Merrill Lynch Has 5 Stocks Rated Buy Under $10 With Massive Upside Potential

While Most of Wall Street focuses on large and mega-cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. Many of the biggest public companies, especially the technology giants, trade from the low to mid hundreds, all the way up to over $1,000 per share. At those steep prices, it’s pretty hard to get any decent share count leverage.

Many investors, especially more aggressive traders, look at lower-priced stocks as a way to not only make some good money but to get a higher share count. That can really help the decision-making process, especially when you are on to a winner, as you can always sell half and keep half.

We screened the Merrill Lynch research database and found five Buy-rated stocks trading under the $10 level that could provide investors with some solid upside potential. While much better suited for aggressive accounts, they could prove exciting additions to portfolios looking for solid alpha potential.

AK Steel

This stock has been hit recently and offers investors a great entry point at current levels. AK Steel Holding Corp. (NYSE: AKS) is the sixth largest U.S. steelmaker and has the capacity to produce nearly 7 million tons of a total 110 million tons of U.S. steel capacity. The company produces flat-rolled carbon, stainless and electrical steel and tubular products in the United States and internationally. It produces flat-rolled value-added carbon steels, including coated, cold-rolled and hot-rolled carbon steel products, as well as specialty stainless and electrical steels in sheet and strip forms.

The company also produces carbon and stainless steel that is finished into welded steel tubing, which is used in the automotive, large truck, industrial and construction markets, and it buys and sells steel and steel products, and other materials, and produces metallurgical coal from reserves in Pennsylvania.

Merrill Lynch has a $6 price target on the shares, and the Wall Street consensus target is $5.21. The stock traded on Friday at $4.35 a share.

Arcos Dorados

This company may be way under the radar, but it has one of the best products imaginable in terms of name recognition. Arcos Dorados Holdings Inc. (NYSE: ARCO) is the world’s largest McDonald’s franchisee and Latin America’s leading quick-service restaurant operator. The company has exclusive rights to operate or subfranchise restaurants in over 20 countries in Latin America and the Caribbean. Brazil represents about half of revenues and nearly 60% of EBITDA.

Arcos Dorados was created in 2007 via the acquisition of McDonald’s assets in the region. The company completed a $1.4 billion initial public offering in April 2011. The company has posted solid results this year, with Mexico leading the way for momentum.

Merrill Lynch has a $10.50 price target, though the consensus target is $10.95. The shares traded on Friday at $6.20.