The party may not be over for low-priced stocks, but it seems as if somebody has called the cops. You can't blame the cynics: Investors who were scooping up bargains when the market bottomed out in March are sitting pretty today.
I began singling out these attractive opportunities in my original "10 Stocks Under $10" column. When the times are good, these picks will be great. But when the going gets tough, these speculative stocks often get bullied.
Let's go over the five picks from March to prove my point.
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Price As of
Aug. 14, 2009
|
Price As of March 13, 2009
|
Gain
|
|
Sirius XM Radio (Nasdaq: SIRI )
|
$0.5654
|
$0.198
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186%
|
|
Bare Escentuals
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$9.21
|
$3.66
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152%
|
|
Focus Media
|
$9.17
|
$5.74
|
60%
|
|
Geron
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$7.46
|
$4.36
|
71%
|
|
Ford (NYSE: F )
|
$7.83
|
$2.19
|
258%
|
The average gain of 145% in just five months is remarkable. Sirius XM Radio and Ford were on the brink of bankruptcy before battling back.
Will the next five months be as scintillating in this space? Probably not. The rallying markets are due for a breather, and the same goes for the stocks trading in the single digits that I cover every month.
It doesn't mean that there aren't opportunities out there. Let's go over this month's picks, as I limit myself only to companies that analysts see turning a profit this year -- to help ease the sting of volatility.
IMAX (Nasdaq: IMAX ) -- $9.20
The big-screen specialist killed off two droughts in a single move earlier this month, when a strong quarter temporarily propped the stock above $10. It was the company's first quarterly profit -- and first time trading in the double digits -- in three years.
The stock has given back some of those gains, but the profitability should stick around. IMAX continues to grow its empire of gargantuan digital movie screens, and movie studios are turning to the company to put out enhanced versions of their films for the premium-priced format.
Cott (NYSE: COT ) -- $6.24
The recession should have been kind to the maker of generic soda. Consumers are flocking to store brands, so Cott should have enjoyed a windfall. Unfortunately, it's been more flat than fizz at Cott these days, with the stock still meandering in the single digits.
The company's bottom line did improve in its latest quarter, but revenue grew by only 2%, even after adjusting for adverse foreign exchange fluctuations. The upside is that Cott has blown past Wall Street's profit targets in each of the past two quarters. Analysts see the budding pop star earning $0.64 a share this year and $0.70 a share next year, enough to price the stock -- like its beverages -- at a steep discount to the national brands.
Domino's Pizza (NYSE: DPZ ) -- $7.61
Pizza isn't a hotbed of innovation, but Domino's appears to have a winner with its pasta dishes served in bread bowls. Just try to avoid counting the carbs. It also has a hit with the Chocolate Lava Crunch Cakes it introduced this month, reminiscent of the amazing Fudgem brownies that were inexplicably axed two years ago.
I'm not just thinking with my gut on this one. The pizzeria chain's stock has shed nearly half of its value over the past year, even though Domino's has topped Wall Street guesstimates for three consecutive quarters. Fire up the ovens! It's time to make that dough rise again.
JetBlue (Nasdaq: JBLU ) -- $5.39
Profitable airlines seem to be as rare as on-time arrivals, but JetBlue fits the bill. It turned heads when it posted its first quarterly profit in four years back in April. The black ink just keeps coming, with analysts targeting net income of $0.22 a share this year and $0.46 a share come 2010.
Last week's $599 "all you can jet" promotion is a bit dodgy, as it perhaps throws the industry into a pricing war, but it's yet another example of JetBlue's ability to think outside the cabin box in an industry that can use fresh thoughts.
The Knot (Nasdaq: KNOT ) -- $9.93
This may be the last time The Knot qualifies for this list, so I may as well send it off with a bang.
The top wedding-planning website has struggled lately. The overall advertising market is down, but couples are also delaying nuptials or scaling back on lavish weddings. When the economy turns, I think you'll see The Knot come roaring back into favor.
Five for the road
As promised, all five of these stocks are expected to turn a profit this year. Analysts see all of them building on that momentum next year.
| |
2009 EPS
|
2010 EPS
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|
IMAX
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$0.08
|
$0.40
|
|
Cott
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$0.64
|
$0.70
|
|
Domino's
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$0.80
|
$0.90
|
|
JetBlue
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$0.22
|
$0.46
|
|
The Knot
|
$0.03
|
$0.13
|
Source: Yahoo! Finance.
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 the service out for free with a 30-day trial subscription. There are nearly a dozen active stock recommendations in the growth-stock research service trading for less than $10 at the moment, including IMAX and The Knot. Check those out, and I'll be back with more on the third Monday of next month.
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