Big gains sometimes come with small stock prices. Most investments trading at prices in the single digits will stay there, but some names currently have valuations too attractive to ignore.
Sirius XM Holdings (SIRI), Annaly Capital Management (NLY -0.32%), and New Oriental Education & Technology Group (EDU -13.96%) are three low-priced stocks that seem cheap right now. Two are profitable with healthy yields, and one is trading roughly for its net cash position. Let's take a closer look.
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Sirius XM Holdings
We're getting back in our cars again, and that's good news for satellite-radio monopoly Sirius XM Holdings. It had 31.4 million self-pay subscribers at the end of June. Outside of a five-quarter stretch when revenue was padded by the acquisition of Pandora, the 15% year-over-year growth it just posted is its strongest top-line showing in more than a decade.
Momentum is back at Sirius XM. In full-year guidance earlier this week, it boosted all four metrics it provides. The same media giant that was hoping to close out 2021 with 800,000 more self-pay accounts than it had when the year started is now eyeing 1.1 million net additions.
Sirius XM is a generator of free cash flow that it returns to shareholders through a quarterly dividend, which currently amounts to 0.9%, and an even larger share buyback program. Sirius XM has repurchased nearly 40% of its outstanding shares since the end of 2012. You know what it's likely to do with the additional money it makes this year.
Annaly Capital Management
If Sirius XM's current yield of 0.9% sounds impressive for a low-priced stock, try Annaly Capital Management on for size. Annaly is a mortgage REIT (real estate investment trust), primarily leveraging its way through a portfolio of government-guaranteed home loans to deliver heady returns.
Annaly's current yield is 10.4%, though there are no guarantees that the payouts will stay that high. Book value per share dipped from $8.95 to $8.34 over the past three months, but that's also essentially where the stock is right now.
Annaly posted better-than-expected second-quarter results on Wednesday afternoon, the same thing it has done for more than a year. Its core earnings of $0.30 per share were well ahead of the $0.27 a share that analysts had been estimating. Annaly is reducing its leverage and the size of its portfolio, in a move to increase the liquidity it can put to work in a more compelling climate later this year. Despite reeling back its risk profile, it still managed to more than cover its dividend for the quarter, and that's exactly what you want in a high-yield play.
New Oriental Education
For-profit educators based in China have had a rough week. Chinese regulators announced late last week that the government would be easing the burden of homework and after-school tutoring for grade-school students in compulsory education. That may not seem like the kind of news that would send the publicly traded players in this space reeling -- but we're talking about new rules that would make after-school tutoring institutions become nonprofit organizations. Restrictions may also limit the raising of capital and the ability to consider acquisitions.
New Oriental Education has plummeted 63% over the past four trading days. So why does it make the cut on this list when its livelihood is being challenged? Well, its major advantage is a net cash position of $3.9 billion. It closed with a market cap of $4 billion on Wednesday. Right now it's effectively trading for free.
The other reason to warm up to New Oriental Education is that it's more diversified than its peers. Bank of America analyst Lucy Yu estimates that new regulations will reduce New Oriental Education's revenue by 40%, less than the 65% and 70% losses the bank expects from two of its rivals.
This won't be the bottom if New Oriental Education can't reinvent itself here; if it begins to bleed through its nearly $4 billion in cash, the stock will continue to drift lower. The upside is still higher in the near term, and the company has plenty of time and money to land on its feet in areas that don't run afoul of China's shifting regulations.
Sirius XM Holdings, Annaly Capital Management, andNew Oriental Education & Technology Group are trading at single-digit price points, but don't call them penny stocks. There's more to all three investments than meets the eye.
