Buying stocks on the cheap can be a tricky gambit, as there is usually a reason why the price is so low.
In some cases, however, the reason why a stock is trading below the psychologically important $10 level is simply because the company either is overlooked, oversold, or undervalued.
(Lest we forget, Bank of America , the largest bank in the U.S. by assets at $2.26 trillion, hasn’t traded above $10 since July.)
At the beginning of this year, Bespoke Investment Group put together a list of 17 stocks trading on the Russell 3000 index at less than $10 per share that it saw with attractive valuations as compared to fundamentals, as well as positive charts.
Since then, that basket has generated a 22.85 percent gain, nearly doubling the Standard & Poor’s 500 index’s own stellar 11.58 percent return. In fact, five of the original names “graduated from the $10 class” and now are trading above that level.
With the changing market, along with price changes and chart fluctuations, in mind, Bespoke has updated its list, and only four of the original names remain.
Again, caution is the watchword, despite the outperformance so far of the under-$10 list. Some of the stocks mentioned are small-cap and even micro-cap (or valued at less than $300 million) names, trading at low volumes, and thus subject to high volatility. Bespoke advises using limit orders , which provide for automatic buying or selling at designated prices levels, with all trades.
Bespoke sees the following as solid performers at bargain-basement prices: Aceto,AXT, Boise, eResearch Technology, First Commonwealth Financial, Global Cash Access Holdings, Journal Communications, Leapfrog Enterprises, Move, Pacer International, Regions Financial, Ruby Tuesday, Ruth’s Hospitality Group, Sciclone Pharmaceuticals, Sun Healthcare Group, Susquehanna Bancshares, TriQuint Semiconductor, and XO Group.
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