If you appreciate the Rule Breakers newsletter service's goal of seeking out superior growth and can accept the risk that comes with buying into low-priced stocks, I won't bother to mince words. I've looked far and wide to find 10 attractive stocks trading in the single digits, but they're often marked down this low for a reason. Keep that in mind. Read my article from last week explaining the thought process that goes into this annual ritual and how the last three lists have panned out.
That said, here's the list.
1. TheKnot.com (OTC BB: KNOT): $6.10. While it's easy to spot the flaw in the wedding resource site's plan -- it's an attractive draw for brides-to-be and nervous grooms-in-waiting for just a sliver of time -- what a great time to have someone's attention. With an audience that's young and ready to spend a ton of money, it's easy to see why online advertising rose by 41% for TheKnot.com last year. It turned a modest profit of $0.06 per share, and I like what I see in the company's recent moves to grow its audience beyond the current 1 million active members.
TheNest.com is the company's new site for newlyweds. It's an underserved and lucrative niche. The company also acquired a pair of dating sites a few months ago. Put together, you have a dynamic company that is now reaching out earlier in the courtship cycle, while also extending its grasp to the other side of "I do."
2. Ninetowns (Nasdaq: NINE ) : $8.19. Our Rule Breakers newsletter service singled out two of the fastest-growing companies in China last year and this third entity also bears watching. In fact, it was the Rule Breakers discussion board that first brought Ninetowns to my attention. Selling software in piracy-plagued China? Don't worry. Ninetowns sells enterprise software that facilitates the import/export process and government agencies aren't likely to skimp on legalities here. If you figured that improving the inflow and outflow of goods in China might be a pretty dynamic place to be, you're right. Last year the company earned $0.57 per American Depositary Share (ADS) as net revenues rose by 52%.
This year the company is looking for earnings to come in between $0.60 and $0.70 per share with revenues climbing another 39% higher. If the earnings growth seems modest, that's because the company went public in December and will be dividing its profits by 26% more diluted shares. The upside? The IPO has the company sitting on nearly $3 a share in cash.
3. CNET Networks (Nasdaq: CNET ) : $9.18. Running a collection of popular sites that include software and music portal Download.com, techie haven News.com, and comparison shopping site MySimon, CNET knows how to draw a crowd. In fact, page views have risen by 94% over the past year and the company's profitability -- despite serving up chunky bandwidth goods like software, video streams, and MP3 files that others avoid like the plague -- has helped it distinguish itself as a multimedia dot-com heavy. That's a good thing now that traditional sponsors are flocking to buy ad space online.
More like a media company with a dot-com bent, CNET's revenue growth won't blow you away -- it saw the top line climb by 18% last year and it's looking at revenue growth to come in between 17% and 22% in 2005 -- yet it also makes it a more steady play as a casual observer of trends and passing fancies. With the media's gradual migration online a given, CNET's portfolio of interlocked properties is right smack dab in the middle of where an investor would want to be.
4. Webzen (Nasdaq: WZEN ) : $5.90. Online gaming in Asia is hot, but that's not much of a consolation to this Korean gaming specialist, which arrived unfashionably early and is now an unfortunate salmon as its games are waning in popularity, while others by companies like Shanda Interactive are taking over. Yet last month Webzen scored a coup when it landed the worldwide rights to the first online game developed by the creator of the Grand Theft Auto blockbuster franchise that has served Take-Two Interactive so well over the years.
While the new massively multiplayer online game, APB, won't hit the market for another two years, the company's cash-rich balance sheet will provide a cushion despite its aimless profitability. Its headstrong entry into the stateside market may lead to some intriguing possibilities even before 2007 rolls around.
5. Jones Soda (OTC BB: JSDA): $4.00. Tapping into my inner Peter Lynch, I tend to have a soft spot for public companies behind products that I enjoy. I didn't even know that Jones Soda, the maker of premium bottled soft drinks with eclectic flavors and user-submitted photographic labels, traded publicly until I had gone through way too many colorful bottles of green apple and blue bubblegum sodas.
