Janet
0
All posts from Janet
Janet in Trading psychology,

Seven stocks for under $10 a piece

Top-performing newsletter editors are a good source of advice on low-priced stocks

Investment newsletters are an obvious source of advice about attractive low-priced stocks.

That’s because the major Wall Street brokerage houses and research departments tend to shun such stocks, focusing on larger-cap issues that typically trade for higher prices. Newsletter editors operate under no such bias towards larger and higher-priced stocks.

That doesn’t mean just any newsletters will do, of course. Some that focus on low-priced stocks are little more than tip sheets, interested in little more than pumping up the stocks they are recommending so that the promoters can unload the shares they own on unsuspecting investors.

Fortunately, because of the Hulbert Financial Digest’s performance ratings, we can ignore the shadier ones and focus solely on those with market-beating records over a long-enough period to justify our paying attention close attention. For this column I chose a 15-year period, which extends back to near the beginning of the 2000-2002 bear market as well as the 2007-2009 bear market, along with two intervening powerful bull markets.

Focusing on this long a period largely eliminates the role that luck plays in performance. Notice also that beating the stock market over this long and varied a period requires more than just being a bullish or a bearish stopped clock.

The list of low-priced stocks below are currently recommended for purchase by at least two of these 15-year market beaters. Two ADRs would otherwise have appeared on this list, but I chose to not list them below since their low prices are in part a function of the exchange rate. (Those two were Ericsson ERIC, +1.95% and Nokia NOK, -0.14% .)

The seven low-priced stocks that survived this winnowing process:

—Affymetrix AFFX, +1.52%

—Barrick Gold ABX, +0.30%

—Chesapeake Energy CHK, +1.90%

—Freeport-McMoRan FCX, +0.47%

—ON Semiconductor ON, +2.58%

—TiVo TIVO, +4.60%

—Willamette Valley Wineyards WVVI, -0.30%

Note carefully, however, that low-priced stocks tend to be more volatile and riskier than the overall market, so don’t allocate more than a small portfolio percentage to any one stock. And if the overall market is headed into a major downtrend, as some are now predicting, low-priced stocks could very well be especially hit hard.

But if the market soon recovers from its recent period of weakness, it certainly seems plausible that low-priced stocks will be among those that rise the quickest and furthest.

More from MarketWatch