5 Stocks Under $10

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 a dozen 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.

 

8/16/13

3/13/09

Gain

Sirius XM Radio

$3.70

$0.198

1,769%

Bare Escentuals*

$18.20

$3.66

397%

Focus Media*

$27.50

$5.74

379%

Geron 

$1.42

$4.36

(67%)

Ford 

$16.30

$2.19

644%

* Bare Escentuals was acquired for $18.20 a share in 2010. Focus Media was acquired for $27.50 a share in 2013.

The average gain of 624% in four years is pretty remarkable.

Even with Geron crashing as the lone stinker, the other four multibaggers have easily trounced the market by excelling in satellite radio, cosmetics, cars, and Chinese advertising -- and two have been acquired at healthy premiums.

Let's go over this month's picks.

Strategic Hotels & Resorts (NYSE: BEE  ) -- $8.50
The lodging industry is starting to bounce back, and we're seeing it in Strategic's numbers.

The REIT watches over 18 luxury hotels including New York City's Essex House, charging an average of $285 a night. Business is booming. Over the past year, it's seen daily rates and occupancy levels climb, combining for a 10% pop in RevPAR (or revenue per available room).

Despite being a REIT, Strategic hasn't played a dividend outside of its preferred shares since 2008. That could change as funds from operations are starting to grow in this welcome climate, but the real buzz here is the potential for a buyout.

JMP Group analysts suggest that Strategic could fetch $13 a share in a deal, and some investment groups have suggested that the takeout price could be closer to $14 a share. These would be healthy premiums to where the REIT's at now, but even if you don't want to speculate, you can still see the improving trend at Strategic.

Kandi Technologies (NASDAQ: KNDI  ) -- $4.44
The combination of electric cars and emission-polluted China sounds like a no-brainer, and that's what propelled shares of Kandi higher two months ago after announcing that it would team up with Geely to co-develop all-electric sedans to sell in the world's most populous nation.

The stock has given back most of those gains as reality has set in.

If electric passenger cars have been a hard sell here given their stiff prices, why should it fare any better in China?

There are also concerns about Kandi itself. It's a pretty small company that relies largely on go-karts and ATVs. The shares took another hit last week after it reported quarterly results that showed us how small Kandi actually is at the moment. Revenue clocked in at $12.2 million, and just $2 million of that came from the sale of electric vehicles.

However, Kandi's electric sedan dreams are just getting started. It wasn't until last month -- after the close of the quarter -- that it announced the delivery of the first 100 Kandi-Geely vehicles for a public car-sharing system in Hangzhou City.

Better days are coming. They may not happen right away, but it's why it's opportunistic to eye Kandi now when it's out of favor than to chase it the way investors did in early June.

E-House (NYSE: EJ  ) -- $6.07
Let's stay in China, where E-House posted blowout quarterly results last week.

The provider of real estate agency and information services saw its revenue soar 43% to $163.4 million and adjusted earnings per share nearly doubled to $0.11 a share. Wall Street was holding out for just a profit of just $0.06 a share on $135.8 million in revenue. This is the second quarter in a row that E-House has smashed through analyst estimates.

The rebound is real. E-House is raising its guidance for the entire year, targeting 36% growth to $600 million this year.

E-House was a rock star a few years ago, but it's been meandering in the single digits for more than two years. Concerns about China's real estate bubble and the country's slowing economy cooled down the stock, but the financials suggest that E-House is heating up again.

Organovo Holdings (NYSEMKT: ONVO  ) -- $5.87
I'm willing to take risks in this column -- as all investors who try to swing from the fences with low-priced stocks accept -- but this one is extremely speculative.

Organovo has a lofty goal of using bioprinting to generate human tissue in a lab that can be used for culture plates or bioreactors to speed up medical research.

How far Organovo is from making that dream a reality is a guess at this point. If it becomes possible in the mainstream market, there are no guarantees that Organovo will be a big player. However, investor interest in 3-D printing -- and that is what this is when you think about it -- is making an already-risky company even more volatile.

It will be feast or famine with Organovo, making this a high risk in exchange for high return pick.

YuMe (NYSE: YUME  ) -- $8.95
Broken IPOs intrigue me.

YuMe went public at $9 two weeks ago, and it closed last week slightly below that.

YuMe is a leading provider of digital video brand advertising solutions. This would seem to be a strong niche given the popularity of online video, but the market has ignored the video marketing IPOs this year.

YuMe is certainly growing. Revenue climbed 70% last year, and it managed to turn a small profit. Growth, earnings, and reaching a global audience of 257 million unique monthly visitors aren't enough to impress the market these days, but YuMe's the real deal.

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 tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. To find out which of these giants is set to dominate the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate and give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!


Read/Post Comments (8) | Recommend This Article (9)

Comments from our Foolish Readers

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 August 19, 2013, at 8:27 PM, CSIHawaii wrote:

    Re Kandi Technologies: The author is short on facts - facts that reinforce his recommendation

    It should be pointed out that China EV sales have been on hold due to the PRC governments delay in announcing the new subsidies. That announcement was expected at the time the stock price last surged. It will surge again when the announcement is made - which will be soon.

    It should be further pointed out that Kandi produces low cost EVs, not subject to the stiff prices that the author references. With the massive PRC and local government subsidies, a Kandi EV will cost about $2,000 and will sell like hot cakes. Large deals are already in place.

    It should be further pointed out that once the subsidies are announced Kandi's EV sales will soar, and its EV revenue and earnings will dwarf revenue and earnings from go-carts and ATVs.

  • Report this Comment On August 20, 2013, at 12:51 AM, antikoolaid wrote:

    CSIHawai is short on his facts, and even shorter in his ability to read financial statements.

