Buying stocks simply because they trade 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 $2 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 megamultibagger 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 tells you on its own 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 they want. That's the reason a $100 stock like Ameron International (NYSE:AMN) might very well be a great opportunity, while most penny stocks are too wild to buy at any price.

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 that are both trading at less than $10 and that also have enough investment merit to earn a CAPS rating of five stars.

Without further ado:


(as of






Medical instr.
and supplies

















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

Cheap-osis diagnosis
Stocks of all shapes and prices have been pummeled pretty badly over the last couple of weeks. But few examples were as harsh (and seemingly overdone) as the one-day 25% lashing that Home Diagnostics received after announcing lower-than-expected Q2 earnings on Thursday.

Despite disappointing Mr. Market, the Florida-based provider of blood-sugar-monitoring systems continues to own a leading position in the diabetes market -- its Sidekick product is the world's smallest blood-glucose-testing system. The company has managed double-digit returns on capital over the last couple of years and sports strong retail relationships with the likes of Safeway (NYSE:SWY) and Walgreen (NYSE:WAG), so there's a chance that the sell-off might have been excessive. The shares currently trade at an EV/EBITDA of 5.7 and a PEG of 0.67.

Additionally, all four Wall Street firms covering Home Diagnostics on CAPS -- Barrington Research, William Blair, Piper Jaffray, and Deutsche Securities -- rate it an outperform.

CAPS All-Star blutzed44's diagnosis of the situation:

I like this company for a couple of reasons; the most important of which is a strong balance sheet (increasing cash and zero debt). Also, the company is increasing structural free cash flow. This will be a volatile stock ... but the strong balance sheet and solid business model will help this one outperform in the long term ...

Low frequency
China GrenTech, a radio frequency (RF) technology developer is another low rider that our CAPS community has high hopes for. According to the Shenzhen-based firm, the company is a leading provider of wireless coverage services to the Chinese telecom industry, so it's no surprise that a whopping 228 CAPS players have an outperform rating on the overseas small cap.

With a forward P/E of 11, our community also considers GrenTech a fairly cheap way to play China's rapid growth. Year to date, the shares are down roughly 50% because of concerns over competitive pricing pressures (gross margins have been in steady decline), but CAPS players remain optimistic about management's ability to win contracts and improve returns over the next several years.  

GrenTech already provides services to Chinese wireless giants China Unicom (NYSE:CHU) and China Mobile, so our Fools might have a point.

CAPS player NuclearElvis says GrenTech is a low way to grow:

This company is helping build the wireless infrastructure in China. Growth is expected through the Olympics, with potential for future 3G growth. Also, this could be the dominant company in the future if they expand toward foreign sales.

The 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'll find anywhere.  

Foolish contributor Brian Pacampara swallows a couple of 10-Ks each day to prevent cheap-osis and owns no position in any of the companies mentioned. China Mobile is a Motley Fool Global Gains newsletter recommendation. The Fool's disclosure policy is always in tip-top condition.