Stocks Under $10

A discussion with a friend of mine over the historic pricing of stocks prompted me to run a screen for quality stocks under $10. Usually, this is an oxymoron. I generally don’t buy stocks under $10 because they are usually garbage stocks. What I have noticed, however, is that some stocks I have bought out of consolidations rose up out of the single digit range to then form a basing pattern over $10.

After running my screen of the entire stock market, I came back with 6 stocks. I’m not going to list all of them because at least 4 of them I wouldn’t consider buying. But one did stand out as worth looking at.

Why bother? I have to admit, sometimes they shoot up quickly to over $10 where people with real money (hedge funds, mutual funds, insurance companies, etc.) start paying attention to them. But single-digit stocks tend to be highly speculative in nature, so you really have to do your homework.

The one stock I liked on the screen I ran is CHOP. I haven’t done a complete research package on it, but take a look for yourself. It’s a Chinese steel producer, so there is that potential Chinese octane. It has the highest possible 99 EPS rating and is showing strong EPS growth and strong recent sales growth.

Two major flaws I can find with it right off the bat are 1) it is estimated to make less money per share in 2010 than it did in 2009 and 2) only one major fund is listed as owning shares in it. This second aspect may have changed recently since it is a very new stock.

One thing I do like very much about stocks under $10 is that they often have small market capitalizations and fewer shares outstanding. This makes it vulnerable to price swings as it doesn’t take much money to push the price down – or up very quickly. This is a double-edged sword, however. At only $315Million market capitalization, it’s difficult for real stock market players (who control three out of four dollars invested) to push money into the stock. So for now, the smaller investor will have to do the heavy lifting if it’s to take off.