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5 Value Stocks Under $10

  • (0:25) - Value Stocks Under $10
  • (2:15) - Stock Screener
  • (4:55) - Tracey's Top Stock Picks
  • (12:45) - Warning Signs: What Happens If A Company Goes Bankrupt?
  • (16:15) - Episode Roundup: Podcast@Zacks.com

Welcome to Episode #66 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.

With many well-known growth stocks now trading at over $100 a share, Tracey decided to look for some stocks that you could buy at the opposite end of the spectrum, at under $10.

But she didn’t just want low cost stocks. She also wanted them to have value fundamentals. She wanted stocks that were genuinely “cheap” by both share price and fundamentals.

Screening for Stocks Under $10

Tracey ran a screen that included, of course, stocks trading under $10, along with a Price-to-Sales Ratio (P/S) under 1.0. Remember, a P/S ratio under 1.0 usually indicates value.

For example, if a company has a P/S ratio of 0.3, that means an investor is paying 30 cents for every $1 in sales. A bargain.

Tracey also added a Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold). She included “holds” because it is still earnings season and many companies haven’t yet reported, which will impact the Zacks Rank. Including holds also will give a wider set of names.

The screen gave her 237 results, but some were penny stocks. Tracey stayed away from those.

What was in the Screen?

Lots of energy names, especially drilling services companies, as well as retailers made the list.

But she narrowed it down to just 5 of them. These stocks are cheap but some of them are extremely out of favor on the Street.

It takes guts to be a value investor.

5 Value Stocks Under $10

1.     The Container Store (TCShas struggled almost from the first day of its IPO. Shares are down 91% from the 2014 IPO and are now trading under $5. This is one of the most hated retailers on the Street, by investors. But as value investors, that’s why we take a look. It is expected to make $0.35 in 2017 and $0.39 in 2018, which is earnings growth of 25%.

2.    Noodles & Company (NDLShas been abandoned by investors as shares have sunk 88%. It has a P/S ratio of just 0.3 but is expected to lose $0.01 this year. That’s coming off of a loss of $0.17 in 2016. Watch its upcoming earnings report.

3.    The Manitowoc Company (MTWis one of the largest crane manufacturers in the United States. Founded in 1925, its seen some tough times in its history. It’s expected to lose $0.15 this year but rebound to $0.07 a share in 2018.

4.    Calumet Specialty Products (CLMTis a refiner of hydrocarbon products. It took a loss of $3.27 last year, is expected to cut that to just $0.25 this year but 2018 is showing another decline to a loss of $0.95. It hasn’t reported yet either. Investors should be checking in on that conference call.

5.    Fossil (FOSLshares are down 57% year-to-date and now trade under $10 at around $7.80. It made $2.44 in 2016 but is only expected to make $0.68 in 2017. It’s still cheap, even though estimates are getting cut. It trades with a forward P/E of 12.4. Are watches really dead?

As always, investors should do their homework on any company they are buying, but especially on stocks under $10.

Some tips:

1.     Is the company making money or does it have a plan to make money in the near future?

2.    Are insiders buying now that the shares have plunged down?

3.    Are there rumors of bankruptcy?

Listen in conference calls. Don’t just read the transcripts. A lot can be learned by the tone of voice.

What else should investors know about buying value stocks under $10?

Tune into this week’s podcast to find out.

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Manitowoc Company, Inc. (The) (MTW): Free Stock Analysis Report
 
Container Store (The) (TCS): Free Stock Analysis Report
 
Calumet Specialty Products Partners, L.P. (CLMT): Free Stock Analysis Report
 
Fossil Group, Inc. (FOSL): Free Stock Analysis Report
 
Noodles & Company (NDLS): Free Stock Analysis Report
 
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