5 Stocks Under $10

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You can play small ball and still hit a few homers.

The market's been rallying since mid-March, and low-priced stocks have been some of the bigger beneficiaries. I have been singling out attractive opportunities since my original "5 Stocks Under $10" eight years ago. The past few months have been exciting times in this space.

Let's go over my five picks from March to prove my point.

Company	10/16/09	3/13/09	Gain
Sirius XM Radio (Nasdaq: SIRI)	$0.5925	$0.198	199%
Bare Escentuals	$13.28	$3.66	263%
Focus Media	$13.00	$5.74	126%
Geron	$6.50	$4.36	49%
Ford (NYSE: F)	$7.42	$2.19	239%

The average gain of 175% in just seven months is remarkable. Sirius XM Radio and Ford were on the brink of bankruptcy before battling back, and have gone on to roughly triple.

Will the next few months be as scintillating? 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. This is a risky fishing hole, and whatever goes up can just as quickly come down.

Let's go over this month's picks.

InfoSpace (Nasdaq: INSP) -- $8.14
There's more to online search than the popular portals. Metasearch sites scour the results of the leading engines to deliver what they believe will be superior findings. InfoSpace sites include Dogpile, WebCrawler, MetaCrawler, and its namesake site.

InfoSpace surprised the market by posting a second-quarter profit, after serving up deficits in each of the three previous periods. Analysts see the black ink growing from here. The dot-com survivor also managed to grow revenue by 14% during the period, a rare sight outside of Big G.

H&Q Life Sciences (NYSE: HQL) -- $9.24
What if I told you that you could buy a basket of promising biotechnology stocks for just $0.82 on the dollar? You can do exactly that through this Hambrecht & Quist closed-end fund.

Unlike traditional mutual funds that trade at net asset value, closed-end funds are bought and sold on stock exchanges throughout the day. Market demand dictates whether the fund sells at a premium or a discount to its actual value. H&Q Life Sciences closed out last week at $9.24, yet its net asset value is $11.31. Yes, investors can buy into a portfolio of biotechs and related health-care stocks at an 18% discount.

The catch, of course, is that many of these closed-end funds perpetually trade at discounts. Unless there's a liquidation of the fund, sellers will have to let the fund go at the same discount. However, it's a great way to play the volatile biotech space where buying into a basket of stocks can help curb some of the risk.

LoopNet (Nasdaq: LOOP) -- $9.41
Let's talk about being at the wrong place at the wrong time. LoopNet runs the leading online marketplace for commercial real estate. After the double whammy of the corporate-cracking recession and the burst of the real estate bubble, this has become a scary sector.

Thankfully, LoopNet is holding up better than you may think. It remains profitable. It has a cash-rich balance sheet. It may have suffered an 18% decline in premium subscriptions over the past year, but listings and free user registrations have surged as the growing supply of properties starts to entice the curious and opportunistic.

Morgans Hotel (Nasdaq: MHGC) -- $5.03
If you want to hang with the pretty people of South Beach – and if money is no object -- you have to stay at the Delano. It's cooler than you, as the swanky beachfront resort draws the rich and famous. The Morgans-owned hotel is where Sarah Silverman and Matt Damon filmed their virally famous Jimmy Kimmel tryst-driven music video last year. Unfortunately, Morgans' financials have been more hip replacement than hip lately.

Nothing kills a chain of "it" boutique hotels like a tourism-snuffing recession. Revenue per available room fell a staggering 37% at Morgans during the second quarter. Losses continue, and that's not fun when you're a leveraged hotelier. It caught a break from its mezzanine lender, but analysts don't see Morgans posting a profit this year or next.

This appears grim, but today's problem of trying to book high-end clientele into the Mondrian at Los Angeles or the company's namesake hotel in New York City becomes an opportunity tomorrow when the economy turns around.

ChinaEdu (Nasdaq: CEDU) -- $8.13
If postsecondary online education is a domestic growth industry, one can only imagine the potential in China. ChinaEdu has been striking deals with Chinese universities, delivering comprehensive services for online degree programs.

Enrollment is growing for its online programs, up 18% over the past year. ChinaEdu has delivered better-than-expected earnings in each of this year's first two quarters, and analysts are jacking up their near-term profit forecasts.

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 Motley Fool Rule Breakers newsletter for which I write. You can check it out for free this month with a 30-day trial subscription. There are more than half a dozen active stock recommendations in the growth stock research service trading for less than $10 at the moment, including LoopNet. Check those out, and I'll be back with more on the third Monday of next month.