5 Low-Priced, High-Star Stocks

Buying stocks simply because they trade for less than $10 remains one of the "lowest" -- but most tempting -- forms of investing out there.

After all, nothing trounces Mr. Market quite like a $2 stock that moves into double digits over just a short period of time. Unfortunately, thanks to the numerous risks that low-priced stocks carry, these mega-multibagger returns don't occur as frequently as one would hope.

Price means nothing
Here at the Fool, we do our darnedest to diagnose and prevent the critical stock affliction known as "cheap-osis" -- the belief that a stock's per-share price, on its own, tells you whether a stock is cheap or expensive, attractive or unattractive, a winner or a loser.  

Through the use of splits and reverse splits, management can make the price of its shares literally anything they want. That's the reason a $100 stock like Alcan (NYSE:AL) might very well be a great opportunity, while most penny stocks are too wild to buy at any price.

Your weekly dose of sweet 'n' low
Sadly, though, some incidents of cheap-osis will never be cured completely. So, with the help of our Motley Fool CAPS intelligence database, we'll screen for stocks trading at less than $10 that also have enough investment merit to earn a CAPS rating of five stars.  

Without further ado:

As always, don't view these stocks as formal recommendations, but rather as ideas you may want to research further.

Opening the iGATEs
A great thing about CAPS is being able to easily find stocks that capitalize on strong, large-scale trends. iGATE, for example, is one of our community's favored ways to play the rampant growth of offshore outsourcing services. With the stock recently receiving a five-star rating, it might be worth a timely look, too.

Historically, iGATE's operating margins have been less than stellar, but over the last couple of years, they've certainly improved -- a positive sign, to be sure. Strong alliances with the likes of Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM) don't exactly hurt the bullish case, either. Throw in the fact that co-founders Ashok Trivedi and Sunil Wadhwani continue to own nearly 60% of the company, and you've got a low-priced stock with some top-notch characteristics.

CAPS player capsgolmal adds:         

The company has been in business for 20 + years and made big missteps in Internet bubble market, but is now back on track. It should grow revenue and margins from here-on. It doesn't need to do anything special for the outsourcing tide to carry it very far.

Rule Bruker
Bruker BioSciences, a Massachusetts-based provider of X-ray technology, is another low rider for which our community has high hopes. Like iGATE, Bruker just recently regained its five-star status, so it might make sense to give it a quick scan -- especially if it's growth you're trying to detect.  

In its latest quarter, Bruker posted earnings growth of 100%, while analysts expect profits to grow 28% annually for the next five years. The company derives half of its sales from overseas -- primarily Germany -- so it might also offer investors a way to benefit from the weak U.S. dollar. With a PEG of 1.25, BRKR isn't exactly cheap, but those growth rates should at least warrant a place on your watch list.

spildale comments on the opportunity:

This company is expanding by making acquisitions of complimentary businesses. Also, because it is in the medical imaging field, Bruker will continue to grow and expand with excellent cash flow.

The Foolish conclusion
Despite our Foolish attempts to educate the investment public about cheap-osis, the allure of low-priced stocks is simply undeniable. The good news, though, is that there are indeed single-digit wonders out there that can also make great investments.

So, if you really have a bad case of the 'osis and would like to find more good low-priced stocks for yourself, then head over to our Motley Fool CAPS community. It's 100% free -- the lowest price you'll find anywhere.