The last full week of March was choppy and took away most of the 2015 gains for the Dow and the S&P. Still, investors keep looking for value, and the trend has been set in stone that they will buy stocks on pullbacks. 24/7 Wall St. reviews dozens of analyst reports each day of the week to find hidden gems for its readers. Some of these analyst calls cover stocks to buy and some cover stocks to sell.
Where investors often find hidden value and great upside stories is in the small-cap stocks and in stocks under $10. While investors often see analysts calling for 10%, 20% or 30% upside in S&P 500 or Dow Jones Industrial Average stocks, they often find analyst projections of 50%, 100% or more in some small-cap and low-priced stocks. Now that the bull market is six years old, many investors are looking for new ideas to find value or lesser known growth opportunity.
24/7 Wall St. would remind readers and investors that these small-cap and low-priced stocks almost unilaterally come with more risk than well-established Dow and S&P 500 stocks. Also, investors need to understand that not all analyst projections come to fruition. Some calls even feel like all-or-none gambles, and some of the companies that appear in this category may even disappear.
One common mistake that is made by investors in small-cap and low-priced stocks is the belief that most small companies eventually grow into huge companies. That just isn’t so. Low-priced and small-cap stocks are generally inappropriate for conservative investors — no widows and orphans funds.
Projected upside in this week’s calls did have some analysts calling for as much as 50% and 100%. Again, that also implies far more risk. This past week we tracked eight key analyst calls in stocks that were under trading under $10 when the analysts made their calls.
Callaway Golf Co. (NYSE: ELY) was raised to Outperform from In-Line and the price target was raised to $12 from $8 by Imperial Capital on Monday. The prior close was $8.58, but shares had risen up to $9.49 by Friday’s closing price. Apparently golf may have some upside, with or without Tiger Woods being in tournaments.
Callaway’s 52-week range is $6.79 to $10.35, and the consensus analyst price target is $10.33. The $12 Imperial target price here still leaves an implied upside of 26% if the analyst is correct, and of the six analysts that cover the company the highest analyst target is $14.
Crossroads Systems Inc. (NASDAQ: CRDS) was started as Outperform with a $5 price target at Northland Securities on Tuesday. This was against a $2.77 prior close, but Crossroads shares took the wrong fork in the road this week. It closed at $2.48, and that drop just may have been tied to a weak broad market tape since there was no real news out after the analyst call.
Crossroads provides data protection solutions and services for enterprises that need to protect their data, but it has a micro-cap profile, as its market capitalization is just under $50 million. Still, if Northland is correct there is a chance for investors to double their money here. Just keep in mind that this company is so small that Northland is the only firm we can see with a formal rating on this stock.