5 Stocks Under $10 Worth Buying

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 "Ten Stocks Under $10" column 11 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 

Jan. 18, 2013

March 13, 2009

Gain

Sirius XM Radio (NASDAQ: SIRI  )

$3.16

$0.198

1,496%

Bare Escentuals*

$18.20

$3.66

397%

Focus Media 

$25.30

$5.74

341%

Geron 

$1.66

$4.36

(62%)

Ford 

$14.11

$2.19

544%

*Bare Escentuals was acquired for $18.20 a share in 2010.

The average gain of 543% in four years is pretty remarkable.

Sirius XM has led the way, transforming itself from a company that was on the brink of bankruptcy four years ago into a media giant with a scalable model and growing profitability. Focus Media is a leading advertising platform provider in China. The country's growth has slowed, but it's still improving at a healthier clip than the rest of the world.

Geron has been the one loser in the lot. When you buy into young biotechs, you're swinging for the fences. I seem to be striking out this time. Ford has been posting several months of strong sales, and the stock has recently raced back into the low teens.

Let's go over this month's picks.

Comverse Technology (NASDAQ: CNSI  ) -- $4.50
Comverse shares popped 11% higher last week. Reports that an Israeli maker of analytical telecommunications gear is in talks to buy competitor Verint Systems pushed Comverse higher, as it has a roughly 41% stake in Verint.

Beyond that, this has been a rough fiscal year for Comverse. Revenue has been flat and earnings have been slipping for the provider of software-based telecommunications products and services. The good news here is that things should get better in the new fiscal year kicking in next month.

Analysts see Comverse's profitability more than doubling to $0.55 a share with revenue climbing 7% to $1.7 billion in fiscal 2013. Comverse is cheap at a forward earnings multiple in the single digits. A Verint buyout at a reasonable premium would merely be the cherry on top.

Vringo  (NASDAQ: VRNG  ) -- $3.18
Vringo has been one of the market's most volatile stocks since buying some old search-related patents from Lycos last year and going after the search engine giants.

The now patent-rich app developer has had some legal decisions go its way, but the stock's a bit of a bucking bronco even when there's nothing new on the plate.

The lesson for investors wanting to hop on Vringo is that it's dangerous to chase a rally. The most opportune time to buy into Vringo -- either for the likely flow of modest royalties from online titans or the potential that its patents can be squeezed even more lucratively -- is after it falls out of favor. Vringo taking an 8% drop last week on no material news qualifies as a buying opportunity.

Power-One (NASDAQ: PWER.DL  ) -- $3.97
Power-One is another company that lost ground last week, but at least the inverter maker had its reasons.

Power-One hosed down its guidance for the fourth quarter. It's now eyeing $190 million to $195 million in revenue, well short of the $221 million that Wall Street was targeting. Analysts were also holding out for a small profit, but Power-One's now going to post a net loss between $12 million and $15 million.

Renewable energy has been a tough gig lately, and Europe continues to be a cold market for Power-One.

This warning comes after Power-One had come up short on the bottom line in two of its three previous quarters, so you can be sure that burned analysts will be revising their forward projections lower. Right now, Wall Street's betting on a profit of $0.40 a share in 2013 on a 9% decline in revenue. Since that will move lower in the coming weeks and days, it's not fair to call Power-One a bargain because it's now fetching less than 10 times this new year's earnings. However, as the global economy does bounce back and weaker competitors get shaken out, Power-One should power back up again.

Banco Santander (NYSE: SAN  ) -- $8.65
This column has largely steered clear of financial services in the past, but sometimes there are opportunities that are too tempting to pass up.

Banco Santander has 102 million customers across 14,700 different branches in Europe and the Americas.

Yes, Banco Santander's home turf of Spain is a bit of a mess these days. The eye-popping 7.1% yield may not last. However, it's hard to dismiss the global banking titan's growth prospects as the global economy begins to claw its way back.

If you don't think that will happen anytime soon, then you may want to steer clear of more than just Banco Santander.

Sirius XM Radio -- $3.16
It may seem odd to have played an opportunist in the past few picks and now single out a company trading at a four-year high, but the future is bright for Sirius XM Radio.

Regardless of where its ownership saga ends, there's a $2 billion share buyback authorization that has yet to kick in if the price starts to slip.

Critics arguing that satellite radio is transitory have had to eat crow. Sirius XM closed out 2012 with 2 million net additions, and that was its strongest showing since shortly after the combination of Sirius and XM in 2008.

This is a truly scalable model, and you can be sure that even the guidance that the media giant issued earlier this month will continue to be bumped higher as 2013 plays itself out.

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.

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.


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  • Report this Comment On January 22, 2013, at 3:22 PM, sharkbitemcnasty wrote:

    With regards to Comverse, there are a few points I'd like to make.

    CMVT is now a holding company whose only asset is a 54% stake in VRNT. The 40% or so that you mentioned is common stock but they also hold a substantial amount of preferred shares which brings their total ownership closer to 53%.

    The next point is that the rest of CMVT's assets have been spun off or sold. CNSI is the ticker for the Comverse business which was spun off a couple months ago. Any profits/losses from Comverse's operations are now reported under CNSI, not CMVT. VRNT and CMVT will be merged in February, effectively making VRNT a standalone company So if you're buying CMVT you're really buying VRNT. .

    Not trying to nitpick, but this is important stuff to know if you're considering buying any of these stocks.

  • Report this Comment On January 24, 2013, at 6:51 AM, rsinj wrote:

    Better to wait on PWER until the earnings come out next week.

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