    In the last quarterly results, the company barely broke even, and that was excluding the warrants adjustment. Even worse, the interest cover in the income statement was only 1.2 times and the company has negative net working capital.That is close to bankruptcy territory. No wonder the company recently hit the market with new share issues, which only a week before was an event ALL Kandi koolaid drinkers denied was imminent.

    For the whole first half of 2013, the company only sold a measly 632 EV car units, That compares to unit EV car sales of 639 for the same period last year despite the old government subsidies still being in place. There is now a delay in the new government subsidies, which may be reconfigured more favorably hybrids instead of pure EVs.

    Whatever the content of the new government subsidies, they better come very soon, and more importantly they better translate in to significant cash enhancing sales this time, otherwise Kandi will be hitting the market again with more share issues to prop up a business model that is not working.

    Anyone who tries to say this company is in a strong position is fantasizing with "Yes but in the future..." . Bagholders have proclaimed the same nonsense of huge projected EV sales in the past for this company but these never materialized.

  • Report this Comment On August 20, 2013, at 6:07 AM, CSIHawaii wrote:

    There are more facts that some short people may not wish you to know...

    Kandi is actually sitting on a pile of cash partly from the new share issue that closed on July 1. The share issue was a surprise to shareholders as was the surprise startup of the Hangzhou Car Share Program which created new cash needs.

    Kandi is in a JV with Geely, the biggest car manufacturer in China. That JV is already supplying EVs to the Hangzhou Car Share Program (think Zipcar) without waiting for the PRC subsidies announcement. The program expects to complete 5 smart parking garages by September and 30 to 40 by the end of 2013. The JV will supply the program with 5,000 to 10,000 EVs in the next 12 months and that is just the start. In addition to approx. 20% profit on EV sales, the JV will receive 19% of the proceeds from the Car Share Program. The city of Shanghai is selecting locations for an identical pilot program.

    The 20,000 EV Hangzhou Car Lease Program will resume when the new PRC subsidies are announced.

    And it goes on - too much to tell. Don't take my word - go to the source: SEC filings, PRs and the Chinese media.

  • Report this Comment On August 20, 2013, at 6:58 AM, corstrat wrote:

    To expand a bit on KNDI and its prospects for this year.

    While it is true, KNDI as well as all other China EV makers are impatiently waiting for the new round of PRC subsidies to be formally implemented, an event that will allow the current waiting list of over 9000 Hangzhou (pop. 11 million) residents to start taking possession of their KNDI EV's under the current 20,000 ($130 million USD to KNDI) car leasing program, the new CarShare program program mentioned by the author does not require subsidies.

    As reported by both the Company and the China Media, the four year goal for this program is to have 100,000 KNDI cars in this proprietary project. For the balance of this year, a minimum of 4000 cars will be placed in service under this program, assuring last half top line of at least $70 million and in excess of $.70 a share in net on revenues of approximately $95 million for 2013.

    Again, this does not include any subsidized sales. Should the subsides, which are expected to start at any time now, be announced soon, you can likely add an additional $40 million for Hangzhou Long Lease sales based on committed orders from two billion dollar Chinese Companies, Sinopoly and Westlake.

    Just for the record. TSLA with its current $19 billion dollar market cap, only had $116 million in sales in 2010 and lost $154 million. KNDI's current market cap is only $151 million and KNDI has always been profitable on an annual basis.

    BTW, last Friday, KNDI announced an agreement with Shanghai government officials to implement a similar CarShare program in Shanghai (pop. 25 million) before the end of this year.

  • Report this Comment On August 20, 2013, at 8:47 AM, corstrat wrote:

    Just to make it clear what CSI Hawaii alluded to when he said KNDI is sitting on a pile of cash due to the institutional share offering at $6.03 a share.

    As he stated, it closed on July 1, the day after the company closed the books for its Q2 Sec filing. For that reason, the cash did not show up on that statement. Had it closed one day earlier, the Company's cash position would have been in excess of $47 million.

    And more importantly, during the quarter, KNDI funded its full $80 million obligation to the KNDI Geely Joint Venture before receiving any proceeds from the stock offering. A full 18 months earlier than required by the JV agreement filed with the SEC.

    (1) The First Payment

    The Parties shall contribute in cash at 20% of the registered capital of the JV company on their first contribution.

    (2) The Second Payment

    The Parties shall make the remaining contribution to according to the resolution by the shareholder meeting of the JV company. However, such contribution shall be completed within 2 years from the date of establishment of the JV company.

    http://www.sec.gov/Archives/edgar/data/1316517/0001062993130...

  • Report this Comment On August 20, 2013, at 10:09 AM, rpetkus wrote:

    I made a motif on Motifinvesting.com titled Fool Rick Munarriz - 5 Stocks under $10

    You can buy into a Motif for as little as $250. I have Motif equally weighted at 20% each.

  • Report this Comment On August 20, 2013, at 6:11 PM, 1993gran wrote:

    FOR A LOW PRICED STOCK LRAD FITS THE BILL UNDER FOLLOWED NO DEBT AND BUYING BACK STOCK(VERY RARE FOR A 1.44 STOCK), GREAT GROWTH

  • Report this Comment On August 21, 2013, at 1:02 AM, CSIHawaii wrote:

    Rick Munarriz is already looking quite smart. One day after his recommendation Kandi is up over 7% at $4.53. This price is still an abberation - due to the usual market insanity. The price can still rise 33% just to get back to the $6.03 level recently paid in a share offering by 2 institutions after their full due diligence. Since the share offering Kandi has released nothing but good news. Check the PRs for yourself.

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