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 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

Nov. 15, 2013

March 13, 2009

Gain

Sirius XM Radio

$3.86

$0.198

1,849%

Bare Escentuals*

$18.20

$3.66

397%

Focus Media*

$27.50

$5.74

379%

Geron

$5.42

$4.36

24%

Ford

$17.07

$2.19

679%

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

The average gain of 666% in four years is pretty remarkable.

Even Geron -- the lone stinker through most of the past few years -- has finally bounced back into the black. The rest have been multibaggers, easily trouncing the market by excelling in satellite radio, cosmetics, cars, and Chinese advertising, respectively. Two have been acquired at healthy premiums.

Let's go over this month's picks.

Zynga (NASDAQ: ZNGA  ) -- $4.02
It's been seven months since I singled out what is now the second-largest player in mobile games. The stock has only moved 18% higher -- barely above the S&P 500's 13% gain in that time -- but I'm going back to the well with the company behind Words With Friends, FarmVille, and other engaging diversions.

Zynga reported quarterly results late last month that may not seem inspiring at first. Revenue and bookings fell sharply, and it posted a small deficit. However, the stock moved nicely higher on the news because the results were actually better than what analysts were expecting.

"I am confident that Zynga is rewiring itself in a meaningful way that will strengthen the core of our business," said new CEO and recent Xbox chief Don Mattrick. He is trying to key in on improving the company's positioning in mobile. That won't be easy, but rival King's upcoming IPO should remind investors about the growth that's possible in Zynga's niche.

Tremor Video (NYSE: TRMR  ) -- $4.07
Zynga isn't the only busted IPO on this list. Tremor Video has been one of this month's biggest losers, shedding more than half of its value after posting disappointing quarterly results.

Given the booming popularity of online video, one would think that a company specializing in video advertising would be on top of the world. Unfortunately, Tremor warned of a sequential dip in revenue for the current quarter. 

Tremor isn't profitable, and that's a concern, but analysts still see it bouncing back to grow revenue at an 18% clip next year. Another thing that makes Tremor attractive is that its June IPO finds it having nearly $2 per share in cash and equivalents on its balance sheet. That's a cushy mattress representing nearly half of Tremor's current market value, though naturally it will need to improve its cash flows to make that matter.

Jiayuan.com (NASDAQ: DATE  ) -- $6.16
The dating scene in China is very different from courtship rituals closer to home, and it's a process that's made easier by online-dating leader Jiayuan.

Jiayuan's namesake site is free to browse, charging members to send messages to one another. This makes it popular, given the significance of financial stature in the world's most populous nation. If someone's paying to reach out to you, it's more than just a compliment in China.

Jiayuan reports quarterly results on Wednesday, and the dot-com speedster is surprisingly cheap at 17 times this year's projected earnings and less than 15 times next year's target. Jiayuan has surpassed Wall Street's bottom-line estimates in three of the past quarters, so it may be even cheaper than those multiples suggest.  

Vringo (NASDAQ: VRNG  ) -- $3.09
Last year was a wild one for this ringtone app developer after it cashed in on some search-related patents from Lycos and lawsuits against search engine giants. The market moved on when it seemed Vringo's payday was shaping up to be less than it was originally hoping for. 

The stock moved higher earlier this month after a key patent was upheld, and Dawson James initiated coverage of Vringo with a buy rating. Despite the favorable developments, Vringo is trading closer to this year's low than to the high, making this an opportune time to hop in ahead of the next wave of volatility.

Dice Holdings (NYSE: DHX  ) -- $7.49
The unheralded Dice has the right approach to online recruiting. It has a growing collection of specialty sites in tech, security clearance, energy, and finance that attract industry pros and the human-resource execs that want to hire them.

Dice is profitable, trading at a reasonable 15 times this year's earnings. It's been buying back stock and snapping up niche sites, and that's been enough to offset the lack of organic growth. Dice's strategy should pay off once the economy starts showing more signs of life.

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.

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  • Report this Comment On November 18, 2013, at 10:27 PM, afcarlin wrote:

    March '09 was low point in the market. Due respect, you could have thrown darts and picked winners.

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