Low-priced stocks appeal to many investors, but you have to be careful before you buy them. Often, low share prices are low for a reason, and the last thing you want in your portfolio is a low-priced stock that falls still lower after you buy it.
Some stocks have already demonstrated promise by seeing impressive share-price gains, yet they're still priced below the $10 mark. In particular, Arcos Dorados (ARCO +1.17%), Valhi (VHI +3.12%), and Everi Holdings (EVRI +0.00%) have modest prices but have seen gains of 50% or more in the past year. Below, we'll look more closely at these companies to see whether they can keep up their strong momentum.
|
Stock |
Share Price |
1-Year Gain |
|---|---|---|
|
Arcos Dorados |
$9.50 |
52% |
|
Valhi |
$6.36 |
92% |
|
Everi Holdings |
$7.78 |
141% |
Data source: Yahoo! Finance.
Put some golden arches in your portfolio
Arcos Dorados translates from Spanish to "golden arches," an appropriate name for the largest franchisee of McDonald's restaurants in the world. The company has about 2,000 locations in a dozen and a half countries across Latin America, including Brazil, Mexico, Argentina, and Chile.
Latin America hasn't always been kind to Arcos Dorados. When the economy in the region was under pressure from falling natural resources prices, the fast-food restaurant chain felt the pinch, as consumers pulled away from discretionary purchases.
Image source: Arcos Dorados.
More recently, Arcos Dorados has enjoyed positive impacts from a recovery in key economies in Latin America, especially Brazil, where about half of its stores are located. Thanks to efforts to make its balance sheet stronger and tapping into better financial conditions for its customers, Arcos Dorados is poised to keep taking advantage of the cyclical upswing in its business.
Made of titanium
Valhi has seen even bigger gains, riding a positive trend in its home industry. Chemicals companies have done well over the past year, and one area of particular strength has been the titanium dioxide market. Titanium dioxide is used as a pigment for paint, and strong demand has lifted prices of companies like Valhi that supply the chemical to customers.
Much of the rise for Valhi has come from consolidation in the industry, with other niche titanium dioxide players having seen interest as acquisition targets. That's produced some volatility in both directions for the stock in line with ups and downs of various proposed deals. Yet with fundamentals in the industry remaining solid, there's every reason to believe that Valhi will be able to do well, either independently on its own or as the target of a future acquisition bid.
Playing to win
Everyone knows that when it comes to gambling, the house always wins. However, casino operations are a complex business, requiring the latest technology that goes into the games that people play and the financial operations that ensure casinos retain all the cash they bring in. That's where Everi Holdings comes in, with its advanced security for floor transactions. Everi also ensures that its clients meet all applicable regulatory requirements, and it even offers a variety of slot machines and cabinet games to patrons.
Casino gaming has spread across the nation, with many areas of the country seeing it for the first time. That often creates a quick growth spurt, and Everi has done a good job of taking advantage of rising demand to serve a greater number of clients. In particular, by offering ATMs and other payment solutions for casinos and their visitors, Everi has been able to tap into a high-growth area that it believes has further to run.
Be smart about cheap stocks
Low-priced stocks can be risky, and too many people assume that any stock below $10 per share is a smart bargain. That's not the case, but these three stocks all have solid potential rewards to go with the risk they carry, making them worth a closer look from those searching for smart investment opportunities.
