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 swiftly rises into double digits. Unfortunately, because of the numerous risks that low-priced stocks carry, these mega-multibagger 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 a company's shares literally anything they want. That's the reason a $100 stock like Boeing (NYSE:BA) might very well be a bargain, 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 which also have enough investment merit to earn a CAPS rating of four or five stars.  

Without further ado:


Price (as of 7/13/07 close)

Market Cap


Advanced Analogic Technologies (NASDAQ:AATI)


$435 million


MIPS Technologies (NASDAQ:MIPS)


$424 million


Endeavour Silver (AMEX:EXK)


$222 million




$142 million


Rubicon Minerals (AMEX:RBY)


$169 million


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

Advanced advancing
Peter Lynch once wrote, "Everyone has the brain power to make money in stocks. Not everyone has the stomach." Advanced Analogic Technologies, a power-management semiconductor company, is a prime example of what the legendary investor was talking about.

After a disappointed Wall Street sent the shares down 40% last September, the stock has since recovered nicely -- up 94% from those 52-week lows. Naturally, with a young, high-growth company such as Analogic Tech, stomach-churning volatility should be expected. The company has grown its top line at a compounded rate of 45% over the last three years, but operating profits have been lumpy.

Of course, with key customers like LG and Samsung signed up, our community's most excited about the company's future. Additionally, all four Wall Street firms covering Advanced Analogic on CAPS --Needham & Company, Jefferies, Next Generation, and Ferris, Baker Watts -- also rate it an outperform.

Back in September, CAPS player lokiboy6 made this rather prescient advanced call:

Small player in a huge market with demonstrated execution (so far -- but watch it closely of course). Just a few innovative products and the stock could double ... they have some in the pipeline.

MIPS Technologies, a California-based small cap, is yet another low-riding semiconductor company that our community has high hopes for.

In addition to an uncannily similar stock price and market cap, MIPS has another trait in common with Advanced Analogic: developing processors for use in consumer electronics. So it's clear that our CAPS community likes these small cyclical semis as a way to play the growing popularity of things like wireless handsets, MP3 players, and digital gadgets. MIPS, in particular, owns 59% of the IP supplier market for digital TVs, with big names like AMD, NEC, and Sony as some of its licensees.

MIPS isn't growing as fast as Advanced Analogic, but with all three Wall Street firms -- Longbow, Cowen and Company, and A.G. Edwards -- bullish about its prospects, MIPS might be worth a closer look on CAPS.

CAPS All-Star NetscribeSemiCdr maps out MIPS for us:

The company is also involved in most of the new high definition DVD players now being shipped with several manufacturers. This is expected to benefit the company and further strengthen its position in consumer electronics and the digital TV market. All these developments will put the company on the road to success, benefiting its shareholders in the future.

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, then head over to our Motley Fool CAPS community. It's 100% free -- the lowest price you'll find anywhere.   

Foolish contributor Brian Pacampara swallows a couple of 10-Ks each day to prevent cheap-osis and owns no position in any of the companies mentioned. The Fool's disclosure policy is always in tip-top condition.