5 More Stocks on Wall Street's Dollar Menu

It's now been nine months since I wrote the original "5 Stocks on Wall Street's Dollar Menu" article. I was surprised at the time to find so many recognized stocks trading for less than $1 a share.

Even more household names would join the list in the months to come, as familiar companies in all industries buckled under the market's malaise.

A lot has changed since my last "dollar-menu" column in early March. The market's monstrous rally has been particularly kind to the downtrodden companies. Four of the five stocks on that March list now trade for well over a buck. The lone exception is Sirius XM Radio (Nasdaq: SIRI  ) , but it has certainly been no slouch, having soared by 169% since the March column.

A healthy market has certainly cleared out many dollar-menu specials, but the cupboard is not bare.

In singling out candidates, I look for two things:

  • The stock should be a stateside company. There are too many foreign American depositary receipts that trade for pocket change. That's not their fault -- it's a currency-exchange thing -- but I still omit those stocks.
  • I also limit myself to stocks with a market cap of no less than $100 million, because the names on this list are speculative enough as it is. I don't want to dig my hand too deep into the penny-stock jar.

That said, let's dive into my first dollar menu in three months.

1. XOMA (Nasdaq: XOMA  ) , $0.82
It's hard to call XOMA an upstart: The company went public in the 1980s! However, it's still swinging away, always aiming for the fences.

Its best hope to round the bases is XOMA 052, a potential blockbuster on the diabetes front. The rub, of course, is that the drug is still in the first phase of clinical trials. It will be years before the drug has a chance to hit the market, and the odds are long for most treatments in the first phase to make it that far.

Favorable studies along the way would certainly help the stock, but like many biotech stocks, this is a lottery ticket for patient investors. This one is priced even cheaper than a scratch-off.

2. Colonial BancGroup (NYSE: CNB  ) , $0.67
Shares of the Alabama-based bank took an 18% tumble yesterday, as the stock was officially booted from the S&P Midcap 400. We're not talking about the widely mimicked S&P 500 here, and the announcement came a week ago, so this is old news. But when you're trading for pocket change, having even a few index-tracking institutions unloading their positions will be enough to shake up your stock.

After dozens of bank failures this year, there is always a chance that Colonial Bank may join the industry's mass grave. Federal regulators hit the bank with a cease-and-desist order this month, a move that put a pinch on a company that needs to shore up its capital levels at the worst possible time.

As a regional bank, Colonial doesn't fall under any "too big to fail" nets, so this one may be as speculative as they come. Analysts don't see a return to profitability this year or next. But bulls will argue that a company still has a shot until it officially fails, and they're right. We're just talking about a huge wall of worry for Colonial to scale at this point.

3. Blockbuster (NYSE: BBI  ) , $0.77
Movie rentals have been one of the few recessionary winners, as consumers angle for the affordable pleasures of a night in with a rented DVD.

Blockbuster isn't afraid to dream big. It's entering the video game rentals-by-mail market this month. It's also investing in kiosks that deliver movies through portable storage devices. The company has been profitable in each of the past two quarters, too.

If this news sounds good so far, then you have to wonder why Blockbuster is trading for less than what its biggest real-world retail threat -- Coinstar's (Nasdaq: CSTR  ) Redbox -- charges for an overnight rental. Well, Wall Street isn't sure that the chain's debt-saddled balance sheet will give it the flexibility to see its dreams become reality. The Street also sees red ink on the bottom line during the second and third quarters.

Blockbuster should be able to appease creditors if it's able to surpass near-term performance expectations. Early success on its new forays would also be an encouraging sight.

4. Capstone Turbine (Nasdaq: CPST  ) , $0.85
Eco-friendly investors are cheering for Capstone. The company makes low-emission microturbine systems at a time when fighting pollution is as popular as it has ever been.

Unfortunately for Capstone, thinking green isn't enough to get you out of the red. The company posted a wider net loss last week than it did during the same quarter a year ago.

