I’ve been singling out attractive opportunities in low-priced stocks since my original “10 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.
| Company | Feb. 15, 2013 | March 13, 2009 | Gain |
|---|---|---|---|
| Sirius XM Radio Inc (NASDAQ:SIRI) | $3.15 | $0.198 | 1,491% |
| Bare Escentuals* | $18.20 | $3.66 | 397% |
| Focus Media | $25.46 | $5.74 | 344% |
| Geron | $1.52 | $4.36 | (65%) |
| Ford | $13.02 | $2.19 | 495% |
*Bare Escentuals was acquired for $18.20 a share in 2010.
The average gain of 532% in four years is pretty remarkable.
Sirius XM has been the top dog, emerging as a media giant with improving margins and status. Focus Media continues to be a marketing force in China. Geron has been the lone disappointment, but that’s the risk in betting on young biotech companies. Ford has roared back as consumers replace their old cars.
Let’s go over this month’s picks.
WisdomTree Investments, Inc. (NASDAQ:WETF) — $9.06
It’s hard to get excited about the mutual fund industry. Exchange-traded funds have exploded in popularity, giving investors and speculators alike the ability to buy into a basket of stocks that price continually throughout the trading day. With ETFs typically charging lower management fees than traditional mutual funds, many brokerage firms have expanded the number of ETFs that they offer without any brokerage commissions.
WisdomTree is the only pure play in this booming investment niche. Assets under management have popped 50% over the past year to $18.3 billion. Capital appreciation and a whopping $4.7 billion in net inflows in 2012 have grown its asset base from $12.2 billion at the beginning of last year.
Its emphasis on exotic offerings has helped set itself apart, highlighted by its WisdomTree Emerging Markets Equity Income vehicle that has exploded to $5.3 billion in assets.
The stock isn’t exactly cheap, but its heady growth and exclusivity as the only pure play in the ETF space make it one of the few financial services providers with ample room to run.
Active Network Inc (NYSE:ACTV) — $5.37
Shares of Active Network are trading 9% higher since being singled out in this column late last year, and that’s after getting tripped up on the heels of a poorly received quarterly report last week.
The top dog in online registrations for triathlons, marathons, and other endurance events is still not profitable, but it is growing at a healthy clip. Revenue climbed 23% in its latest quarter and 24% for all of 2012.
Getting registrants to pay more has been a major driver, but eventually the Active.com parent will have to accelerate its number of registrations.
Growth will slow in 2013, but Active Network still expects revenue to climb 12% to 15% this year. It also sees its net loss narrowing. As more people make the switch to active lifestyles and embrace the social merits of 5K runs and half-marathons, Active.com will be a major beneficiary.
