If you've got 10 bucks, I have some stock ideas for you.
I've been singling out attractive opportunities in low-priced stocks since my original "5 Stocks Under $10" column 10 years ago, and I've seen plenty of stocks with pocket-change prices generate incredible gains.
There are risks, and they are readily apparent given the recent volatility. There are often good reasons for stocks to be ignored or beaten down. However, a market rally can work wonders for the unloved with positive catalysts in their pockets.
Let's go over my five picks from March 2009 to prove my point.
|
Stock |
Sept. 16, 2011 |
March 13, 2009 |
Gain |
|---|---|---|---|
|
Sirius XM Radio |
$1.83 | $0.198 | 824% |
| Bare Escentuals* | $18.20 | $3.66 | 397% |
| Focus Media | $31.72 | $5.74 | 453% |
|
Geron |
$2.43 | $4.36 | (44%) |
| Ford | $10.62 | $2.19 | 385% |
Source: Yahoo! Finance. *Bare Escentuals was acquired for $18.20 a share last year.
The average gain of 403% in a little more than two years is remarkable.
Sirius XM Radio has bounced back from the brink of bankruptcy, and last week revealed that it will be raising its basic rates by nearly 12% come January.
One can only imagine how well this list would have looked if I had sidestepped Geron. I was drawn to the biotech shortly after it secured FDA approval for a study to test human embryonic stem cell-derived therapy for the treatment of spinal cord injuries. Unfortunately, profitability has been elusive for the biotech -- and Wall Street doesn't see positive earnings anytime soon.
Let's go over this month's picks.
CNinsure
Selling life insurance in China seems like an easy gig. A quickly evolving middle class in the world's most populous nation is waking up to the need of protecting the new lifestyle of its dependents. Unfortunately, CNinsure is trading for a little more than a third of its earlier high.
A CEO-led buyout failed to materialize, but is the future really all that bad for CNinsure? The company is ridiculously profitable, fetching a P/E ratio in the single digits. CNinsure has also topped Wall Street profit estimates pretty consistently in recent quarters.
Now trading for much less than its $16 IPO four years ago, CNinsure is a bargain -- regardless of what the failed attempt to take the company private may suggest.
Maiden Holdings
This won't be an insurance-themed list this month, but Maiden is a Bermuda-based provider of non-catastrophic, customized reinsurance products and services.
What do I like about Maiden? Well, its $0.08 a share quarterly dividend may not seem like much, but it translates into a chunky 4.1% yield as the result of its low price. The cherry on top here is that Maiden has come through with payout hikes in each of the past four years.
Like CNinsure, Maiden has been consistently profitable and is also trading at a earnings multiple in the single digits.
Siliconware Precision Industries
Moving away from insurance, Siliconware is a Taiwanese provider of integrated circuit packaging. Revenue may have declined 10% in its latest quarter relative to its performance a year earlier, but there was sequential improvement.
It should continue to get better from here, as analysts see Siliconware's profit growing from $0.27 a share this year to $0.39 a share come 2012.
Patient investors are being rewarded with a generous 4% yield, which is high for the tech space.
Smart Balance
I recommended Smart Balance to Rule Breakers newsletter subscribers a couple of years ago, when it was cashing in on its heart-healthy buttery spreads by expanding the brand into new areas. I was particularly fond about the push into enhanced milk, since moo juice is a more frequent purchase in most homes than butter-like spreads.
It didn't play out the way I would have liked, so we booted Smart Balance from the service's scorecard last year. Smart Balance wasn't a good fit given the newsletter's growth bent, but now Smart Balance is an intriguing consideration for value-minded investors.
The company entered the gluten-free market after a small acquisition last month. Smart Balance also recently raised its outlook for the full year.
La-Z-Boy
Things are looking up for the maker of cozy recliners. Sales climbed in its latest quarter, and its backlog of pending orders is growing even faster.
Home furnishings -- even big-ticket items -- should hold up better than home improvement projects that would be lost in foreclosures if the real estate market continues to crumble. At least La-Z-Boy customers know that moving trucks can take their recliners to their next digs.
Five for the road
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 that I write for. You can check it out for free this month with a 30-day trial subscription. There are six active stock recommendations in the growth stock research service trading for less than $10 at the moment. Check those out, and I'll be back with more on the third Monday of next month.
If you want to follow these five low-priced stocks, consider adding them to My Watchlist.
- Add Siliconware Precision Industries to My Watchlist.
- Add Smart Balance to My Watchlist.
- Add Maiden Holdings to My Watchlist.
- Add La-Z-Boy to My Watchlist.
- Add CNinsure to My Watchlist.
