5 Stocks Under $10
If you've got ten 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.
|Sirius XM Radio||$1.80||$0.198||809%|
* Bare Escentuals was acquired for $18.20 a share last year.
The average gain of 387% in less than three years is remarkable.
Sirius XM Radio (NAS: SIRI) has come a long way since balking at bankruptcy in early 2009. It's been consistently profitable in recent quarters, and this quarter will bring the debut of Sirius XM 2.0 -- its first major receiver upgrade since the inception of satellite radio.
Geron (NAS: GERN) has been the lone disaster in this list, the only pick that hasn't at least quadrupled in value. I was attracted to the biotech shortly after it secured FDA approval for a study to test human embryonic stem cell-derived therapy for the treatment of spinal cord injuries. My theory apparently lacked backbone. Profitability has been elusive for Geron, and Wall Street doesn't see positive earnings anytime soon.
Let's go over this month's picks.
E*TRADE (NAS: ETFC) -- $9.80
I didn't think that I would see the discount broker on this list after it executed a 1-for-10 reverse split last year and made a pedigreed choice as its new CEO. However, here we are -- at prices that would imply spare change if it wasn't for the reverse split.
This is the wrong time to give up on E*TRADE. The discounter is now quite profitable, and when it reports its latest quarterly results Wednesday we'll see that its bottom line is growing. We're also in a niche that is prone to sector consolidation. If E*TRADE stays this cheap for too long, either of its two larger rivals, or any financial services heavyweight looking for some skin in discount brokering, will adopt the E*TRADE Baby.
Dice Holdings (NYS: DHX) -- $9.78
Dice runs several specialized career websites for professional communities. Its namesake Dice.com site has been a hub for IT pros since the mid-1990s. Other sites include ClearanceJobs.com for folks with security clearance and Rigzone for the oil and gas industry.
Its latest quarter was a beauty. Revenue climbed 50%, or a still impressive 37% if you back out recent acquisitions to get an organic pulse. Earnings and operating cash flows more than doubled. Even one of its largest websites that appears to be dedicated to a troubled industry -- eFinancialCareers -- saw a 48% year-over-year spike in revenue.
Despite Dice's heady growth, the stock is now trading for less than 20 times this year's projected profitability and just shy of 15 times next year's target. Dice knows that its stock is a bargain, initiating a buyback plan this summer. Investors should follow suit.
Demand Media (NYS: DMD) -- $7.57
Content may be king, but it's a dethroned king at Demand Media.
Demand Media went public at $17 in January. Its portfolio of websites -- including the eHow tutorial site, Cracked.com comedy hub, and Trails.com hiking guide -- was drawing more than 100 million unique visitors every month at the time.
For better or worse, Demand Media has been tagged as a content mill. It turns to freelancers for cheap but timely material, using its search engine optimization magic to milk traffic. Some of its websites were stung after an algorithmic tweak began to penalize the content farms, but the pessimism is overdone. Even if Demand is often caught emphasizing timely quantity over timeless quality, it's not as if its content is rubbish. More importantly, Demand Media's model is defying the skeptics by actually working. After barely breaking even as it went public, analysts see Demand Media earning $0.23 a share this year and $0.39 a share come 2012.
Crown Media Holdings (NAS: CRWN) -- $1.50
Crown Media is the profitable broadcaster behind the Hallmark Channel, a cable channel that is available in 88 million U.S. homes.
Hallmark Channel is home to endearingly hokey original movies and surprisingly robust daytime programming. Now that even The CW is apparently capable of a meaty digital distribution deal, isn't it time to show Crown Media some respect? Even if it is ultimately content poor, it's not as if its flagship operations are chopped liver. Revenue and adjusted EBITDA climbed 16% and 18%, respectively, in its latest quarter.
Jiayuan.com (NAS: DATE) -- $8.69
Jiayuan runs the top online dating site in China. Unlike some of its subscription-based rivals, Jiayuan is free to use. Bachelors and bachelorettes simply pay up for individual messages to one another.
It's certainly true that government officials are concerned with the Internet these days and the culture-altering freedoms it inspires. Do you really think that will mean clamping down on the country's most popular site when it comes to widening the courtship pool?
Wall Street sees this recent Rule Breakers recommendation earning $0.32 a share this year and $0.51 a share next year.
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 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.
If you want to follow these five low-priced stocks, consider adding them to My Watchlist.
- AddE*TRADE Financialto My Watchlist.
- AddDemand Mediato My Watchlist.
- AddDice Holdingsto My Watchlist.
- AddJiayuan.com Internationalto My Watchlist.
- AddCrown Media Holdingsto My Watchlist.
At the time this article was published The Motley Fool owns shares of Jiayuan.com International.Motley Fool newsletter serviceshave recommended buying shares of Jiayuan.com International. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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