If you have 10 bucks, I have some stock ideas for you. I’ve been identifying 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. 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.
| Stock | 9/13/13 | 3/13/09 | Gain |
|---|---|---|---|
| Sirius XM Radio | $3.81 | $0.198 | 1,824% |
| Bare Escentuals* | $18.20 | $3.66 | 397% |
| Focus Media* | $27.50 | $5.74 | 379% |
| Geron | $1.99 | $4.36 | (54%) |
| Ford | $17.35 | $2.19 | 692% |
*Bare Escentuals was acquired for $18.20 a share in 2010. Focus Media was acquired for $27.50 a share in 2013.
The average gain of 648% in four years is pretty remarkable.
Even with Geron crashing as the lone stinker, the other four multibaggers have easily trounced the market by excelling in satellite radio, cosmetics, cars, and Chinese advertising — and two have been acquired at healthy premiums.
Let’s go over this month’s picks.
ReneSola Ltd. (ADR) (NYSE:SOL) — $4.24
Solar energy has been a volatile industry for investors over the years, but it’s an area that holds long-term promise. Will the global economy be stronger in a few years? Will traditional energy prices remain high in a world of growing demand? If you’re nodding your head at both questions, start exploring solar energy stocks.
ReneSola Ltd. (ADR) (NYSE:SOL) steps up as an opportunistic value play. The shares plunged 26% last week after pricing a direct secondary offering at a 15% discount to where the stock was trading. It cheated investors who owned the stock at the start of last week, but ReneSola Ltd. (ADR) (NYSE:SOL) begins the week at $4.24 per American depositary share, a discount to that $4.67 per ADS pricing. Yes, the direct-offering buyers also got warrants, but those have an exercise price of $6.04 per ADS. If it gets to the point where that’s dilutive, you’ve already done well here.
Like many solar-products companies, ReneSola Ltd. (ADR) (NYSE:SOL) is losing money. However, it broke a long streak of posting wider quarterly deficits than analysts were targeting this past quarter, and now those same pros see ReneSola Ltd. (ADR) (NYSE:SOL) turning a profit next year.
Bazaarvoice Inc (NASDAQ:BV) — $9.31
Bazaarvoice Inc (NASDAQ:BV) is a broken IPO. The provider of social-commerce solutions went public at $12 early last year, but now it’s trading in the single digits after posting disappointing quarterly results two weeks ago.
Let’s view this as an opportunity. Yes, Bazaarvoice Inc (NASDAQ:BV) is losing money, but it has posted narrower losses than analysts were expecting every single quarter since last year’s IPO.
There are more than 1,000 different retailers relying on Bazaarvoice Inc (NASDAQ:BV) to generate sales, brand awareness, and customer loyalty by mining the more than 400 million questions and experiences of roughly 20 million different products.
Wall Street sees narrowing losses on revenue growth in the mid-teens through the next two years. That’s not bad for a stock selling for less than last year’s IPO.
NII Holdings, Inc. (NASDAQ:NIHD) — $7.19
This provider of mobile communication services through Latin America under the Nextel banner is about to come into a great deal of money. It agreed to sell approximately 2,790 cell towers in Brazil and another 1,666 towers in Mexico in an $811 million transaction. It will lease them back. It still needs them. But the amount of money raised will provide some welcome liquidity for NII Holdings, Inc. (NASDAQ:NIHD).
NII Holdings, Inc. (NASDAQ:NIHD) also sold its Peruvian operations in a deal for more than $410 million.
The stock took a hit last year after posting declines in wireless customers, but it’s gaining ground again. It closed out its latest quarter with 9.9 million subscribers, 100,000 more than it had a year earlier.
Things aren’t perfect. The average revenue per user has fallen as NII Holdings, Inc. (NASDAQ:NIHD) kicks in with retention efforts to keep customers around. The mobile provider is also losing a lot of money, and that’s not good for a highly leveraged company. The $1.2 billion raised in the two deals equals NII Holdings’ market cap, but its enterprise value is north of $5 billion given the substantial debt levels.
However, the welcome liquidity and the long-term prospects for wireless services through Latin America make NII Holdings, Inc. (NASDAQ:NIHD) a risky play with some serious potential upside.
Giant Interactive Group Inc (ADR) (NYSE:GA) — $8.51
It’s been nine months since I tagged Giant Interactive in this monthly column, and even though the stock is trading 44% higher now, I still don’t have a problem giving it the nod again. Giant Interactive Group Inc (ADR) (NYSE:GA) is a growing player in China’s emerging online gaming scene. It’s had lumpy fundamentals in the past, but it’s been surprisingly consistent these days.
Giant Interactive Group Inc (ADR) (NYSE:GA) earned $0.82 a share this last year. It’s on pace to crank out a profit of $0.92 a share this year, and analysts see net income of $0.99 a share come 2014. You rarely see these kind of big and growing per-share numbers on a stock trading in the single digits. My bet is that Giant Interactive Group Inc (ADR) (NYSE:GA) won’t be trading in the single digits for too much longer.
Nokia Corporation (ADR) (NYSE:NOK) — $6.41
After posting gains of 38% and 19% in back-to-back weeks, it may seem that I’m a bit late in pointing to Nokia Corporation (ADR) (NYSE:NOK). However, Nokia Corporation (ADR) (NYSE:NOK)’s decision to sell its devices and services business for $7.2 billion two weeks ago not only provides a cushion of safety, but it will also be interesting to see what the Finland-based wireless pioneer does with the new cash mattress.
I’ll go with Nokia Corporation (ADR) (NYSE:NOK). I’m late this time, but I was also too early last 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 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.
The article 5 Stocks Under $10 originally appeared on Fool.com and is written by Rick Munarriz.
Longtime Fool contributor Rick Munarriz owns shares of Ford. The Motley Fool recommends Ford and Giant Interactive Group and owns shares of Ford.
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