It's not the way I drew it up, but I find myself with a couple of stocks fetching single-digit price tags in my portfolio right now. I'm an investor in Genius Sports (NYSE:GENI), Annaly Capital Management (NYSE:NLY), and Latch (NASDAQ:LTCH). They are all trading below $10 as of Wednesday's close.
I've never had a problem approaching low-priced stocks, but I initially bought into two of these stocks while they were trading in the double digits. It's humbling, but I still like all three of these investments. Let's see why these are my three favorite stocks trading for less than $10 a share.
You can't have gambling without data, and this is where Genius Sports is winning the game. It's a leading provider of data and software solutions that it provides to sportsbook operators, casinos, and even traditional media companies that need official scores and statistics. Genius Sports took a hit after reporting mixed third-quarter results last week.
Revenue soared by a better-than-expected 70%, and it raised its top-line guidance. The problem here is that this isn't a prototypical "beat and raise" performance. The "raise" component isn't ideal since it's less than the "beat" in the third quarter, translating into weaker-than-expected growth for the current quarter. Genius Sports also pared back its outlook for adjusted earnings before interest, taxes, debt, and amortization -- triggering concerns by some Wall Street pros that it overpaid for its NFL rights and other sports deals with escalating fees.
I'm still a believer. Let's start with football. Nearly 38 million viewers tuned in for the Cowboys and Raiders game on Thanksgiving last week, the NFL's largest audience for a regular season game in 28 years. Something tells me owning 97% of the U.S. market for NFL data wasn't such a bad investment. The other bullish point is that the company itself is electing to receive the kickoff to go on offense. Several Genius Sports board members, including the chairman and CEO, bought shares earlier this week with the stock falling into the single digits.
Low stock prices and high yields can be hypnotic -- as long as you understand the risks. Annaly Capital is a mortgage real estate investment trust (mREIT) that just happens to be yielding a head-turning 11% right now.
Unlike traditional REITs that buy properties, Annaly holds mortgage-backed securities. Home loans are generally stable, and 92% of Annaly's $94.2 billion portfolio consists of agency-guaranteed debt. The sticking point here is that mREITs tend to take on leverage to produce higher yields for investors than the ho-hum returns offered by average mortgage rates. The leverage could be a problem, especially with the market consumed with the notion of rising rates and Federal Reserve tapering in the year ahead.
Annaly and its fellow mREITs will be challenged to sustain their beefy payouts and stock prices, but a lot of the negativity is already priced into the shares. Annaly is now trading lower than its book value of $8.39 a share.
Sometimes a ground floor opportunity starts at the basement. Latch -- like Genius Sports -- is now a broken special purpose acquisition company. It's trading for less than its acquirer's debut.
Latch is a provider of cloud-based access solutions for the rental market. LatchOS is an operating system that is gaining traction with landlords at high-end apartment buildings. As the name implies, the operating system controls the lock to every apartment door with a high-tech keyless solution. This makes it easy to move new tenants in and out since there are no keys to worry about collecting and rekeying. Landlords can also show a property to potential renters without being on-site. Renters can also take advantage of the next-gen tech to let houseguests, or maybe a cleaning service or delivery person, in remotely. More than one in every 10 new apartment buildings are now building LatchOS into their housing, and door locks were really just its foot in the door. The system can also work with intercom systems and smart-home hubs, making this a one-app solution to create rentals worthy of charging a tech premium.
We're still early here, but revenue has more than doubled for Latch every quarter this year. If opportunity is knocking -- for Latch or any of these low-priced stocks -- this is the company that will allow you to remotely answer the door.