and covers.

The fear that Asian companies will swarm the market with cheap knockoffs -- even in areas where ZAGG has patents -- has been going on for years, but it has yet to materialize. ZAGG is still growing at a healthy clip, even before factoring in portfolio-padding acquisitions.

Singling out ZAGG was considered irresponsible by some. Really? I originally singled out ZAGG for this monthly column 11 months ago when the stock was at $6.81. Between a 40%-plus pop in 11 months and a near 12% gain in a single month since bringing it up again, I can live with that kind of irresponsibility.

ZAGG has raised its guidance for 2011 three times since this past summer, and next week is the moment of truth when it reports its quarterly results.

The four that failed
8x8 earned my attention by posting profitable results in each of its 11 previous quarters. Providing Web-based telephone service to companies during a recessionary lull -- and doing so in the black -- is worth applauding. Revenue climbed 31% in its most recent quarter.

MCG Capital is a business development company that provides commercial financing for middle-market companies. The shares were downgraded by Stifel Nicolaus earlier this month, but that hasn't been enough to offset the modest gains over the past four weeks. Maybe income investors are having the final say here. MCG's been paying out quarterly dividends of $0.17 a share over the past few quarters for a chunky yield of 14.8%.

Nokia is the lone loser in the list, and the Finnish handset maker didn't do its near-term prospects any favors with another round of layoffs earlier this month. Nokia may have been the market leader when it came to feature phones, but it's not resonating with consumers in the smartphone revolution.

EnerNOC is a provider of solutions for managing electricity on power grids. Few will argue that grid management isn't a compelling growth opportunity, though EnerNOC has struggled with declining capacity prices and a dispute last year with its largest customer.

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Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

The Motley Fool owns shares of EnerNOC. Motley Fool newsletter services have recommended buying shares of EnerNOC and Nokia. Motley Fool newsletter services have recommended writing puts in EnerNOC. Motley Fool newsletter services have recommended creating a naked call writing position in ZAGG. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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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 February 23, 2012, at 1:03 PM, Mega wrote:

    "critics that judge the company based on its dodgy past -- when it was much smaller"

    So having a dodgy past is fine with you as long as they were small?

    Usually when a dodgy company gets bigger, its problems get bigger too.

  • Report this Comment On February 23, 2012, at 9:36 PM, clbjblk wrote:

    ONCE WAS A FOOL WHO SAID NOK WOULD BOUNCE BACK, NOT A GOLD MINE BT THERE CHECK WON'T BOUNCE AND YOU CAN PROBABLY DROP THE SMAT PHONE AND IT WILL BOUNCE BACK AND TALK BACK

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