You may already be familiar with our Rule Breakers newsletter service. Every month, the newsletter singles out promising stocks early in their stage of corporate defiance. They may be a risky lot, but the ones that break through can also be financially rewarding.

That same drive to find companies on the cusp of relevance has fueled my interest in low-priced stocks. Three times over the past four years, I have written about promising companies that just happen to trade below $10. It's worked out fairly well. While the S&P 500 has averaged a modest 5% return in that time, my collections are up by an average of 23%.

I'm not talking about penny stocks. If you want to roll the dice on financially flawed companies that trade in the thousandths, it's your crapshoot. No, I'm talking about real companies with real prospects that trade in the single digits, typically changing hands between $5 and $10 a share.

2001: A Low-Priced Odyssey
It all started in the summer of 2001, when I wrote the original Ten Stocks Under $10 column. It was an odd collection of neglected stocks. Some were rich in cash. Some were rich in potential. They were all poor in attention. Would the market come around to adopt these forgotten equities? Hammering home the importance of diversification, the results have been all over the map.

Price 7/11/2001 2/28/2005 Gain/Loss
Lodges *
$7.80 $9.04 16%
TiVo $6.00 $4.01 -33%
Helen of Troy $9.45 $28.33 200% ** $6.17 $24.85 5%
Oil States $9.65 $21.04 118%
Hollywood Entertainment $9.35 $13.67 46%
Telefonica Moviles $6.50 $12.68 95%
ESS Tech $8.34 $5.64 -32%
World Acceptance $8.70 $27.30 214%
Sirius $8.39 $5.57 -34%
Average Gain 59%
S&P 500 3%

* Suburban Lodges was acquired in 2002 for a total payout of $9.04 a share.
** merged into FTD Incorporated with each share of equal to .26 shares in the new company, which was taken private at $24.85 in February 2004.

Two of the 10 stocks, as noted above, were eventually acquired at a premium. Three of the other eight have shed roughly a third of their value. Yet all it takes is a couple of winners to more than offset the losers. In this case, with Helen of Troy (NASDAQ:HELE) and World Acceptance (NASDAQ:WRLD) tripling, it didn't matter that the flashiest of my picks that last innocent summer -- Sirius Satellite Radio (NASDAQ:SIRI) -- has dipped by 34%. A personal care specialist and a loan specialist helped save the day.

Yes, it was a risky strategy. I know that. I hope you know that, too. Yet those 10 stocks are up by an average of 59% as of the end of February, while the S&P 500 is up a mere 3%.

2002: The Thrifty Empire Strikes Back

I was back a year later with another low-priced roundup. At the time, my original picks were up by just 19.5%, while the rest of the market was in the red. Throwing my line into the equity pool yet again until I hooked the eclectic and the unloved, I singled out 10 new stocks trading for less than $10 apiece.

Price 4/7/2002 2/28/2005 Gain/Loss
Fargo Electronics $9.08 $13.81 52%
Williams Industries $6.69 $3.65 -45%
DHB $6.85 $14.19 107%
Register.Com $8.54 $6.16 -28%
Team Inc. $7.15 $16.75 134%
Quovadx $7.55 $2.91 -61%
Sherwood Brands $6.00 $2.67 -56%
ScanSoft $6.45 $4.29 -33%
Educational Development $7.15 $10.40 45%
MVC Capital $9.65 $9.47 -2%
Average Gain 11%
S&P 500 7%

Although my sophomore effort hasn't matched the performance of my first outing, some out-of-the-ordinary winners again saved the day. An industrial maintenance provider doubling? A company arming law-enforcement agencies with protective gear -- and no, it wasn't Taser (NASDAQ:TASR) -- also doubling? They made up for the six of the 10 stocks that are currently in the red. The average pick in 2002 is up by 11%, while the S&P 500 has inched 7% higher.

2004: I should've listened to Apollo Creed
Maybe "no rematch" would have been the best approach when I went for another low-priced collection last spring. My heart was in the right place, but it was hard to overcome one colossal mistake.

Price 2/17/2004 2/28/2005 Gain/Loss
CCA Industries $6.73 $11.18 66%
GSI Commerce $9.68 $14.35 48%
ILX Resorts $7.50 $9.45 26%
InsWeb $4.81 $2.90 -40%
Intelligroup $9.35 $1.22 -87%
Six Flags $7.18 $4.46 -38%
Radica Games $9.18 $8.75 -5%
RealNetworks $6.02 $6.26 4%
Switchboard $5.91 $7.75 31%
TradeStation $8.21 $6.72 -18%
Average Gain -1%
S&P 500 4%

I got burned badly by outsourcing specialist Intelligroup (OTC BB: ITIG). It trades at an eighth of its original value. I could have overcome that kind of call in earlier lists -- all it takes is one stock to double to offset the sinker -- but this time, it didn't happen. Without Intelligroup, I would have doubled the S&P 500's 4% return. But in an accountable world, I have to concede temporary defeat: My 10 low-priced stocks from last year are averaging a flattish return of -1%.

Yet for the third time in as many lists, I had a stock pick acquired at a premium. In this case, it was Switchboard being gobbled up by InfoSpace (NASDAQ:INSP) in an all-cash transaction. That's one of the nifty things about picking the right small companies: They often become buyout fodder for their larger rivals. A fourth company, Hollywood Entertainment, is now weighing premium buyout offers from two suitors. In fact, I'm surprised that fellow 2004 pick RealNetworks (NASDAQ:RNWK) still hasn't found a larger company on bended knee for its cash and technology dowry.

10 Under $10 for 2005?
I'm going to give it another shot this month. I know that every one of my lists has been a weaker performer than the one that preceded it, but there's a really vibrant sample of companies out there that could reverse the trend.

Next week -- next Thursday, to be exact -- I'll have my new list of 10 low-priced stocks ready. Some of the picks may leave you scratching your head. Some may leave you scratching your chin.

That's OK. They wouldn't be trading for under $10 if they were beauty queens. And if you really need some intriguing stock ideas to hold you over until next week, by all means, give Rule Breakers a try.

After all, when it comes to investing, showing up fashionably early isn't necessarily a faux pas.

Longtime Fool contributor Rick Munarriz really does relish panning for gold in dirty waters. It's why he always keeps a wet-nap handy. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.