Capstone also has more things to worry about than just a deficit on the bottom line. The company is selling its microturbines for less than it costs to make them. In its fiscal year that ended in March, the company scored $43.9 million in revenue, but that figure was more than offset by $49.3 million in costs of goods sold.

Negative gross margins aren't pretty, and they make the 120% surge in Capstone's order backlog bittersweet. However, as green technologies get cheaper to make -- and the incentives get larger -- you have to like Capstone's chances.

5. Finisar (Nasdaq: FNSR  ) , $0.59
This stock has all of the makings of a tech darling. It's a major player in fiber-optic subsystems and network test systems at a time when high-speed multimedia connectivity is all the rage. Finisar is also backed by a healthy rating in Motley Fool CAPS, with members of our Fool community rating it four out of five stars.

Revenue fell by 4% in its latest quarter from year-ago levels, but most tech stocks have felt that pinch. Finisar almost broke even on a non-GAAP basis, and it is profitable on that basis over the past year. Its balance sheet could be better, but it's in surprisingly good shape on the debt front, beyond some hefty convertible notes.

Finisar isn't perfect, but then again, you can never expect perfection from a dollar menu.

Here are some other ways to buck the buck:

Longtime Fool contributor Rick Munarriz enjoys a $0.99 burger as much as the next bargain hunter does. He owns no shares in any of the stocks in this story and is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 24, 2009, at 12:58 PM, catoismymotor wrote:

    Rick,

    Thanks for the article. I am going to have some with your screeing criteria to see what else looks good. Thanks for the idea.

    Cato

  • Report this Comment On June 24, 2009, at 1:16 PM, JackSpaded wrote:

    Rick,

    As great as the article sounds, I have trouble with it, mainly based on what you had to say about your March dollar menus and how 4 out of 5 are trading well over one dollar now. We all know SIRI is having trouble and it's stock is down from .89 to .39 from than to now, but the other stocks have been hit significantly worse. CDL was at .78 in March and now is at .01 and facing extinction, SIX flags was at .92 and currently trades at .13, and Vonage is well below the 1.14 it was trading at in March. The only up swing has been Rite Aid with a .32 cent jump to 1.30. If I had placed $1000 on each stock for a total of $5000, I would have only $2550 left, which is a 49% drop. Not exactly what I want to be investing in. Of all of those stocks currently, the only one still promising is SiRiUs, due to the new iphone app and the used car market they are beginning to push themselves in. As for the new list, I am not liking the chances of CNB, and this is coming from a man that has been buying and selling the crap out of bank stocks over the past couple of months. Making well over 49% return on investments in BAC, FITHD, and Citi. BBi looks to take a turn for the worse too. Only one of your stocks did well last time, and I am going on a limp and saying you might have two this time, with FNSR and CPST. FNSR looks poised to grow and CPST could do the same. I do like the odds on XOMA, but not enough to put my money on it, maybe yours, lol. See you three more months down the road with Dollar Menu updates from all 10 of these stocks, hope they rebound for your sake.

    Sincerely,

    Jack

  • Report this Comment On June 24, 2009, at 1:34 PM, ddvideo wrote:

    Hi Folks,

    I mistakenly clicked on this link. I try to ignore the dribble from Bob and Tom, or Ted and Alice, or whoever these guys are.

    SIX VG SIRI RAD CDL were the last five dollar stocks mentioned. “Four of the five stocks on that March list now trade for well over a buck.” No-- I don’t think so.

    If these guys printed their news letter it would not be fit for a public restroom-- alright-- maybe it would be good for toilet paper.

    Sincerely,

    Too Ashamed to Admit I read this.

  • Report this Comment On June 24, 2009, at 4:32 PM, trammen0 wrote:

    You guys are IDIOTS!!! Take your crappy free article and your crook hedge fund friends and start up a new hobby.......

Add your comment.

DocumentId: 927759, ~/Articles/ArticleHandler.aspx, 7/25/2014 7:53:46 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement