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Published: November 8, 2010
There's a balance
between performance and stability when it comes to stock prices.
Equities priced under $5 per share can offer huge percentage
returns, but are generally volatile. Stocks priced more than $10
are generally more predictable, but offer a muted upside. In
between $5 and $10 though, stocks offer the best of both worlds.
Here are five sub-$10 stocks to consider today...
1. Boise Inc. (NYSE: BZ): Paper and forestry stocks have
been one of the market’s recent-but-quiet big winners, and Boise
Inc. has been blazing the trail every step of the way. Shares
are up about +46% in the past 12 months, while the forestry
indices are up about +28% in the same period. The overall
market, by comparison, has only gained about +14% in the same
timeframe.
While such outperformance has often been followed by matching
underperformance in the past year and a half, for paper stocks
-- and Boise in particular -- a continued uptrend may be more
than merited.
Skyrocketing materials costs
through 2007 nearly brought the paper and corrugated box
industry to its knees. For better or worse, the recession that
began at the end of that year solved the problem. Though
materials costs were up on a year-over-year basis for Boise last
quarter, they’re still well under 2007’s stunning levels,
despite the mild economic rebound since then. The result? Boise
just posted record-breaking third-quarter
operating income of $0.44 per share, and the sustainable
balance between materials costs and paper demand remains intact.
2. Aircastle LTD (NYSE: AYR): While it may feel too late
to tap into the revival of the airline industry, it’s not. The
back door is still open, via Aircastle.
The company arranges sales and leases of commercial jet
aircraft, which was admittedly a lousy business to be in through
2009 while air passenger traffic was declining. In 2010, a light
appeared at the end of the tunnel. Though bottom lines haven’t
actually rebounded yet, but they’re expected to in 2011 on a
year-over-year as well as on a sequential basis.
Besides, with a trailing as well as a projected
price-to-earnings ratio (P/E) just above 8.0, it’s not like
value is a question mark with Aircastle.
3. American Axle & Manufacturing (NYSE: AXL): The initial
reaction to last quarter's earnings for American Axle &
Manufacturing wasn’t a kind one. Despite topping analyst
estimates of $0.39 by actually bringing home $0.52 per share,
the company dropped from a high of $10.15 to an ultimate low of
$8.84 thanks to a “disappointing” full-year revenue forecast in
the $2.2 billion to $2.3 billion range.
While the actual numbers may have been shy of estimates,
valuations here are also teetering on being ridiculous. American
Axle shares are priced at a mere 8 times earnings on a trailing
basis in the last four quarters, and even if earnings shrink per
current
EPS estimates of $1.35 for 2011 (which isn’t likely), the
stock’s still priced at about seven times forward-looking
forecasts. The market seems to have caught its mistake though;
the stock has bounced back to $9.96.
Bottom line: this stock has far more upside potential packed
into its future.
4. Celestica (NYSE: CLS): A stock that rallies on good
news makes sense. A stock that rebounds despite bad news may not
make much sense, but in many regards it speaks volumes more
about how investors view the company.
After the electronics manufacturer announced last week it would
likely be posting income under analysts’ estimates of $0.25 per
share for the current quarter, shares fell from $8.84 to a low
of $7.96 -- for half of a day. Now it’s even higher than where
it started that journey.
So the company countered the bad news with a rebound catalyst?
No. It’s just that Celestica is (1) still consistently growing
earnings on a year-over-year basis, and (2) is still
bargain-priced at less than 10 times 2011’s anticipated
earnings.
5. Excel Maritime Carriers (EXM): Finally, there’s a
difference between "based in Greece" and "dependent on the Greek
economy." Excel Maritime Carriers is only guilty of the former,
but the stock has taken several lumps in the past few months,
suggesting investors are assuming the latter.
That’s not to say the company escaped the global recession
unscathed -- Excel Maritime did indeed dip into the red
throughout most of 2009. In the last three quarters though,
operating profits have not only improved, they’ve been positive,
and the company appears to be coming out of the storm. In fact,
the company topped last quarter’s EPS estimate of $0.10 with a
per-share profit of $0.11.
While one -- or even three -- solid quarters don’t mean
everything, the plausibly forecasted (2011) P/E of 8.8 goes a
long way toward that end.
Action to Take --> Investors don't have to choose
strictly between stability and performance. The narrow band of
stocks priced between $5 and $10 offer a very rewarding balance
of both. These five names are among the picks of that particular
litter, and could serve as a well-balanced addition to almost
any portfolio.
-- James Brumley
Contributor
StreetAuthority |
