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 megamulti-bagger 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 Boeing 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 perfect CAPS rating of five stars.

Without further ado:

Company

Price
(as of
Nov. 2 close)

Market Cap
(in millions)

Industry

Aurizon Mines

$4.34

$636

Gold

Newpark
Resources

$5.93

$534

Oil and gas
services

North American
Palladium
(AMEX:PAL)

$8.00

$438

Industrial metals

Brocade
Communications
Systems
(NASDAQ:BRCD)

$9.41

$3,670

Data-storage
services

Carriage Services
(NYSE:CSV)

$9.70

$185

Death-care
services

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

Brocade OK'd
It's rare to find a low-priced stock competing toe to toe with the likes of Cisco (NASDAQ:CSCO) and QLogic (NASDAQ:QLGC). Rarer still is it to find CAPS players who actually like its chances. In fact, according to many Fools, San Jose-based Brocade Communications is one of the best ways to play the growing computer-storage sector.

Of course, Brocade -- as a result of its August acquisition of McData -- now owns a dominant share in the enterprise-storage space, so our community may have a point. And as my Foolish colleague Anders Bylund notes, strong partnerships with the likes Hewlett-Packard (NYSE:HPQ), IBM (NYSE:IBM), and EMC aren't exactly bad for the bullish case, either.

CAPS player MistaMoFo adds:        

...Back to why I still believe: great earnings, huge market share, they have absorbed the cost of acquiring McData ahead of schedule, and their products are just what the whole world is going to be needing for the forseeable future -- reliable hardware, software, AND SERVICES to help large and small businesses manage the explosive growth of data and media their customers demand and use.

Death sentences
Carriage Services, a Houston-based provider of burial and cremation services, is another low rider that our community has high hopes for. Despite being a tiny player in one of the more morose industries you'll find, all 14 All-Stars who've rated Carriage are bulls.  

Naturally, Carriage represents another play on the country's aging demographic. Recently, management reported a 16% increase in third-quarter revenues while issuing a strong outlook for 2008. It's those steadily improving results that have the stock up 100% year over year. Throw in above-average insider ownership of roughly 12%, and you've got an idea worth monitoring.

schuured sees a $0.50 dollar in the Carriage:

Although I'm a bit put off by the substantially negative tangible value at present, their capital structure is appealing-with low (fixed) interest rates and maturity dates significantly into the future. Further, large insider purchases and substantial management transparency gives me a warm fuzzy feeling about CSV. If the company's growth assumptions are correct, I put a reasonable value of about $22 to $24 on this stock.

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 10K's 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 shape.