Angling for low-priced stocks is a lot like fishing in an uncharted island. You have plenty of elbowroom to cast your reel out and there's no telling what you'll reel in. Over the summer, I scoured the market for $5-to-$10-a-stub stocks. I was looking for dirt-cheap value stocks just waiting to be unearthed. I was looking for upstart growth stocks just hoping for the chance to be timed in a sprint. I was looking for the story stock that still remained untold. As I noted back then, I found myself on the Wall Street crosswalk that separates reward from risk's most dangerous intersection. Would I have the right of way?
To emphasize the volatility of the deceptively shallow low-priced equity wading pool, of the 10 stocks I singled out, only half remain in the $5 to $10 camp. Two have fallen out of favor and into the penny-stock camp while another three have clawed their way up and into the double-digits. As of Wednesday, while six of the stocks are trading lower than they did back in July, thanks to healthy gains in some of the winners, the average gain has been slightly positive -- up 1.6% through last Wednesday's close.
11-Jul 24-Oct Return FTD.com $6.17 $4.24 -31.3% ESS Tech 8.34 14.55 74.5% Helen of Troy 9.45 11.02 16.6% Hollywood Ent. 9.35 14.63 56.5% Oil States Services 9.65 8.10 -16.1% Sirius Satelite 8.39 3.00 -64.2% Suburban Lodges 7.80 7.00 -10.3% Telefonica Moviles 6.50 6.89 6.0% TiVo 6.00 5.57 -7.2% Worldwide Acceptance 8.70 8.00 -8.0% 10 Under $10 1.6% Nasdaq Composite -12.2% S&P 500 -8.0%
Let's revisit these companies one by one:
Suburban Lodges of America (Nasdaq: SLAM) -- A lodging stock during these travel-weary times? Suburban has been stung. Last month, its average weekly revenue per room dropped by 5.6% to $153.47. That's actually far better than the tourist industry as a whole, and that's due to the fact that Suburban is an extended stay chain, catering to the relocating and those on temp assignments.
The slow economy has prompted analysts to scale back projections. The company is now expected to earn $0.49 a share next year -- four pennies lower than its summer consensus. Trading at half the company's book value, yet highly debt-leveraged, it might be one checking into a little further.
TiVo (Nasdaq: TIVO) -- Two weeks ago, personal television specialist TiVo got a major boost when the company entered into a seven-year deal with Sony (NYSE: SNE) to use the TiVo technology in Sony products. While the company has become a household word for couch potatoes, it has also been a four-letter word to its investors. The company continues to grab subscribers at a healthy clip and is patent-rich, yet the profitability payday is still years away.
Helen of Troy (Nasdaq: HELE) -- Sitting pretty this summer, this beauty and health products company was the first to break into double-digits after reporting a strong fiscal first quarter back in July. Things got even better earlier this month when the company reported that second-quarter earnings nearly doubled on a 29% surge in revenue.
The company also raised its full-year targets. Again. Helen of Troy is now expecting sales to top $410 million and earnings per share to fall between $0.82 and $0.92 a share. That would have profits rising by at least 37%. That's not too shabby for a company trading at just 12 to 13 times this year's earnings.
FTD.com (Nasdaq: EFTD) -- Like clockwork, FTD.com reported its fifth consecutive quarterly profit last week. A profitable dot-com? Indeed. The company continues to drive down its corporate overhead, and that includes its customer acquisition costs. Revenue is up and more customers are migrating towards the more cost-effective online interface over simply ringing the company up for floral arrangements and gift deliveries.
Oil States International (NYSE: OIS) -- With oil prices back down, the once-hot energy sector has been cooling off. That doesn't mean the company's offshore products, tubular services, and well site services are necessarily out of favor. However, the company's heady growth, where it had the top line more than doubling through the first half of the year, might be slowing. We'll have a clearer picture when the company reports its third-quarter performance later this week.
Anyway, since July, this deepwater drill sergeant has seen next year's net income estimates fall from $1.03 a share to $0.88 a stub. That's a penny less than it's expected to earn this year.
Hollywood Entertainment (Nasdaq: HLYW) -- Video rentals? Hot? The slumping economy already had the chains buzzing. Second only to Blockbuster (NYSE: BBI) in size, Hollywood saw healthy foot traffic all summer long and things only picked up after last month's terrorist attacks had folks wanting to stay closer to home and their VCR machines.
Since we checked the stock out for a three-month rental back in July, its profit outlook has more than doubled this year -- to $0.47 a share. The lone analyst with a 2002 figure is looking for earnings to more than double to $1.01 a share come next year.
This summer produced some meaty box office flicks and not enough time to see them all. As those films make their way through the video distribution channels it's easy to see why Hollywood Entertainment is worthy of the spotlight right now.
Telefonica Moviles (NYSE: TEM) -- As the cell phone arm of Spain's Telefonica (NYSE: TEF), Moviles has had to ride out the global wireless slump. The company still has the halo of potential, having followed Telefonica into South American markets where the wireless market remains to be more fully developed. As I pointed out last time, from 1996 through the end of last year, revenues went from $1.3 billion (in U.S. dollars) to $5.5 billion. However, this is an overseas play, even if it trades as American Depositary Shares. You have currency issues to deal with. Acquiring information is also much harder than sticking to stateside equities.
ESS Technology (Nasdaq: ESST) -- As the third of our double-digit school graduates, ESS continues to ride the growing DVD adoption rate. While results fell year-over-year, they were up sequentially as the company now claims to be the market leader in DVD chips. ESS was able to buy back 700,000 shares while bulking up its cash position above the $100 million mark.
World Acceptance (Nasdaq: WRLD) -- As a provider of small consumer loans, one would think that World Acceptance would be eating up the recent wave of rate cuts. Well, it is and it isn't. While it's in a position to offer more attractive rates, and its loan portfolio has grown as a result, it has also had to deal with a spike in personal bankruptcies.
Yet, the sum of all its parts was positive as the company reported its September quarter results two weeks ago. Revenue and profits rose by 10% and 13%, respectively. That's more than decent when you consider that the stock is going for just seven times next year's bottom-line projections.
Sirius Satellite Radio (Nasdaq: SIRI) -- Sirius is also known as the Dog Star, so it's no surprise that this was the biggest dog in our summer list. While its satellite radio rival XM Satellite Radio (Nasdaq: XMSR) has launched according to plan, Sirius has not been as fortunate. Earlier this month the company announced that it would delay its service until next year and its CEO stepped down.
Despite significant deals in place, now that XM has beat it out in the space race to roll out subscription-based radio with nearly 100 crisp channels offering coast-to-coast coverage, this is hardly a welcome situation. Sirius may be the lowest priced of the lot here, but it has earned it.
So, the potential and the pitfalls picked it up a notch. Only three of the 10 stocks were spared a double-digit percentage move one way or the other. While the sum produced a smooth average, it is an important reminder to diversify. The small cap arena is a very exciting place to be, for the very reasons that Paul singled out last week, but you also want your money invested elsewhere.
Rick Aristotle Munarriz has 10 good reasons to look into these 10 stocks a bit further, but he doesn't own a single one. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.