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Low-priced stocks can offer greater risks and rewards for investors. Since these stocks tend to be more volatile than "blue-chip" stocks that can trade for $50 per share or more, there is often more money to be made if investors buy at the right time. December is one of the best times to buy low-priced stocks that have been beaten down by tax loss selling. That's because the selling of shares to harvest tax losses comes to an end on December 31. In the first days of January, stocks that have been hit hard by the temporary wave of tax loss selling pressure often suddenly show strength in what is called a "January Effect" rally. Shorts that have watched stocks drift lower under the weight of tax loss selling can become complacent plus they often don't want to cover profitable short positions until after January since that will allow them to postpone a taxable event for their accounts. However, this can cause shorts to cover in early January, especially if they see a momentum shift in the stock. This in turn can catch some short sellers off-guard and when they see a stock firming up, it often causes them to cover their positions, sometimes fueling a short-squeeze rally.

Because of this, it can often be very rewarding to buy a few stocks that have been beaten-down by tax loss selling as long as the companies still have solid fundamentals or turnaround potential. If you can find a stock with these characteristics which also has a high level of short interest, you might have a stock that is "spring-loaded" for a rally into January. With that in mind, here are a few stocks that are trading below $7 and well below their 52-week highs which could be poised to rebound once tax loss selling ends. As noted below, some of these stocks also have a high level of shorts which could add more fuel to a January Effect rally:

Iridium Communications, Inc. (IRDM) provides global communication services through its network of 66 satellites. While earth-based mobile phones work for the average consumer or business user, Iridium's satellite network covers the world and it is suited for many industries such as search and rescue, maritime users, aviation, military, mining, forestry, expeditionary travel and more. While traditional communication providers can often see network and other failures in the event of a natural or man-made disaster, Iridium's satellite-based network is sometimes the only system that can continue to provide services without failure or disruption. For example, when a massive earthquake and tsunami hit Japan in March 2011, that country's telecom, military and emergency teams relied on Iridium and within hours of that disaster voice and data traffic surged 700%. Events like this highlight the strategic need for satellite-based communications from Iridium.

Iridium has a solid balance sheet with about $189 million in cash and around $588 million in debt. This company is profitable and analysts expect it to earn nearly $1 per share in 2013. The shares look very undervalued with a price-to-earnings ratio of just about 6, plus it is trading below book value which is $10.19 per share.

According to Shortsqueeze.com, there are about 6.6 million shares short and since Iridium trades about 376,000 shares on an average day, the short interest is equivalent to about 17 days worth of volume. Shorts appear to have jumped into this as a momentum play to the downside when the market dropped after the Presidential election. That November market sell-off took this stock down from about $7.50 to current levels. However, shorts that have become complacent and not yet covered could watch profits evaporate since tax-loss selling is about to end. This is likely to take away the cheap supply of shares that have put pressure on Iridium since it dropped in November. A January Effect rally and a short squeeze could cause this stock to rebound up to about $7.50 to $7.85 (which is the 200-day moving average for this stock) in the near term. However, in the long run, this stock could be a multi-bagger and one top fund manager has made a strong case for the shares to be worth $12.50 soon, and up to about $32, by 2017, if it is valued like its peers. Out of all these stocks, I believe Iridium has the most upside potential for a major rally into January.

Zynga, Inc. (ZNGA) is considered by many investors to be a top social gaming company as it has some of the most popular games played on smartphones, mobile devices as well as online. Zynga's "Farmville", "Mafia Wars", "Word With Friends" and other titles are a fun way for people to "stay connected" to family members and friends while playing a game. Since this company's games are also popular with Facebook (FB) users, it is often tied to that company, and as Facebook's IPO created a lot of buzz and then subsequent disappointment, investor interest in stocks like Zynga faded. Zynga shares were trading for over $15 in the past year, but now can be purchased for just over $2. To be sure, this company has had challenges such as keeping top employees from departing, and it is not easy to keep coming up with popular new games. However, at current levels, the stock is just too cheap to pass up for a number of reasons. First of all, Zynga shares appear ripe for a seasonal "January Effect" rally which often occurs in stocks that have created losses for shareholders in the current calendar year. With Zynga shares trading for a mere fraction of the 52-week high of about $15, and even the IPO price of $10, there is no doubt that many investors have losses. Tax loss selling in this stock has probably created a real drag on the shares which could be lifted when tax loss selling ends in just a matter of days. If the stock is holding firm around the $2.30 per share level, imagine where it might be trading at when the extra supply of stock being sold for tax reasons fades.

Aside from that seasonal tax-loss buying opportunity, there are some other major positives. The company has about $1.32 billion in cash and just around $100 million in debt. The cash it has on the balance sheet is equivalent to $1.69 per share and that makes this stock look cheap at just $2.30 per share. Also, it trades below book value which is about $2.38 per share. With well over $1 billion in cash, this company has the funds to develop more games or buy other companies. It also has major growth potential if online gambling is legalized in the future and Zynga is taking steps to tap into this industry as it recently filed to acquire a real-money gaming license. Analysts at Needham recently upgraded this stock to a buy and set a $4 price target on Zynga shares. With the stock trading around $2, that would provide investors with a double.

