subject: The Top 5 Stocks Under $10 With The Most Potential For Upside [print this page] In stock markets, inexpensive stock actually can mean two different things (at least). One, the stock is generally cheaper in its value per share as compared to other expensive stock/s. Two, actual value of the stock is cheaper than its valuation, a method of estimating theoretical value of stock, and therefore, is touted to be inexpensive and having great upside potential.
In this article, we combine the best of both these worlds, not only we will talk about stock that are generally cheaper than others, but also are cheaper with respect to their future valuations. In order to achieve this, we set up the following criteria to deduce five stocks:
Trading at or below US$10 per share
Having the most potential for upside
The five companies listed in this article are trading well below their 52-week highs and general market estimates. Now, the most common reason to prefer lightweight stocks to other expensive ones is that they form the perfect trading vehicles with lots of volatility and provide frequent opportunities for greater returns relative to the market. They also allow you to reduce the size of your investment if you are not willing to bet big. Further, they help in diversifying your investment in as many different ways to reduce your risks. So lets have a look at these stocks:
SandRidge Energy, Inc. (SD)
The Oklahoma-based company operates as an independent natural gas and oil company in the United States. The company engages in the exploration, development, and production of oil and gas properties. SD has US$3.12 billion in market capitalization and is trading for less than two times its book value. Its EPS for next year is expected to rise by 121%. The company posted a net profit margin of 16.75% with both QoQ sale and EPS growth up by 22% and 27% respectively. Analysts believe the company is well below market consensus and its 52-week high. SandRidgessenior vice president, Kevin White, recently said thatthe companys operations on the Mississippian are more mature in Oklahoma where the company is typically seeing a 100% return on investment over the life of a well. Lastly, the recent Natural Gas rally makes it even more attractive for investment.
Cornerstone Therapeutics, Inc. (CRTX)
A specialty pharmaceutical company based in Cary, North Carolinaand engages in the acquisition, development, and commercialization of prescription pharmaceutical drugs for the hospital, niche respiratory, and related specialty markets. Founded in 2000, Cornerstone currently has US$191.25 million in market capitalization and has been trending higher so far in 2012. CRTX announced on July 25th that the FDA has scheduled a review of the new drug application for Lixivaptan. Ever since the announcement the stock has been seeing significantly higher trading volumes and looks ready to trigger a major breakout trade. Should the stock manage to sustain its breakout above $6.50 to $7.00 a share with strong upside volume flows, it has a great chance of re-testing and possibly taking out its next major overhead resistance levels at US$8.50 to US$9.20 a share.
Alcoa, Inc. (AA)
This New York-based company engages in the production and management of primary aluminum, fabricated aluminum, and alumina. The multi-national company has US$8.93 billion in market capitalization and also is a traders favorite with over 22 million share exchanging hands daily. Fundamentally, Alcoa has several positives. The company has a forward P/E of 11.31, with share price approximately two thirds of its book value and EPS this year is up over 100% while next year it is expected to rise by 155.17%. The company pays a dividend with a yield of 1.40%.Alcoa beat street estimates last quarter and posted robust growth in all businesses. Anticipating improved aluminum demand from automobile, aerospace, packaging and commercial transportation, the company is believed to have a great potential for an uptrend in near future.
Rentech, Inc. (RTK)
Founded in 1980, this Los Angeles-based company owns and develops technologies that enable the production of synthetic fuels and renewable power when integrated with third-party technologies in the United States. The company also owns the patented Rentech Process based on Fischer-Tropsch chemistry that converts synthesis gas from gasification technologies into complex hydrocarbons, which is upgraded into fuels or chemicals. In addition, it manufactures and sells natural gas based nitrogen fertilizer and industrial products, including ammonia, urea ammonium nitrate, urea granule, urea solution, nitric acid, and liquid carbon dioxide for agricultural and industrial uses. It has a market value of approximately US$468 million and was off to a monster start in 2012 with shares up 74% in the first 4 months. Following which RTK droppeda little before recovering back to its resistance level formed earlier this year. Analysts believe that with high volumes the company should easily continue to uptrend and tag US$3 to US$4 a share in the near future.
Micron Technology Inc. (MU)
This Idaho-based manufacturer and marketer of semiconductor devices worldwide, comes in 5th on this list. Founded in 1978, MU currently has market capitalization of US$6.44 billion. It has a forward P/E ratio of 35.17 and its EPS is expected to grow by 117% next year. In October last year the stock initiated an uptrend that ended in March this year. Since then, the prices retraced back to October-levels and analysts believe that it is trading well below itsmarket estimates and its 52-week high. Good news for Micron as Toshiba is lowering the NAND flash memory production, thereby leadinga rise in contract prices after huge first half declines.
To conclude, after careful analysis of the fundamental and technical aspects of several stocks, we chose the above 5 as the best stocks under US$10 with the most potential of an upside move. It should be noted that some of these stocks are technically stronger whereas other are fundamentally better. Therefore, dividing your investment into all these stocks may not be bad idea either. Lastly, bare in mind trading low-value, high volume stocks can expose your investment to substantial risks, but can garner handsome returns too. In any case, it is always recommend to be prepared for any uncertain market moves.
