The bull market may now be almost nine years old. And January of 2018 might have been the strongest start of a year in some time. Unfortunately, the less than traditional and somewhat disorderly sell-off in stocks in February of 2018 acted as a harsh reminder to investors that the markets can correct and can correct violently.
The big concern now is to weigh all the factors contributing to the sell-off to determine which are temporary and which are longer-term issues. And then there is the consideration of how investors should be positioning themselves for the rest of 2018 and beyond.
24/7 Wall St. reviews dozens of top Wall Street research reports each day of the week. This ends up being hundreds of research ideas each week, and it can be over 1,000 different reports over the course of a month. Some analyst reports cover stocks to buy and some cover stocks to sell.
Despite the big sell-off in February, many Wall Street analysts are sticking by their bullish calls. To many investors, particularly those with investing horizons longer than the next news cycle, this pullback represents a buying opportunity. There is an interesting group of stocks to consider among all those “Buy” and “Outperform” ratings. In the past 10 days or so, there have been a host of analyst reports calling for investors to buy some of the stocks trading under $10. This is a class of stocks that can be scary to some investors, and it can be an attractive area for speculative investors because some of the implied upside to the analyst price target is so high in percentage terms.
Investors have to understand that most stocks under $10 tend to be riskier than Dow Jones industrial average and S&P 500 stocks. Some of the companies are very small, with market values of a few hundred million or less. Others are formerly larger companies that may have become stuck over time. Either way, these come with more risk than conservative stocks.
To outline how much more risk there is, investors have to consider the notion that a higher implied upside should translate to a higher risk profile for a company. The traditional analyst upside target had been roughly 8% to 10%, but that might be a range as high as 10% to 15% for new Buy/Outperform calls now that stocks have sold off. Some of the analyst calls in the stocks under $10 that have been made in the past 10 days during the selling panic have seen upside predictions of 25%, 50% and even over 100% in some of the much more speculative calls. Again, more upside projections inherently come with a higher risk.
In an effort to highlight lower-priced shares that still might have some upside, we have included additional metrics in each call. The date of each call has been highlighted, as has what the target means in implied upside. We also included recent trading performance metrics to show how this compared to the sell-off in which the Dow and S&P went from being up 8% at the peak in 2018 to being down 2% each in year-to-date performance. Consensus estimates on earnings data or on analyst price targets are from Thomson Reuters.
These are eight analyst stock picks with share prices under $10. One additional stock has been featured as a runner-up, with less detail, since its shares are now back so close to the $10 mark again.
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