5 Stocks Under $10 Worth Buying

If you've got $10, 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 13 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.

 

June 13, 2014

March 13, 2009

Gain

Sirius XM Radio 

$3.34

$0.198

1,587%

Bare Escentuals*

$18.20

$3.66

397%

Focus Media*

$27.50

$5.74

379%

Geron (NASDAQ: GERN  ) (NASDAQ: GERN  )

$2.98

$4.36

(32%)

Ford

$16.56

$2.19

656%

*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 597% in a little more than five years is pretty remarkable. Yes, that also happened to be when the market was bottoming out, but that still blows away every major market index in that time.

Let's go over this month's picks.

SouFun  (NYSE: SFUN  ) -- $8.88
After consistently trading in the double digits for nearly three years, Soufun fell into the single digits late last week. Soufun runs a popular online portal that centers primarily on the housing market. It also offers a marketplace for home improvement and other house-related products.

The stock took a hit last week after Deutsche Bank downgraded the stock from buy to hold after SouFun announced a 40% discount on its subscription fee to secondary listing customers. The market for leads is getting competitive in China, and this seems like a desperate move to remain relevant.

However, even Deutsche Bank's new price target of $11 represents a healthy 24% advance from last week's close. SouFun also represents a surprising value for a company whose growth may be decelerating but it nonetheless moving in the right direction.

Revenue and earnings per share rose 33% and 43%, respectively, in its latest quarter. Soufun sees revenue climbing 22.5% to 25% for all of 2014. Wall Street projections have moved lower in light of the cutthroat market and SouFun's margin-slashing initiatives, but it's hard to dismiss the stock at just 10 times next year's profit forecast. 

Geron -- $2.98
The lone sinker in my list from five years ago -- the only one that didn't go on to appreciate several times over -- is this spunky cancer-tackling biotech. Setbacks along the way haven't helped, but the stock bounced back in a major way by soaring 43% last week. 

The stock shot higher after a partial clinical hold on its clinical trial of imetelstat in myelofibrosis was lifted by the Food and Drug Administration. This doesn't mean the treatment is sure to get cleared, but it is one less obstacle to face in the grueling approval process. MLV & Co. upgraded Geron following the announcement. 

Sigma Designs  (NASDAQ: SIGM  ) -- $4.34
Shares of Sigma Designs popped 29% higher last week. The provider of intelligent media platforms posted quarterly results that may not seem very inspirational at first glance. Revenue slipped nearly 30%, and its adjusted loss widened for the period. However, Sigma Designs is confident that its new products and active pipeline will turn things around.

"We feel strongly that the new products we have launched over the past six months put us in a position to secure increasing customer deployments, grow our top-line in the quarters ahead, and that our first quarter revenue represents the lowest revenue level for the foreseeable future," chief executive officer Thinh Q. Tran said. 

Wall Street isn't taking the promise of a turnaround lightly. Needham upgraded Sigma Designs following the report. 

Yingli Green Energy  (NYSE: YGE  ) -- $3.30
Just as solar energy stocks were starting to heat up, things started to get territorial. The U.S. Department of Commerce moved to impose duties on imports of solar energy products, sending Yingli and other Chinese makers of photovoltaic-related hardware into a tailspin.

It's against this backdrop that Yingli steps up to report quarterly results on Tuesday. Yingli isn't among the handful of companies turning a healthy profit in solar, and that explains why the stock is trading for about the price of a Happy Meal. However, it is seeing a robust uptick in revenue. Analyst see Yingli's top line growing more than 20% this year and again come 2015. The profitability will follow. 

Rite Aid  (NYSE: RAD  ) -- $7.21
If Yingli needs some inspiration on how bottom lines can turn around, it can always rub elbows with Rite Aid. The drugstore operator was a mess a few years ago, but on Thursday it should be reporting it seventh consecutive quarterly profit.

Rite Aid may not have the elaborate pharmacy benefit management business that larger rivals watch over, but the drugstore chain has been posting steady performances lately. The stock has more than doubled over the past year. It has popped nearly sixfold over the past two years. It's still not too late. Rite Aid has proven itself worthy. The stock may not double again over the next year -- or be a six-bagger over the next two years -- but it should continue to beat the market from here.

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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Read/Post Comments (3) | Recommend This Article (11)

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 June 17, 2014, at 3:08 PM, simplemts wrote:

    "SouFun (NYSE: SFUN ) -- $8.88

    After consistently trading in the double digits for nearly three years, Soufun fell into the single digits late last week."

    That's just wrong, SFUN was not in double digits for even a month. I really don't mean this to be cynical, but once the first stock's facts don't check out I stop reading everything else.

  • Report this Comment On June 18, 2014, at 1:15 AM, andy101 wrote:

    SFUN traded in the double digits for a period of time in EXCESS of three years ...

    Simplemts in his comment above is looking at the "Chart prices" which have been adjusted for two stock splits : one split was 4 for 1 ( Feb 18,2011) and recently a split 5 for 1 (April 7,2014). So, you have to multiply the chart prices by 5 to get the trading price...

    Rick is RIGHT his article as he is referring to the TRADING prices and NOT the chart prices...

    Thank You.

  • Report this Comment On June 18, 2014, at 11:20 AM, simplemts wrote:

    I appreciate you creating an account just to comment to me, I didn't know I had that effect on people.

    Based on your logic, AAPL is trading at a 90% discount since it once traded at $700, and SFUN is at a huge discount since it once traded above $80 !

    The point of my comment, which clearly went way over your head, is that at best, Rick is ignorant to the split and quoting the stock was in the teens (it was actually as high as $80 by that logic, so he is still wrong) and at worst he is misleading investors by IMPLYING the stock is trading at a huge discount to where it traded for years... which is not true. A stock at $10 that was split 10:1 is not worth a penny more than a stock at $100 before the split. The fact that he mentions it was in the "teens for years" without referencing this is my opinion, very, very manipulative and misleading.

    As I mentioned, this is a marketing article to get people to buy a paid service, and nothing more.

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