It's a good time to be a bottom-feeder. I began singling out attractive low-priced stocks with the original "5 Stocks Under $10" more than seven years ago. It has evolved into a monthly list.
There are risks, of course. Stocks have their reasons for trading for less than a Hamilton greenback. However, now that the market has been rallying for six weeks, it's really lifting a lot of the stocks out of the doghouse.
Last month's picks have been a thing of beauty.
| Company |
4/17/09
|
3/13/09
|
Gain
|
|
Sirius XM Radio
|
$0.50
|
$0.198
|
153%
|
|
Bare Escentuals
|
$6.00
|
$3.66
|
64%
|
|
Focus Media
|
$6.71
|
$5.74
|
17%
|
|
Geron
|
$5.40
|
$4.36
|
24%
|
|
Ford
|
$4.00
|
$2.19
|
83%
|
The average gain of 68% in a single month is pretty awe-inspiring. Sure, the buoyant ways of Sirius XM Radio (Nasdaq: SIRI ) and renewed confidence at Ford (NYSE: F ) helped drive a good chunk of those gains, but all five stocks outpaced the S&P 500's 15% sprint over the same time.
I guess that places a little more pressure on me in drumming up this month's list of low-priced stocks worth watching, but I don't mind.
LoopNet (Nasdaq: LOOP ) -- $8.73
Being the leading online marketplace for commercial real estate is a lot like being crowned King of Cooties these days. Commercial properties may have held up relatively better than residential realty when the market began to falter, but vacant office buildings now stand next to foreclosed condo towers.
The upside for LoopNet is that it has held up reasonably well, financially. It also helps that the company is cash-rich and debt-free. Once commercial real estate prices begin to stabilize -- and we may be closer than the market's worrywarts think -- LoopNet will be the hotbed of activity again.
Take-Two Interactive (Nasdaq: TTWO ) -- $9.38
Was the company behind Grand Theft Auto IV stupid to pass on a $26-a-share buyout offer last year? You bet. It was also depressing to see the company's own financials turn to dust so quickly after GTA4 became the year's hot video game.
Things won't be pretty for Take-Two in the near term, but analysts have a brighter long-term outlook. With a healthy pipeline of releases and digital download initiatives, Wall Street sees the renegade video game publisher posting earnings of $0.95 a share next year, after making a meager profit this fiscal year.
NetScout (Nasdaq: NTCT ) -- $8.46
I became a shareholder in this company earlier this year; embarrassingly enough at a higher price than today's. The company is the niche leader in helping companies monitor uptime for high-speed networks. That's critical for systems that can't afford to fall asleep at the wheel, including online brokers and government defense platforms.
Acquisitions have helped light a fire under the company's growth. By month's end, analysts see the company reporting a profit of $0.88 for fiscal 2009. For fiscal 2010, which began just a few weeks ago, the pros see earnings clocking in essentially flat at $0.89 a share. I like a little more growth in my growth stocks, but this is an essential company trading for less than 10 times forward earnings.
Smart Balance (Nasdaq: SMBL ) -- $6.74
If you've strolled down the dairy aisle of your local grocer, you've probably seen the Smart Balance line of healthy buttery spreads.
What really impresses me here is that the company actually gained market share in its latest quarter. So many premium-priced brands are bellyaching about consumers shifting to cheaper generics, yet customers' loyalty to Smart Balance remains strong. The company's expansion into lines such as peanut butter and microwaveable popcorn hasn't been as successful as its flagship spread, but the brand keeps getting stronger.
LivePerson (Nasdaq: LPSN ) -- $2.50
If you surf around the Web long enough, you will find many companies turning to LivePerson to offer Web-based live assistance to customers and potential buyers. LivePerson supports 7,000 corporate clients, including biggies like Hewlett-Packard and Microsoft. It also provides "experts" to paying customers who need a little insight and consultation on a wide range of subjects.
Alluringly, LivePerson is growing within a profitable niche. Despite a difficult fourth quarter that featured a large writedown, Wall Street sees the company earning $0.17 a share this year, and $0.20 a share next year.
Five for the road
Turnarounds never happen overnight. 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 too much longer.
Finding promising stocks while they're still cutting their baby teeth is at the heart of the Motley Fool Rule Breakers newsletter for which I write. You can check it out for free with a 30-day trial subscription. It has nearly a dozen active stock recommendations trading for less than $10 at the moment, including Take-Two Interactive and LoopNet. Check those out, and I'll be back with more on the third Monday of next month.
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