If you’ve got 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. 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.
| 8/16/13 | 3/13/09 | Gain | |
|---|---|---|---|
| Sirius XM Radio | $3.70 | $0.198 | 1,769% |
| Bare Escentuals* | $18.20 | $3.66 | 397% |
| Focus Media* | $27.50 | $5.74 | 379% |
| Geron | $1.42 | $4.36 | (67%) |
| Ford | $16.30 | $2.19 | 644% |
* 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 624% in four years is pretty remarkable.
Let’s go over this month’s picks.
Strategic Hotels and Resorts Inc (NYSE:BEE) — $8.50
The lodging industry is starting to bounce back, and we’re seeing it in Strategic Hotels and Resorts Inc (NYSE:BEE)’s numbers.
The REIT watches over 18 luxury hotels including New York City’s Essex House, charging an average of $285 a night. Business is booming. Over the past year, it’s seen daily rates and occupancy levels climb, combining for a 10% pop in RevPAR (or revenue per available room).
Despite being a REIT, Strategic Hotels and Resorts Inc (NYSE:BEE) hasn’t played a dividend outside of its preferred shares since 2008. That could change as funds from operations are starting to grow in this welcome climate, but the real buzz here is the potential for a buyout.
JMP Group analysts suggest that Strategic Hotels and Resorts Inc (NYSE:BEE) could fetch $13 a share in a deal, and some investment groups have suggested that the takeout price could be closer to $14 a share. These would be healthy premiums to where the REIT’s at now, but even if you don’t want to speculate, you can still see the improving trend at Strategic Hotels and Resorts Inc (NYSE:BEE).
Kandi Technologies Group Inc (NASDAQ:KNDI) — $4.44
The combination of electric cars and emission-polluted China sounds like a no-brainer, and that’s what propelled shares of Kandi Technologies Group Inc (NASDAQ:KNDI) higher two months ago after announcing that it would team up with Geely to co-develop all-electric sedans to sell in the world’s most populous nation.
The stock has given back most of those gains as reality has set in.
If electric passenger cars have been a hard sell here given their stiff prices, why should it fare any better in China?
There are also concerns about Kandi Technologies Group Inc (NASDAQ:KNDI) itself. It’s a pretty small company that relies largely on go-karts and ATVs. The shares took another hit last week after it reported quarterly results that showed us how small Kandi Technologies Group Inc (NASDAQ:KNDI) actually is at the moment. Revenue clocked in at $12.2 million, and just $2 million of that came from the sale of electric vehicles.
However, Kandi Technologies Group Inc (NASDAQ:KNDI)’s electric sedan dreams are just getting started. It wasn’t until last month — after the close of the quarter — that it announced the delivery of the first 100 Kandi-Geely vehicles for a public car-sharing system in Hangzhou City.
Better days are coming. They may not happen right away, but it’s why it’s opportunistic to eye Kandi Technologies Group Inc (NASDAQ:KNDI) now when it’s out of favor than to chase it the way investors did in early June.
E-House (China) Holdings Limited (ADR) (NYSE:EJ) — $6.07
Let’s stay in China, where E-House (China) Holdings Limited (ADR) (NYSE:EJ) posted blowout quarterly results last week.
The provider of real estate agency and information services saw its revenue soar 43% to $163.4 million and adjusted earnings per share nearly doubled to $0.11 a share. Wall Street was holding out for just a profit of just $0.06 a share on $135.8 million in revenue. This is the second quarter in a row that E-House (China) Holdings Limited (ADR) (NYSE:EJ) has smashed through analyst estimates.
The rebound is real. E-House (China) Holdings Limited (ADR) (NYSE:EJ) is raising its guidance for the entire year, targeting 36% growth to $600 million this year.
E-House (China) Holdings Limited (ADR) (NYSE:EJ) was a rock star a few years ago, but it’s been meandering in the single digits for more than two years. Concerns about China’s real estate bubble and the country’s slowing economy cooled down the stock, but the financials suggest that E-House is heating up again.
Organovo Holdings Inc (NYSEMKT:ONVO) — $5.87
I’m willing to take risks in this column — as all investors who try to swing from the fences with low-priced stocks accept — but this one is extremely speculative.
Organovo Holdings Inc (NYSEMKT:ONVO) has a lofty goal of using bioprinting to generate human tissue in a lab that can be used for culture plates or bioreactors to speed up medical research.
How far Organovo Holdings Inc (NYSEMKT:ONVO) is from making that dream a reality is a guess at this point. If it becomes possible in the mainstream market, there are no guarantees that Organovo will be a big player. However, investor interest in 3-D printing — and that is what this is when you think about it — is making an already-risky company even more volatile.
It will be feast or famine with Organovo, making this a high risk in exchange for high return pick.
YuMe Inc (NYSE:YUME) — $8.95
Broken IPOs intrigue me.
YuMe Inc (NYSE:YUME) went public at $9 two weeks ago, and it closed last week slightly below that.
YuMe Inc (NYSE:YUME) is a leading provider of digital video brand advertising solutions. This would seem to be a strong niche given the popularity of online video, but the market has ignored the video marketing IPOs this year.
YuMe is certainly growing. Revenue climbed 70% last year, and it managed to turn a small profit. Growth, earnings, and reaching a global audience of 257 million unique monthly visitors aren’t enough to impress the market these days, but YuMe’s the real deal.
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 and owns shares of Ford.
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