In a world that's focused on bargain prices, it's easy to understand why many investors gravitate toward low-priced stocks. But on its own, the price of a stock means nothing, because it's up to the company how many shares it has outstanding. If you look only at a stock's price, you'll miss out on other key information, including some warning signs that could steer you away from dangerous investments.
Some low-priced stocks have opportunities to regain lost ground, while others are still on an ascent after a quick start. Among the stocks you can currently purchase for less than $10 per share are Sirius XM Holdings (SIRI +0.00%), Annaly Capital Management (NLY 1.35%), and Infosys (INFY 2.12%), and below, we'll take a look at how long they're likely to remain this cheap for would-be investors.
Image source: U.S. Currency Education Program.
|
Stock |
Share Price |
1-Year Price Change |
|---|---|---|
|
Sirius XM |
$6.26 |
10% |
|
Annaly Capital |
$9.98 |
(19%) |
|
Infosys |
$9.83 |
35% |
Data source: Yahoo! Finance. Stock price as of Oct. 17, 11:30 a.m. EDT.
Sirius opens Pandora's box
Sirius XM was a pioneer in the satellite radio industry, and it's been an investor favorite for years. But after enjoying massive gains during the tech boom of the late 1990s, the satellite radio provider's stock suffered equally large share-price declines from which it has never fully recovered.
Nevertheless, Sirius XM has gotten back into Wall Street's good graces more recently. Recent quarters have shown rising subscriber counts, and falling churn levels indicate greater loyalty among the company's core customers. Sirius projected even stronger growth numbers ahead.
Even more promising is Sirius XM's offer to buy Pandora Media (P +0.00%) in a deal worth about $3.5 billion. Under the deal's terms, Pandora investors will receive 1.44 Sirius XM shares for every Pandora share they own. The combination promises to give Sirius greater exposure to mobile listeners while giving Pandora valuable content to promote over its network. The strategy could well keep lifting Sirius even after the deal's complete, and that would be good news for longtime shareholders who've gotten tired of seeing the stock stuck in single digits.
Annaly deals with rising rates
On the other side of the performance coin, Annaly Capital has gone through challenging times lately. Rising interest rates create a difficult environment for the mortgage-focused real estate investment trust, which relies on cheap financing in order to make leveraged investments in mortgage-backed securities.
However, Annaly has two things going for it right now. First, it's been able to sustain its dividend fairly well and pays a whopping 12% dividend yield at current prices. Also, Annaly currently trades at a price below its tangible book value, which has historically been a good indicator of value. That's no guarantee that Annaly shares will rebound quickly, especially in a rising-rate environment. Over the long run, though, healthy dividends and good value should translate to solid returns ahead.
Looking to emerging markets
Finally, Infosys finds itself back below the $10-per-share mark after a brief stint in double-digit territory earlier this year. Healthy demand in the information technology sector has been able to offset negative sentiment about emerging-market stock markets recently, and the reforms that Indian Prime Minister Narendra Modi has put in place have had generally positive impacts on the corporate sector in India.
Infosys has a lot of potential in serving the needs of enterprise customers seeking to expand their technological capacity. Key areas such as cloud computing, data analytics, the Internet of Things, and interactions between customers and businesses are bringing the IT consultant a lot of business, and Infosys doesn't see those trends letting up anytime soon. As long as tech keeps moving forward, Infosys will have the ability to keep expanding its business.
Be prudent with your investments
Picking any stock just because of its price can be like throwing your money away. With reasonable prospects to keep producing good returns, the three stocks above give investors reason to believe that they can produce solid gains for their shareholders going forward.
