The investment adage that a cheap stock is cheap for a reason is often a good one to follow, as it can keep you from buying a busted business. It's why investing in penny stocks is also generally not a good idea.
But to every rule there are exceptions, and sometimes a low-priced stock is still a great one to own. The three companies below are trading under $10 a share, and represent some compelling opportunities.
Image source: Getty Images.
AMMO
Share price: $5.80
Just as its name suggests, AMMO (POWW -2.34%) is an ammunition manufacturer, and it is having one of its best years ever. Fiscal-third-quarter sales surged 500%, and through the first nine months of the year they have nearly quadrupled. The company expects business to be even better this year and into 2022, too.
Although AMMO competes against much larger ammo producers -- like Vista Outdoor (VSTO -0.41%), which owns the Federal Premium brand, and Olin, which manufactures the Winchester brand -- there is a massive ammunition shortage because demand is so high, and the rising tide is lifting all of the industry's boats. Federal Premium's president was so exasperated by allegations his company was suppressing supply he took to YouTube to plead for understanding that his company was working around the clock to produce as much ammo as it can.
Gun sales have risen to unprecedented levels recently, and President Biden's recent call to ban the sale of certain firearms is likely to keep demand from gun buyers at a fever pitch. Because millions of Americans bought their first firearms in 2020 -- some 40% of sales were to first-time buyers -- ammo sales could see even greater growth.
After a years-long slump, the firearms and ammo industries are white-hot right now, and AMMO should be a beneficiary of the heightened demand.
LiveXLive
Share price: $6.07
Going to a concert -- or any live show -- during the pandemic was virtually impossible, which is why LiveXLive (LIVX 8.05%) hit the scene at just the right time to bring such events to people virtually. It broadcasts concerts via audio and video, and early on in the COVID-19 outbreak hosted a 48-hour music festival called "Music Lives" that generated over 50 million views, with over 5 billion views on TikTok.
LiveXLive just announced it was further expanding its programming, and perhaps offering a better way to monetize its content by using Facebook's (META -12.78%) new paid online event feature. The service allows event organizers to manage the entire process from creating and marketing events to signing up attendees and collecting fees, and do it all in one place. Facebook is also helping LiveXLive reach as many people on the social networking platform as possible. The pay-per-view shows will cover areas including comedy, sports, and podcasting.
One analyst recently raised his price target on LiveXLive to $7 a share, but with virtual events still likely to be the norm for some time to come, the online audio and video event host may even have more to offer investors going forward.
OrganiGram
Share price: $3.50
Partnerships between marijuana producers and consumer products giants are nothing new, and even becoming common these days as CPG companies scramble to earn social media bonus points. But the investment British American Tobacco (BTI -0.78%) just made in OrganiGram (OGI -2.59%) could be very different.
The global tobacco company is, like much of the rest of the industry, moving away from combustible cigarettes and toward healthier alternatives, such as vapor and heated tobacco products. It took a 19.9% stake in OrganiGram, paying $176 million for some 58.3 million shares of the business, and says it is primarily interested in the cannabidiol segment of the market.
British American is piloting a CBD vaping product in the U.K., and the tobacco company says Organigram "has a proven track record of consumer-led innovation and developing high quality adult-use recreational and medical cannabis products, which are legally available in Canada."
Because British American took a measured approach to finding a partner, it avoided the writedowns many other companies have since taken on their investments. Analysts are stoked by the deal's potential for OrganiGram: They think its market share in Canada could nearly double over the next few years, and that the acquisition offers the possibility of entering new markets. There's even the possibility British American could increase its ownership position, or even buy the rest of the company.
Particularly if marijuana legalization happens in the U.S. sooner rather than later, it's a partnership that could pay off handsomely for investors.
