5 Stocks Under $10
If you have 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. But 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.
Oct. 11, 2013
March 13, 2009
Sirius XM Radio
The average gain of 658% in four years is pretty remarkable.
Even with Geron crashing as the lone stinker -- and it has actually bounced back by soaring 55% over the past month alone -- the other four multibaggers have easily trounced the market by excelling in satellite radio, cosmetics, cars, and Chinese advertising. Two have been acquired at healthy premiums.
Let's go over this month's picks.
Arena Pharmaceuticals -- $4.37
Arena shares have been losing some serious weight lately. The stock surrendered 10% of its value last week, and that was on top of a steeper 16% drop a week earlier. Since peaking at $11 in January, Arena shares have plunged 60%.
Arena got investors excited when its Belviq became the first FDA-approved weight-loss medication in more than a decade. But now that it's actually on the market we have a combination of "sell on the news" and potentially uninspiring sales.
Earlier this month we had Credit Suisse slashing its price target from $5 to $4 after analyzing the first three months of prescription data. Well, we're already near that pessimistic price target. Cowen also initiated coverage this month with a neutral "market perform" rating.
Did the market really think that Belviq would be a winner right away? Despite thousands of patients tested with the obesity drug before gaining FDA approval there are side effects. There always are. There's also the matter of marketing. Most of the country has probably never even heard about Belviq. Time should change that. This is a "buy low" gamble, but I'm comfortable with it here as a high-risk yet huge-potential pick.
Christopher & Banks -- $6.22
Most of the apparel retailers trading in the single digits are there for a reason. They're profitless. Sales are sliding. They're fading in popularity. Christopher & Banks doesn't fit those shortcomings.
Analysts see the clothing chain putting out a modest profit of $0.12 a share this fiscal year, more than doubling to $0.28 a share next year. Sales growth hasn't been impressive, but that's part of the store rationalization strategy where it's been closing underperforming locations. Comps rose 7.7% in its latest quarter, and that's stacked on top of an 8.9% spike in same-store sales during the same period a year earlier.
TechTarget -- $4.98
True to its name, TechTarget owns more than 120 tech-specific websites, offering a broad range of sites for advertisers trying to reach technology buffs that include 7.5 million registered users.
TechTarget is profitable, though growth hasn't been consistent. If TechTarget's growth were consistent, you wouldn't find it in this single-digit grab bag of stocks. But TechTarget's unique properties, solutions, and platforms should serve it well as the economy improves and IT spending increases.
TechTarget allowed shareholders to tender enough shares for it to buy back 6.5 million shares at $5 a share last month. If this call is right, those sellers will come to regret their decision.
Companhia Siderurgica Nacional -- $4.94
Steel isn't a very tantalizing industry for those unwilling to ride the cyclical swings, and growth itself hasn't been all that exciting in recent years. But that all changes when you whip out the Risk playing board and narrow your scope to Brazil.
Companhia Siderurgica Nacional, or CSN for short, has seen its steel production climb 15% in the first half of this year. More than 77% of that was absorbed domestically. That resulted in record revenue that was 21% higher than the first half of last year. Iron ore sales rose 45% in its more recent quarter.
Over the past year, CSN has trounced Wall Street's quarterly profit targets. The market doesn't ignore that kind of performance, which explains why the stock has more than doubled since bottoming out this summer. Some will argue that the pop makes CSN overvalued, and trading at 1.8 times book value is a premium to laggards closer to home. But it trades at compelling trailing and, particularly, forward earnings multiples. CSN is a smart play on Brazil's economic recovery.
Sirius XM Radio -- $3.88
The satellite radio provider's stateside monopoly hit a new six-year high last week -- and it's the biggest winner from the 2009 list I dug up earlier -- but there's still room to run here.
Sirius XM is now a viable, profitable, and growing media giant. Streaming radio hasn't slowed it down, as it crossed the 25 million-subscriber milestone earlier this year. Sirius XM's stock has been stuck in the single digits for ages because of the large number of shares outstanding, but a new buyback authorization results in $4 billion in stock repurchases announced over the past year.
Strong car sales should continue to boost Sirius XM's growth, driving the number of active and dormant receivers out there well beyond the 50 million currently on the market.
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 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.
If you like finding stocks early in their growth cycles, follow up this month's entries by checking out a free report detailing some key players leading the way in a hot global trend. With the U.S. relying on the rest of the world for such a large percentage of our goods, many investors are ready for the end of the "made in China" era. Well, it may be here. Read all about the biggest industry disrupters since the personal computer in "3 Stocks to Own for the New Industrial Revolution." Justclick here to learn more.
The article 5 Stocks Under $10 originally appeared on Fool.com.Longtime Fool contributor Rick Munarriz owns shares of Ford. The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.