These five stocks have solid upside potential and are well positioned for growth. Furthermore, some have gotten downright interesting based on improving fundamentals, valuation and solid growth stories.
Additionally, the five stocks are trading at or below $10. Stocks trading for $10 or less tend to be more volatile with frequent, large percentage moves in the stock price. This provides the opportunity for greater returns (or losses) relative to the market. These are stocks with market caps of $3 billion or greater. Stocks trading under $10 may provide more bang for your buck.
Now, simply selecting $10 stocks trading with some strong fundamental data is only the first step to finding winners that may provide alpha. We need to see if these dogs can hunt. I will perform a brief analysis and give my take on each stock below. You should perform further due diligence to determine if this is the time to start a position for yourself.
In the following sections we will perform a review of the fundamental and technical state of each company to determine if this is the right time to buy. Additionally, we will discern if any upside potential exists based on sector, industry or company specific catalyst. The following table depicts summary statistics and Tuesday's performance for the stocks.
Brocade Communications Systems, Inc. (BRCD)
Brocade is currently trading at 16% below its 52 week high and has 17% upside potential based on the consensus mean target price of $6.33 for the stock. Brocade was trading Tuesday at $5.41, up over 2% for the day.
Brocade has some fundamental positives. The company has a price to book ratio of 1.12 and has a forward P/E of $7.96. EPS is up tremendously over 300% this year according to Finviz.com.
Technically, the stock has been trading sideways for quite a while. Nevertheless, the stock just bounced off of long-term support at the $5.20 mark. The last time this occurred the stock had a significant run.
Bradford Networks, a provider of secure network access for bring-your-own-device (BYOD), and Brocade just announced a strategic partnership and an integrated (BYOD) security solution. The solution utilizes Bradford Networks' patented Network Sentry solution to provide customers with secure network access control (NAC) across the Brocade wired and wireless HyperEdge Architecture.
The stock was up today on twice the normal volume. Revenue is growing and profit margins are up. I posit the new BYOD product will be well received. The stock is a buy here.
Boston Scientific Corporation (BSX)
The company is trading 4% below its 52 week high and has 4% potential upside based on the analysts' consensus mean target price of $8.02 for the company. BSX was trading Tuesday for $7.69, down nearly 1% for the day.
BSX has some strong fundamentals. BSX has a price to book ratio of 1.60. BSX has a forward PE ratio of 16.36. The company trades for approximately 1.5 times sales.
Technically, the stock has been stuck in a trading range between $7 and $8 for the past few months. The stock is trading 2% above the 50-day sma which is positive.
Boston Scientific should experience strong growth during the next several years. BSX has had a series of positive catalysts recently with new product in the pipeline that should increase revenues in 2013.
BSX's business model generates solid free cash flow, reliable revenue and controllable capital expenditure requirements. I believe BSX is a buying opportunity at this level.
LSI Corporation (LSI)
The company is trading 18% below its 52-week high and has 23% potential upside based on the analysts' consensus mean target price of $8.23 for the company. LSI was trading Tuesday for $6.68, up almost 1% for the day.
LSI has several fundamental positives. The stock has a projected EPS growth rate for the next five years of 13%. LSI has a solid balance sheet and plenty of cash. The forward P/E ratio is 9.28.
Technically, the stock has been trading sideways for quite some time. Recently, the stock bounced off its 52 week lows and has been moving higher since. The stock just broke through major resistance at the 50-day sma which is very positive.
Goldman recently downgraded LSI to Neutral. The firm argues weak enterprise IT spending will take a toll on demand for servers, storage and PCs relying on LSI's chips. Furthermore, nose diving desktop PC sales, down 13% year over year in the first quarter, will hurt its hard drive controller business. On the other hand, LSI rallied last week after delivering a first quarter beat. You can read the transcript here. The company is holding a shareholder meeting on May 9th. I posit the shareholder meeting will be positive and the drop in the stock caused by the Goldman downgrade will prove to be a buying opportunity. I like the stock here.
Regions Financial Corp. (RF)
The company is trading on par with its 52-week high and the analysts' mean target price of $8.84 for the company. Regions was trading Tuesday for $8.73, up slightly for the day.
Fundamentally, Regions has many positives. The company has a forward P/E of 10.15. EPS is rising 60% quarter over quarter. The company is trading for a price to book ratio of .78. The company has a net profit margin of 23.80%.
Technically, Regions looks great. The stock has been in a well-defined uptrend since November of last year. The rise has been orderly. Although the stock just broke out above the long-term trading range and may be approaching overbought levels with the RSI at 68.
Regions has many positive catalysts still in place and its technical and fundamental states are positive. Regions was a client of mine while I worked for Ernst & Young out of the Atlanta office in 1997. I was impressed with its professionalism and conservative values. The company has continually improved EPS, revenues and margins over the last few years. The stock is a buy here.
Sprint Nextel Corp. (S)
The company is trading on par with its 52-week high and the analysts' mean target price of $7.20 for the company. Sprint was trading for $7.22 on Tuesday, up slightly for the day.
Fundamentally, Sprint has some positives. EPS is expected to rise by 74% next year. The company is trading at a price to book ratio of .61. EPS is up 26% quarter over quarter.
Technically, Sprint is currently overbought with an RSI of 74.37. The stock has been in a solid uptrend all year. I recent flurry of buyout offers has run the stock up.
Sprint is the only company that offers the Apple iPhone with unlimited data, which is driving subscriber growth. The company is cleaning up the balance sheet and executing well on operational objectives. Sprint received an offer from Softbank (OTCPK:SFTBF) to buy a majority stake in the company which caused the company to pop up to the $6 mark. Recently, DISH Network (DISH), a U.S. satellite TV provider, offered Sprint a $25.5 billion bid which caused the recent spike in the stock from $6 to $7. I think this may be just the start of the bidding war for Sprint. The company is well positioned for future growth. I like the stock here.
The Bottom Line
I posit these equities will continue upward from their current share prices based on macroeconomic, sector and company specific catalysts. These stocks have great stories, good fundamentals and positive facilitators for future growth.
If you ignore the noise, do your due diligence, have a long-term time horizon and courage in your convictions, you can be a successful investor. I suggest layering into these names as there may be buying opportunities the coming months with the market at all-time highs. Take your time building a position. One of the major factors affecting your potential return in a stock is your cost basis. Always remember to have a well-balanced diversified portfolio containing several different asset classes.
Additional disclosure: : This is not an endorsement to buy or sell securities. Investing in securities carries with it very high risks. The information contained within this article for informational purposes only and is subject to change at any time. Do your own due diligence and consult with a licensed professional before making any investment.