Buying stocks for less than $10 remains one of the "lowest" -- but most tempting -- forms of investing out there.

After all, nothing trounces Mr. Market quite like a $1 stock that moves into double digits over just a short period of time. Unfortunately, because of the numerous risks that low-priced stocks carry, these mega-multibagger returns don't occur as frequently as one would hope.

Price means nothing
Here at the Fool, we do our darnedest to diagnose and prevent the critical stock affliction known as "cheap-osis" -- the belief that a stock's per-share price, on its own, tells you whether a stock is cheap or expensive; attractive or unattractive; a winner or a loser.

Through the use of splits and reverse splits, management can make the price of its shares literally anything it wants. That's the reason a $100 stock like Deere & Co. (NYSE:DE) might very well offer a great opportunity, while most penny stocks are too risky to buy at any price.

For us Fools, price means nothing and thirst (OK, business valuation) means everything.

Your weekly dose of sweet n' low
Sadly, though, some incidents of cheap-osis will never be cured completely. So, with the help of our Motley Fool CAPS intelligence database, we'll screen for stocks trading at less than $10 which also have enough investment merit to earn a CAPS rating of five stars -- the highest score a stock can receive.

So, without further ado:


Price (as of 03/06 close)

Sify Limited (NASDAQ:SIFY)


CombinatoRx (NASDAQ:CRXX)


On Track Innovations (NASDAQ:OTIV)




Northern Orion Resources (AMEX:NTO)


Insite Vision (AMEX:ISV)


As always, don't view these stocks as formal recommendations, but rather as ideas you may want to research further. With that said, ICO Inc. and Sify might be worth some of your own Foolish due diligence.

Fantastic plastics
Texas-based ICO Inc. is one of those companies that habitually flies under Wall Street's radar. It's small, it's boring, and it's tough to get excited about. After all, when was the last time you heard a producer of specialty resins and concentrates being touted on CNBC?

Despite being a leader of custom polymers -- which are used in the production of things like toys, paint, and auto parts -- and managing to consistently grow sales in the double-digit range, only one professional analyst covers ICO.

For the last quarter, the continued weakness of resin prices led to a year-over-year decline in operating income for ICO. Revenues were up 15%, however, and should resin prices stabilize, the company should see its operating income surge in 2007. ICO trades at just 9 times forward earnings and at less than half of its sales, so its stock might be worth considering.

Here are two CAPS contestants who've conducted their own plastic surgery on ICO shares:

  • JohnLevine: "ICO Inc. is a value pick. A manufacturer of specialty resins and concentrates, the stock trades at a healthy (low) earnings multiple. It has healthy profit margins and management, easily manageable debt and a history of consistent earnings. The company's products are used in sundry households across a wide array of uses."
  • lasong11: "Great looking fundamentals. Looks like a great growth stock for the long-term. Even though the chart looks like a train wreck, it is time to start adding this to your portfolio if you are a long-term investor looking for quality."

Keep your Sify belts fastened
Unlike the dullish ICO, Sify Limited has a way of eliciting bubble-like jubilation among investors. In addition to being one of India's largest private internet and e-Commerce service providers, Sify operates a chain of over 3,500 cyber-cafes and several wildly popular internet sites like and As the Indian economy continues to grow rapidly, it's tough not to see Sify benefiting from this dominant infrastructure.

Of course, Sify is often compared to the AOLs and Yahoo!s of the late '90s, so valuation should be a Fool's main focus here. Sify currently trades at about 25 times EBITDA, and it was only recently that the company posted a profit. Still, the general consensus of our CAPS community is that with CEO Raju Vegesna at the helm -- who essentially owns 40% of the company through his Infinity Capital Ventures fund -- Sify is definitely worth the price of admission.

We'll leave it up to CAPS all-star gujuguy3 to give us his version of the "Top 6 reasons why Sify makes a great investment":

"So many reasons, take your pick: 1. New management -- Current CEO is a Silicon Valley entrepreneur who sold one of his companies to Broadcom for $2 bil., 2. The CEO owns about 40% in the company, 3. Just turned profitable, 4. Lot of new partnerships and joint ventures (began selling railway tickets at its 3400 cyber-cafe locations), 5. Just received license to be a long distance carrier, 6. Lot of growth potential as the Indian market is beginning the tech boom that we experienced 10 years ago."

Foolish conclusion
Despite our Foolish attempts to educate the investment public about cheap-osis, the allure of low-priced stocks is simply undeniable. The good news, though, is that there are indeed single-digit wonders out there that can also make great investments.

So, if you really have a bad case of the 'osis and would like to find more good low-priced stocks for yourself, then head over to our Motley Fool CAPS community. It's 100% free -- the lowest price you can find anywhere.

For more CAPS-related Foolishness:

Foolish contributor Brian Pacampara likes to use value-based metrics to prevent cheap-osis and holds no position in any of the companies mentioned. Yahoo and AOL-parent company Time Warner are Motley Fool Stock Advisor picks. The Fool's disclosure policy is always in tip-top condition.