Please ensure Javascript is enabled for purposes of website accessibility

5 Stocks Under $10 Worth Buying

By Rick Munarriz - Apr 15, 2013 at 5:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's all about the Hamiltons, baby.

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 a dozen 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.





Sirius XM Radio 




Bare Escentuals*




Focus Media












* Bare Escentuals was acquired for $18.20 a share in 2010.

The average gain of 532% in four years is pretty remarkable.

Even with Geron crashing as the lone stinker, the other four multibaggers have easily trounced the market by excelling in satellite radio, cars, and Chinese advertising.

Let's go over this month's picks.

8x8 (EGHT 5.50%) -- $7.27
Shares of the telecom provider soared 137% last year, but there may be more room to run here.

8x8 is doing a great job in getting businesses to replace their old-school telecommunications services with 8x8's more economical Web-based offerings.

Customers are sticking around, too. Churn is at historic lows.

The stock isn't cheap. 8x8 is now fetching 25 times projected earnings for the new fiscal year that began earlier this month. However, the recent growth warrants a fat multiple as profit margins are expanding on top of healthy revenue growth of 20% or better in recent periods.

LifeLock (LOCK) -- $9.31
We live in insecure times, and LifeLock is the leading consumer brand in proactive identity theft protection. LifeLock monitors subscriber identities for any breaches that may result in credit-damaging identity theft occurrences.

Fear sells, and the fear of having to cope with an identity theft situation alone keeps sending customers LifeLock's way. It closed out the year with 2.5 million members, up 20% over the past year. LifeLock has increased revenue and its membership tally -- sequentially -- for 31 quarters in a row. That consistency is impressive, especially when one considers the recession that's wedged in there.

LifeLock quietly went public at $9 in October, and that's essentially where it finds itself today, even though it has come through with blowout quarterly results in its first two quarters as a public company.

Dangdang (DANG) -- $3.93
Busted Chinese IPOs are a yuan a dozen.

When Dangdang went public three years ago, it was hailed as "the Amazon of China," but the initial pop didn't last. Investors soon realized that Dangdang was too dependent on low-priced books and growing its business meant cranking out a lot of deficits.

Dangdang is still losing a lot of money, but the red ink is narrowing. Dangdang has also posted smaller-than-expected losses in its two most recent quarters. Its popularity continues to grow. Analysts see net sales soaring 28% this year and 27% come 2014. Investors are simply concerned about the lack of profitability.

Then again, that's the price of admission. Dangdang is trading for a quarter of its original IPO price of $16. Patient investors could be rewarded by taking a chance on this risky e-tailer here.

Zynga (ZNGA 1.71%) -- $3.42
The market was ready to leave the leading social gaming company for dead until it rolled out real-money gaming through a partnership with a company that's legally entitled to do so through the U.K.

This doesn't mean that things are rosy at Zynga. Traditional social and casual games continue to suffer for the company that has come to define the social gaming niche with its FarmVille and Words With Friends franchises. Executives also bolted at a feverish clip last year.

Analysts aren't optimistic for growth or profitability this year, but they do see Zynga breaking even next year on a resumption of top-line growth. If the real-money gambling initiatives pan out sooner rather than later, expect analyst forecasts to be conservative.

Cohu (COHU -0.33%) -- $9.07
Cohu would like investors to forget 2012, and 2013 isn't shaping up to be a whole lot better for the provider of test handling, burn-in, thermal subsystems, and MEMS test solutions for the semiconductor industry.

Revenue fell sharply in 2012, and 2011's healthy profit was reversed. Analysts don't see Cohu returning to profitability until next year, but investors are being rewarded for their patience with a modest 2.6% yield at today's prices.

Cohu has been able to find its way into the double digits in the past when its stock has fallen into the single digits. A repeat performance may not happen right away this time, but that's where the dividend feeds the meter.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Zynga Inc. Stock Quote
Zynga Inc.
$8.61 (1.71%) $0.14
E-Commerce China Dangdang Inc. Stock Quote
E-Commerce China Dangdang Inc.
LifeLock, Inc. Stock Quote
LifeLock, Inc.
8x8, Inc. Stock Quote
8x8, Inc.
$8.05 (5.50%) $0.42
Cohu, Inc. Stock Quote
Cohu, Inc.
$28.91 (-0.33%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.