Advanced Micro Devices, Inc. (AMD) is a potential short-term rebound play, but it also has long-term turnaround potential. Although that comes with risks since the PC industry is facing challenges and AMD has serious competitive pressures. As a leading manufacturer of semiconductor chips, it needs to keep up with old rivals like Intel (INTC) as well as newer companies like ARM Holdings (ARMH). Intel and AMD shares have been hit hard in the past couple of months as investors have become increasingly concerned about the shift from PCs to tablets like the iPad. PC sales have been impacted as consumers and businesses allocate their tech budget towards tablets and hold on to older equipment. The concern about PC sales became even more pronounced when Microsoft's Windows 8 launch did not seem to set off much of an upgrade cycle for the industry. However, it seems far too early to call for the death of the PC industry, it is more likely just a transitional period.

The rise in popularity of tablets has certainly taken the growth out of the PC business for now, and chip makers like Intel and AMD certainly need to be better positioned for slower growth and new industry dynamics. These companies need to develop more products for tablet and mobile devices in order to capture the growth in those markets. AMD has developed a specialized processor for tablets, called "Tamesh," which is reportedly already being used in a 4G tablet. AMD has a solid balance sheet with about $1.3 billion in cash and around $2 billion in debt. This will give the company some flexibility to invest in new products and ride through the transition period this industry is facing. If the new Tamesh chip and other designs catch on, this could be an ideal time to buy this beaten-down stock.

Even in the short term, AMD shares seem well-positioned to rebound because it could be a prime candidate for a January Effect rally and even some short covering. AMD shares have a 52-week high of about $8, and with the stock just over $2 now, plenty of investors have lost money and that means this stock is probably being impacted by tax-loss selling now. When that stops on December 31, the end of this extra selling pressure could help lift the stock as could some short-covering. According to Shortsqueeze.com, about 145 million shares are currently short. Since it trades about 26 million shares on an average day, the short position is equivalent to about 6 days worth of trading volume. While that might not be enough for a major short squeeze rally, it could be enough to add a little buying pressure in AMD shares in the future. While many analysts have reduced expectations for AMD, some price targets still suggest major upside potential. Analysts at FBR Capital Markets have a $6 price target on AMD shares and give the shares an "outperform" rating. A less than $3 per share now, investors could double their money if the stock hits the $6 price target.

NII Holdings, Inc. (NIHD) is one of the largest providers of mobile communication services including voice services, data services, and wireless Internet access in Latin America. This company was once an international business division that launched operations in Brazil in 1997, and owned by Nextel Communications, Inc. It has since become a publicly-traded company that has expanded into neighboring countries such as Argentina, Mexico, Chile and Peru. This company continues to expand and improve the range of services and technology that it offers. It has launched a 3G network in Peru and Chile, and it expects to launch 3G services in Brazil and Mexico later in 2012. The company has seen subscriber growth of about 14% from 2011 to 2012, and it has about 11.2 million subscribers as of June 20, 2012.

This stock has dived in 2012 and it now trades for just a little bit over the 52-week high. The problem is that stiff competition and unfavorable currency exchange rates have impacted financial results and the company has been recently reporting losses. However, the company might be able to position itself for higher margins and reduced competition when it launches 3G services in key markets such as Mexico and Brazil in late 2012. The stock appears to be significantly undervalued if the company can return to profitability and it now trades for about half of book value which is $17.21 per share. It also appears to be a prime "January Effect" rally candidate, although Iridium looks like a much better value and lower risk play in the telecom sector.

Xerox Corporation (XRX) shares have declined in 2012, as investors have shunned companies that are considered to be "old tech." It seems that in an era of iPhones and iPads, that anything else seems too boring to invest in for many investors. The current lack of interest in many tech stocks has created a solid buying opportunity for investors who are willing to take a longer term view. While many investors only think of Xerox as a copy machine maker, a closer look at the company reveals that it is much more.

Not only does this company still make world-class copy machines, it also offers printers, software, consulting, and IT business solutions to many Fortune 500 companies. Xerox has a special research and development division called Palo Alto Research Center or "PARC." This division has created breakthrough technology including encryption systems, electronic reusable paper, solid-state lasers, optical storage and more. This company continues to spend on R&D which means future breakthroughs are possible which it can add to the roughly 9,400 patents it currently owns. With the stock at $6.70 per share, it now trades for a price-to-earnings ratio of just about 6.5. That is less than half the average PE ratio for a stock in the S&P 500 Index. It also pays a dividend that yields nearly 3%. With expectations and the valuation of this company at very low levels, it could be poised to surprise to the upside and investors are paid a solid dividend in the meanwhile.

Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.

Source: Buy These Cheap, Below $7 Tech Stocks Now For A 'January Effect' Rally