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 -- when low-priced stocks bottomed out -- to prove my point.
Sept. 14, 2012
March 13, 2009
|Sirius XM Radio||$2.47||$0.198||1,147%|
*Bare Escentuals was acquired for $18.20 a share in 2010.
The average gain of 436% in a little more than three years is remarkable.
Let's go over this month's picks.
Smartphone usage is booming, and that's good news for Velti.
The Dublin-based provider of mobile marketing and advertising technology saw its stock soar 21% last week, but it's still well off its springtime highs in the low teens.
Velti is growing too fast to be trading this cheap.
Analysts see revenue and earnings growing 55% and 46% this year, followed by 32% and 33% spurts, respectively, come 2013. Despite the heady projected growth, Velit shares are fetching just 12 times this year's projected profitability and just nine times next year's mark.
Support.com barreled toward a fresh 52-week high last week, but it still has room to run.
The company provides live online tech support to consumers and small businesses. It also partners with retailers and anti-virus to provide remote support.
There may be plenty of companies entangled in this competitive niche, but Support.com is still finding ways to deliver impressive growth. Wall Street's banking on 35% top-line growth this year, with revenue climbing 27% next year. Yes, Support.com isn't profitable, but it's getting there. The Web-savvy service provider has posted narrower-than-expected losses in three of the past four quarters, and analysts see Support.com turning profitable next year.
When will ZAGG get it right? The company behind the invisibleSHIELD screen protector for smartphones and tablets has fallen back into the single digits, and last month a margin call led to the resignation of its CEO.
On the surface, ZAGG's business is holding up. Revenue soared 59% in its latest quarter with profitability per share surging 80%. The maker of third-party accessories even revised its guidance higher.
It wasn't enough. Nothing seems to be enough to satisfy the skeptics that feel that its suite of products is too susceptible to lower-priced competitors.
There's an opportunistic nibble to be taken here. A day after the iPhone 5 was introduced, ZAGG began promoting invisibleSHIELD Extreme for the new smartphone. Going with a larger screen for the iPhone 5 is going to pay off for companies making accessories for the device since owners of older generations will need new cases, screen protectors, and even new dock adapters.
LeapFrog is the leading maker of education electronics, and its stock has fallen back into the single digits on the recent wave of cheap tablets.
Earlier this month it was Toys R Us introducing its own $149 kid-friendly tablet. Toys R Us may or may not fare well with the tablet, but there's still a market for LeapFrog's much cheaper LeapPad line that may be billed as a tablet. though it's a far more closed and secure learning toy than the "tablet" tag would seem to suggest.
LeapFrog is now fetching just 11 times next year's estimates earnings, and the pros have been historically conservative with the cutting-edge learning-toy maker. LeapFrog has blasted through Wall Street's profit targets with ease over the past year.
Shares of the parent company of job listings website Monster.com have been buoyant since its CEO said that the company wouldn't be opposed to being acquired back in February.
Buying a stock solely for the potential of a buyout premium is a dangerous game, but Monster's attractive even if there isn't a deal. Yes, revenue growth has been nonexistent lately, but at least the company is still very profitable.
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 roughly a half dozen 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.