Available at all of the usual suspects, such as Starbucks, Panera, and Barnes & Noble, the company has started to market canned soda products at Target. The end result is that while soda sales have been sleepy for Coke and Pepsi, revenues rose by 37% for Jones last year as earnings tripled to $0.06 a share.
6. Sirius Satellite Radio (Nasdaq: SIRI ) : $5.60. Although I am borrowing this one from my original "Ten Stocks Under $10" list, the company has come a long way. No, I am not pleased with the massive amount of shareholder dilution that has happened since then, but I am happy to see the company have a firmer balance sheet and product in place. I believe that Howard Stern come 2006 and Nascar come 2007 will help catapult more listeners into the realm of satellite radio.
Yes, Sirius has just 1.1 million subscribers while rival XM Satellite Radio started out the year with 3.2 million listeners. There is plenty of market to share, and now that XM has hiked its prices, we will begin to test the pricing elasticity of this very dynamic sector.
7. Six Flags (NYSE: PKS ) : $4.43. I'm not going to lie to you: Six Flags has problems. The regional amusement park operator is deeply in debt. Even a brilliant ad campaign last year couldn't nudge the company toward profitability. It's got problems -- obvious problems -- including a closed-minded board that has turned away its largest investors when they have demanded change.
A shakeout is in the cards. You don't sit on prized assets for so long, underutilized, without reason eventually pumping through the veins of the company's clammy heart. If you look at the company's chart over the past few years, you see that perpetual late summer disappointments shatter the stock in the fall, yet it is now trading at the low end of its range. In other words, the typical pre-summer price buildup is no longer there as optimists are hard to come by. What a wonderful time for a contrarian to defy the odds and bank on either the company finally getting it right this summer or coming to its senses and cleaning house.
8. Krispy Kreme (NYSE: KKD ) : $7.37. Can the riskiest stock on this list also be its most recognized name? Probably. I'll admit that this pick would have been better a few days earlier, after I watched it shoot up by 39% over the first six trading days of March. That's fine. There is more sugar-glazing to be had if the brand restoration process succeeds. After Krispy Kreme's rough year, that isn't necessarily going to be easy, but for a company that many still see as potential bankruptcy fodder, there is a contrarian play here that is certainly not for the weak of heart -- then again, neither are the company's tasty treats.
9. Autobytel (Nasdaq: ABTLE ) : $5.89. The leading online car marketer is no lemon. Using its Internet properties to generate enough leads to produce $40 billion in annual car sales -- or 8% of the market -- the company is a vital tool for the automotive industry. Because it is able to produce results at a fraction of the cost of traditional car-selling channels, 31 of the 33 automakers have established relationships with Autobytel. Yes, the company did mark down its earnings guidance back in December, but revenues continue to inch higher. Yes, that extra letter in its ticker symbol means that the company has to rush to be in financial reporting compliance with the SEC, and it is trading at a third of where it was a little over a year ago. So it's not a shiny, perfect stock by any means, but as a sector-specific, valuable dot-com trading at less than two times sales, it may also be a trade-in worth making.
10. Radyne ComStream (Nasdaq: RADN ) : $9.02. While the broadcasting technology specialist has seen its shares climb by 26% since being recommended in our Hidden Gems newsletter, its prospects are worthy of being shouted about on rooftops -- or, at the very least, beamed off passing satellites.
This past quarter found earnings clocking in at $0.18 a share, a respectable improvement over last year's $0.16 showing during the year's final period. Sure, revenues came in essentially flat -- up just 2% -- yet it did so on meatier margins and a greater uptick in its order backlog. While the consistently profitable company was also packing more than $2 a share in cash when 2005 began, that will all go into acquiring amplifier maker Xicom -- a move that will grow the company's revenue base by 77%.
So there you have it: 10 under $10.
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Longtime Fool contributor Rick Munarriz hates counting to 10, but he doesn't mind doing it backwards. He owns shares in Jones Soda. The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.