Whether it's through following technical analysis, blindly heeding the advice of the talking heads, or engaging in some rapid-fire day trading, investors often take precarious shortcuts to generate investment gains. Of course, another one of the more popular shortcuts is looking for low-priced stocks under the assumption that they could "pop" at any moment.

Unfortunately, this doesn't happen as frequently as one might hope, because of the numerous risks that low-priced stocks carry.

Nevertheless, the fascination with low-priced stocks probably persists for the following reasons:

1. They are often considered dirt cheap.
2. They are linked with turnaround situations.
3. They are associated with small, obscure, and ignored companies.

Price means nothing
Here at the Fool, we do our darnedest to diagnose, prevent, and even cure the critical stock affliction known as "cheap-osis" -- the belief that a stock's per-share price, on its own, tells you whether a stock is cheap or expensive.

Through the use of splits and reverse splits, management can make the price of its shares literally anything it wants. That's the reason a company like Affiliated Managers Group (NYSE:AMG) -- whose shares are priced above $100 -- might very well be a bargain, while most penny stocks are too risky to buy at any price. It's the business valuation that counts most.

The rules of high/low
Sadly, though, some incidents of cheap-osis will never be cured completely. So, with the help of our lovely and incredibly talented assistant, the Motley Fool CAPS intelligence database, we'll screen for stocks that are trading for less than $10 and also have enough investment merit to earn a CAPS rating of four or five stars, with five being the highest possible. "High-star" stocks are investments that the CAPS community, in general, believes will outperform the formidable Mr. Market.

So, without further ado, here's this week's list of low-priced CAPS stars.



(as of 1/29 close)

Parker Drilling (NYSE:PKD)



Extreme Networks (NASDAQ:EXTR)



Microtek Medical Holdings (NASDAQ:MTMD)



Orthovita (NASDAQ:VITA)






As always, don't view these stocks as formal recommendations, but rather as ideas you may want to research further. With that said, one stock on the list, Parker Drilling, might indeed be worth some of your own Foolish due diligence.

Drilling low to the floor
Priced at a touch above $9, Houston-based Parker Drilling barely makes it into this week's star-studded list. But Parker is particularly interesting because its portfolio of services is fairly more diversified than your typical oil and gas driller, giving it the ability (in theory, anyway) to perform regardless of where the energy business cycle stands.

In addition to its U.S. barge drilling, international land drilling, and drilling-related rental-tools segments, the company also provides project management services. Besides meaning lowered exposure to the vagaries of energy prices, this type of diversity -- both in terms of asset class and location -- also allows Parker to offer a wider range of "full-service" products to operators all over the world. And judging from the bullish support that Parker is gaining in our CAPS community, investors are slowly catching on to the company's advantages and global reach.

The general sentiment in CAPS is that management's efforts to de-leverage its balance sheet, in addition to a seemingly attractive valuation and the positive near-term outlook for the drilling industry as a whole, make Parker a strong investment candidate. In addition, it's believed that Parker's impressive fleet of premium land-drilling rigs puts the company in a strong position to capitalize on increased utilization -- and, therefore, higher rig rates.

Taken all together, Parker Drilling seems pretty deserving of its five-star rating. CAPS resident tinpony believes that Parker's stock, although drilling for less than $10 now, shall soon come up with some double-digit returns:

"Higher rig rates, a reduction in debt and hopefully better future management should allow this stock to beat estimates in the future and rise to the $14.00 area."

The Foolish conclusion
Despite our Foolish attempts to educate the investment public on cheap-osis, the allure of low-priced stocks is simply undeniable. The good news, though, is that there are indeed single-digit wonders out there that can also make great investments.

So, if you really have a bad case of the 'osis and would like to find more good low-priced stocks for yourself, then head over to our Motley Fool CAPS community. Feel free to star-gaze for as long as you wish.

Foolish contributor Brian Pacampara reads the financial fine print to prevent cheap-osis and holds no position in any of the stocks mentioned. Affiliated Mangers Group is a former Motley Fool Stock Advisor pick. The Fool's disclosure policy is always in tip-top shape.