With Dow Jones Industrial Average (DJIA) and S&P 500 Index hitting new highs, investors are now looking for new ideas and value stocks that they might have overlooked. Investors have proven every time this year that they will buy value and stocks on pullbacks or when they are overlooked. With that in mind, 24/7 Wall St. reviews dozens of analyst calls each morning of the week to find new ideas for our readers.
It turns out that some of the so-called stocks to buy have low share prices and are under $10. This past week, we tracked nine analyst stocks with a share price under $10 and an implied analyst upside that is well above average for typical DJIA or S&P 500 stocks.
Investors need to take extra precautions in low-priced and small cap stocks. Many of these do not have stock options, and many companies are highly speculative. These companies are also less covered by analysts than traditional DJIA and S&P 500 stocks. They are generally much riskier too, and some are so speculative that their business could fail if the analysts are wrong — and sometimes the analysts are very wrong. These low-priced stocks almost never pass the classic “widows and orphans” suitability test.
Now that the warnings and caveats have been stated, low-priced stocks under $10 still are the source of much interest for many investors. Finding the next diamond in the rough or a stock that could have exponential growth in the years ahead is the obvious draw. Some investors believe that there is more potential upside in low-priced and small cap stocks than there is in established companies worth billions and with high share prices. That belief is often misguided, but that is still how some investors view stocks.
FuelCell Energy Inc. (NASDAQ: FCEL) was raised to Buy from Neutral at Sidoti on Monday. The upgrade did not help the slide at the time, as shares were down over 7% and close to $1.54 late on Monday after the call. Alternative energy has been pounded with the price of oil — what does a 52-week trading range of $1.28 to $4.74 tell you? Still, there was positive sector news this week and the stock was up at $1.69 as of Friday’s close, the same as the previous close.
Groupon Inc. (NASDAQ: GRPN) was raised to Buy from Neutral at Merrill Lynch on Monday. The deals and commerce provider’s price target was raised to $9.50 from $8.00 in the call, which was actually based on a sum of the parts analysis (versus a $7.53 close). Groupon shares ended the week under $7.30, which implies upside of about 30%. The consensus analyst price target is $8.24.
Sprint Corp. (NYSE: S) is one in which it is hard to find many financial bulls on the stock, but the financially stretched wireless carrier was started as Overweight by HSBC on Tuesday, with ratings higher than AT&T and Verizon at the firm. The prior close was $4.87, but shares were down to $4.69 the following day, and the stock ended Friday at $4.85. The $6.30 price target just may simply not have enough allure for some investors when you consider that Sprint has lost money habitually and does not pay any dividend.
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