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Published: October 28, 2010
As cliche as the term "stocks on sale" has become, there's
still something exciting about grabbing a great stock for less
than five bucks a share. They just seem well equipped to dole
out bigger rewards -- in terms of percentage gains -- than their
higher-priced counterparts.
With that as a backdrop, here are five sub-$5 equities you may
want to consider as we head into 2011.
1. Cincinnati Bell Inc. (NYSE: CBB) -- Cincinnati Bell
earned more in 2008 than it did in 2007, and earned more in 2009
than it did in 2008. Now that the economy is out of the rut,
however, this regional telecom is anticipated to post less
income this year than it did last year.
Respectfully, to the analysts, please notice the trend.
While rampant growth has never been the company's strong suit,
that's not a fault of Cincinnati Bell -- that's just telecom.
The trade-off is amazing value. Priced at only 5.7 times
trailing earnings and 6.6 times earnings projections for the
next twelve months, it's a bargain by most standards. And
remember, those are highly reliable earnings.
The icing on the Cincinnati Bell cake is the recently-swollen
short interest. At 13.8% of the
float, all those traders who drove the stock down lately may
end up spurring a
short-covering rally.
2. Mizuho Financial Group Inc. (NYSE: MFG) -- Believe it or not,
there are other investment-worthy countries in the Far East
besides China. Try Japan, where the banks are apparently coming
out of the balance-sheet-blasting credit crunch much faster than
their U.S. counterparts. Though the official results aren't in
yet, Japan's top three banks are expected to have more than
tripled their profits in the past six months on a year-over-year
basis. As more bad debt is shed from the books, bottom lines
should continue to grow.
Are the numbers the real ones, or just the published ones? Great
question, though it may not really matter. If the investing
public believes in the results, they'll respond in kind. That's
good news for the likes of Mizuho Financial Group, especially
now that the company is looking to expand internationally.
3. LSI Corp. (NYSE: LSI) -- After seven earnings beats and no
misses in the past 14 quarters (and three beats in the past four
quarters), the market should start to recognize that this
semiconductor manufacturer is underestimated. The fact that the
company is on pace to grow earnings by +37% this year and +8%
next year is just gravy.
As it stands right now, LSI Corp. shares are priced at about
nine times 2011's anticipated earnings, which is stunningly low
by tech stock standards against that kind of growth.
4. Graphic Packaging Holding Co. (NYSE: GPK) -- While most
investors are thinking of the obvious ways to play the
rebounding economy, the savvy way to play it may well be with a
group that's too obvious to notice, like packaging, signage and
printing companies. In fact, the profit of $0.08 per share
Graphic Packaging Holding is expected to announce in early
November would be a record-breaker for the company.
Graphic Packaging Holding has already proven it's taking
advantage of the recovery by swinging back to profitability five
quarters ago, and staying there ever since. The year-over-year
comparisons have been nice increases that entire time as well,
with the biggest one yet slated with the third quarter's
estimates.
5. Art Technology Group Inc. (Nasdaq: ARTG) -- Trading at a
little more than 18 times projected earnings for the next four
quarters, one would be hard-pressed to say Art Technology Group
is a "cheap" stock. On the other hand, you have to pay for
quality and reliability, and this company definitely falls into
that category.
The company, in simplest terms, offers e-commerce solutions.
Apparently it's a good business to be in. Though income was
reeled in slightly during the early part of the recession, Art
Technology Group never dipped into the red ink at any point in
the past four years.
How so? The nature of the business is heavy on recurring
revenue; income growth comes from adding new customers/revenue
streams. And now that the economy is on measurably firmer
footing, new customers should be easier to find. Given 2011's
earnings estimates of a record $0.24 per share, analysts seem to
agree.
Action to Take --> There's a difference between "cheap" and
"undervalued." Cheap stocks are on the low end of the price
scale for a reason, so being priced under $5 doesn't mean you
should ease up on your selection standards. These five names are
undervalued, and also just happen to be trading under the $5
mark. That could change in a major way, however, over the course
of the coming year.
-- Tim Begany
Contributor
StreetAuthority
P.S. -- There's an analyst with a track record you need
to see. She has an 89% win rate -- remarkable for this market.
And she just keeps picking winners. One of her recent picks shot
up +18.2% in just 13 days.
Go here for the details... |
