5 Stocks Under $10

The past few months of bullish sentiment have worked wonders for low-priced stocks. I began singling out attractive opportunities in the single digits with the original "5 Stocks Under $10" eight years ago.

I don't think I've seen a rally this strong. Just look at my five picks from March.

The average gain of 86% in just two months is pretty unbelievable. Sure, Sirius XM Radio battled back from the brink of bankruptcy, but did you expect a minerals-based cosmetics maker to more than double? I'm glad it did, of course. Bare Escentuals is an active Motley Fool Rule Breakers recommendation, so the company's turnaround is helping out the growth stock newsletter's scorecard.

This doesn't mean that low-priced stocks are any safer. Stocks trading under $10 are often there for a reason, and volatility cuts both ways.

Let's go over this month's list.

E*Trade (NASDAQ:ETFC) -- $1.46
The market is worried about the online discounter, but it has nothing to do with its stock brokerage business. E*Trade continues to pay the price for the evolutionary steps it took into becoming more like an online bank during merrier times.

It is shedding non-brokerage accounts these days, and banking requirements are tightening. It doesn't help that the company has posted seven consecutive quarters of losses, with the red ink likely to continue in the near-term.

However, I think the market is underestimating E*Trade's original business. This is still a popular online broker, and the brilliant E*Trade Baby ads continue to attract new traders. It closed out April with 32,550 more brokerage accounts than when the month began. As long as E*Trade's online banking woes don't bring the company down, I think the stock will be a winner.

IMAX (NASDAQ:IMAX) -- $6.57
This is a good time to start believing in IMAX again. The cinematic enhancer with its super-sized screens and elite sound system posted dynamite quarterly results earlier this month. IMAX posted a smaller-than-expected deficit on a 43% surge in revenue.

The future continues to brighten, as the shift to digital technology, the wider rollout of its revenue-sharing deal with leading multiplex exhibitors, and a hot slate of summer theatrical releases on IMAX are all favorable catalysts.

Ford -- $5.49
A rerun from the March list? Why not? Ford isn't in great financial shape, but it's the relative winner among domestic automakers that have been tapping the government for handouts.

As Chrysler and GM shutter product lines and kill off dealerships, drivers with the "buy American" mind-set will begin flocking to Ford. It may not be enough to bring the company back to its former glory, but when three poor swimmers dive into the water, I like to bet on the one that can hold its breath underwater the longest.

GigaMedia (NASDAQ:GIGM) -- $5.94
The Web-based gambling specialist has been a bad bet for investors, but it is one of the higher-rated stocks now in the Motley Fool CAPS universe. The company has a sparkling, cash-rich balance sheet.

The stock is also dirt cheap. Unlike the first three names on this month's list, GigaMedia is consistently profitable. There are a few near-term challenges leading to a projected net income decline this year, but Wall Street sees earnings bouncing back to $0.83 a share next year. Yes, the Taiwanese company is fetching just seven times next year's projected profits. Isn't 7 supposed to be a lucky number?

Travelzoo (NASDAQ:TZOO) -- $9.33
Welcome back, Travelzoo. The travel-deals publisher behind the weekly "Top 20" opt-in emails is flying high again. It surprised analysts with a quarterly profit last month. Wall Street was also braced for a top-line swoon, but Travelzoo delivered a 12% revenue gain.

So where do we go from here? We're several years removed from when a thin float and heady growth prospects made this one of the market's most volatile performers. It is a steadier player these days. Still, expansion into key overseas markets has been a drag on margins, especially since it can't use losses from abroad to offset the tax bite on stateside profits. But as operations stabilize globally, the company will continue its ascent.

Five for the road
Turnarounds never happen overnight. These five stocks aren't trading in the single digits by accident. If I'm right about the catalysts, though, they may not be trading in the single digits for too much longer.

Finding promising stocks while they're still cutting their baby teeth is at the heart of the Rule Breakers newsletter service that I write for. You can check it out for free with a 30-day trial subscription. There are nearly a dozen active stock recommendations in the growth stock research service trading for less than $10 at the moment, including IMAX and GigaMedia. Check those out, and I'll be back with more on the third Monday of next month.