Buying stocks simply because they trade for less than $10 remains one of the "lowest" -- but most tempting -- forms of investing out there.

After all, nothing trounces Mr. Market quite like a $2 stock that moves into double digits over just a short period of time. Unfortunately, because of the numerous risks that low-priced stocks carry, these megamultibagger returns don't occur as frequently as one would hope.

Price means nothing
Here at the Fool, we do our darnedest to diagnose and prevent 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, attractive or unattractive, a winner or a loser.  

Through the use of splits and reverse splits, management can make the price of its shares literally anything they want. That's the reason a $100 stock like Fluor (NYSE:FLR) might very well be a great opportunity, while most penny stocks are too wild to buy at any price.

Your weekly dose of sweet 'n' low
Sadly, though, some incidents of cheap-osis will never be cured completely. So, with the help of our Motley Fool CAPS intelligence database, we'll screen for stocks trading at less than $10 that also have enough investment merit to earn a CAPS rating of four or five stars.  

Without further ado:


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Oil and gas

As always, don't view these stocks as formal recommendations, but rather as ideas you may want to research further. With that said, IXYS and ABX Air might be worth some of your own Foolish due diligence.

Ixnay to IXYS?
With a price tag just under $10, IXYS barely squeezes into this week's list of low-priced studs. Still, the power semiconductor company -- whose financial and price ratios seem to be popping up on stock screens everywhere -- doesn't exactly need my help to garner it some attention.

Fueled by strong demand from energy cost-conscious clients like General Electric (NYSE:GE) and Samsung, IXYS' revenues, earnings, and operating cash flow have grown at a double-digit clip on average for the past five years. But although those growth rates are indeed impressive, it's really IXYS' valuation (a P/E of 11.5 and EV/EBITDA of 9.5) that has our CAPS Fools talking.

As with most statistically cheap stocks, there's probably a reason IXYS sells at such a reasonable price. However, the combination of a strong backlog, ongoing buyback efforts, and the fact that founder and CEO Dr. Zommer owns approximately a fifth of the company indicates that IXYS might actually have a good chance of being a low-priced steal.

CAPS All-Star investu conducts a quick pitch on this semi:      

Small-cap with high insider ownership, little debt, and positive cash flow (from operations). Competes as a small sapling in a forest with competitive gross margins and a low P/E. ... Nice, unnoticed, potential gem for patient investors.

Low-cost flight
ABX Air, a Wilmington, Ohio-based air cargo transporter, is another low-priced stock that our CAPS players have high hopes for.

Last December, I highlighted ABX Air's frugal valuation after finding it among the core holdings of several master value investors (like Mohnish Pabrai and David Dreman, to name a couple). The big risk with ABX is the fact that 95% of its business continues to come from just one customer -- DHL -- so it's easy to see why Mr. Market has kept the stock grounded.

Yet despite that (very) scary risk, our community believes that the loss of DHL -- which ABX has been in business with for nearly three decades -- is a huge long shot at best. In addition, ABX bulls believe that management's strategy to capitalize on higher-margin, non-DHL opportunities is the catalyst that should finally unlock ABX's hidden value. I'm siding with CAPS on this one, but as an ABX shareholder (and confessed value junkie), I'm definitely a little biased.

Back in February, CAPS All-Star NetscribeServcs let investors know why they shouldn't be too airsick:

ABX Air has taken delivery of the first three ex-Delta Boeing 767s that have been converted from passenger aircraft to cargo aircraft. ... eight more are scheduled for delivery in 2007 and 2008. These planes will be used to expand company's non-DHL business where margins are high. Considering the above facts, the shares of ABX offer a good opportunity for long-term investors.

The Foolish conclusion
Despite our Foolish attempts to educate the investment public about 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, head over to our Motley Fool CAPS community. It's 100% free -- the lowest price you'll find anywhere.  

Foolish contributor Brian Pacampara owns shares of ABX Air but in none of the other companies mentioned. The Fool's disclosure policy is always in tip-top condition.