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.
|Company||July 20, 2012||March 13, 2009||Gain/Loss|
|Sirius XM Radio||$2.095||$0.198||958%|
*Bare Escentuals was acquired for $18.20 a share in 2010.
The average gain of 368% in a little more than three years is remarkable.
Let's go over this month's picks.
InvenSense (Nasdaq: INVN ) -- $9.79
We live in a world of motion-controlled gadgetry, and InvenSense is a leader in the gyroscopes that make it happen. Whether it's bowling on your Wii, shaking your smartphone to pick up a call, or using a remote control to navigate around the screen of a Web-tethered television, InvenSense gets around.
The company closed out its fiscal 2012 in fine fashion a couple of months ago, reporting a 59% surge in revenue as profitability nearly quadrupled. One would expect to pay dearly for this kind of verified growth, but the market's still skeptical.
InvenSense may be expected to grow revenue by at least 40% in each of the next two years -- and for profitability to grow even faster -- but the stock can be bought for just 12 times next fiscal year's earnings target.
Groupon (Nasdaq: GRPN ) -- $7.40
Investors had no problem paying $20 a share for Groupon when the daily deals leader completed its IPO late last year. Now it's hard to find folks willing to risk owning the stock for a little more than a third of its debutante price.
Groupon isn't perfect. Some merchants are grumbling, and an accounting restatement didn't help win over the trust of the investing community.
However, there are still economies of scale in this seemingly cutthroat niche. Profitability is starting to trickle in now after Groupon's breakneck international expansion. The stock is trading at just 11 times the $0.66 a share that Wall Street's targeting for next year, even though Groupon is growing faster than that.
Office Depot (NYSE: ODP ) -- $1.94
Office supplies are out of style these days. Corporate America is still on dicey ground, and Office Depot's larger rival has pushed the "easy" button to outdo the competition.
However, warming up to Office Depot is easier than you think. The company has been profitable for three consecutive quarters, and most of the job growth in this country has been coming from the small and medium-sized companies in the private sector that rely on Office Depot.
The buzz may float or sink in the coming days, but what doesn't change is that OCZ is an intriguing niche company that is somehow trading for just six times next fiscal year's estimates. If analysts are up to the task here, OCZ may be a win-win for investors because either a company steps up to take out the company at a premium, or its valuation rises to a more justifiable multiple.
TASER International (Nasdaq: TASR ) -- $4.84
Last week's horrific movie theater gunman rampage in Colorado is bringing the gun control debate back into the media spotlight.
It's a polarizing issue, and certainly beyond the scope of this monthly column -- but TASER International has a funny way of striking a compromise between the two sides with its less-than-lethal weaponry. The leading stun gun maker has been a disappointing investment after several false starts over the years, but it's now profitable and sporting reasonable growth. Between safety issues and political uncertainties, it wouldn't be a surprise to see consumer sales begin to creep higher.
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 roughly 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 appreciate low-priced stocks as ground-floor opportunities, recent IPOs should be appealing. A new report details a hot tech IPO that just happens to be an active Rule Breakers pick. The report is free, so check it out now.