Editors' Note: This article discusses micro-cap stocks. Please be aware of the risks associated with these stocks.
Like folklore tales that have been handed down from generation to generation, there is an underlying prevailing mindset in the world of investing that says that a cheap stock, or one that is very affordable, is too dangerous for individual investors. The thought is that these lower priced stocks are too speculative and that buying them will surely end in a loss for the investor. This fable about affordable stocks is unfortunate because it robs investors of opportunities to buy quality, high-value stocks at a discount before institutional investors get wind of them. These stocks provide a great way to get in on the ground floor and ride the wave of progression on the way to some handsome profits. Obviously, not every low-priced stock is a winner, but here are six I believe that are a great buy now to watch grow for the long haul.
Himax Technologies (NASDAQ:HIMX) is a Taiwanese LCD technology manufacturer that manufactures and distributes liquid crystal on silicon (LCoS) micro-displays, a component of wearable technology. Founded in 2001, the company sells its products through direct sales teams in Taiwan, China, South Korea, and Japan, as well as in Europe and the United States. Google (NASDAQ:GOOG) recently bought a 6.3% stake of Himax Technologies' display subsidiary to ramp production on chips and micro-displays once Google Glass launches in January. Himax Technologies' display drivers are also used across a variety of devices such as smartphones, notebooks, TVs, tablets, monitors and cameras, with large panel display drivers making up about 30% of the business. The company's second quarter report reveals that total sales for the quarter increased 17.8% sequentially and 9.2% year-over-year to $207.0 million. Revenues from large panel display drivers were $64.3 million, down 19.3% from a year ago but up 7.0% from the first quarter of 2013, accounting for 31.1% of total revenues. Sales of small and medium-sized drivers came in at $110.9 million, up 32.3% from the same period last year and up 21.5% sequentially. Sales of small and medium sized drivers accounted for 53.6% of total revenues. Trading currently around $10.69, (52-week high is $11.49, and its 52-week low is $1.77), Himax's stock has more than doubled in value already this year and I believe will continue to climb at least to $13-$15 before year's end.
Star Scientific, Inc.
Star Scientific, Inc. (STSI) engages in the development, manufactuer, sale, and marketing of nutraceutical dietary supplements and consumer products. The company has created and distributed some good products, but unfortunately, it has been known more for its lawsuits, than its manufacturing. Star Scientific won a $5 million lawsuit with R.J. Reynolds accusing Reynolds of infringing its patents for a tobacco-curing process designed to reduce cancer-causing nitrosamines in tobacco products. The company's stock has a 52-week range of between $1.15 and $3.56 and currently trading around $2. Regardless of the hoopla surrounding the company, Star Scientific has great potential. The company announced recently that it is licensing the trademarks and technology for its discontinued dissolvable tobacco products and shifting its focus on dietary supplements, including its Antabloc anti-inflammatory support product. The company's second quarter report shows that the company had net sales of $2.5 million, a 74% improvement over the $1.4 million reported in the same period the previous year. For the first six months of 2013, the company's top line came in at just over $5 million, almost double the year-ago period of $2.5 million. The company has suffered some significant losses, (net loss was $16.9 million), due to the lawsuits, and ambitious sales and marketing efforts. However, Antabloc is showing signs of success and I believe the stock can go much higher once the dust settles by the spring of 2014. I would buy this stock on hang onto it.
Spindle, Inc. (OTCQB:SPDL) provides a mobile commerce platform for consumers and merchants. Lots of companies do that, but Spindle also offers mobile commerce technology currently serving over 300,000 consumers and 6,000 merchants. Spindle delivers a simple API for eCommerce and mCommerce merchants to accept multiple forms of payments. The company is integrating with some of the largest point of sales systems including NCR Corporation (NYSE:NCR), SalesVu, Zing, and others. The company announced recently that it has expanded its payment processing services to include the immediate boarding of eCommerce merchants. This three-year old company is gaining traction with generating $700,000 in the first half of 2013 with FY2014 revenue expected to climb to $6-$8 million. eBay (NASDAQ:EBAY) recently announced it will purchase Braintree, a competitor of PayPal, for $800 million. Spindle hasn't quite met the maturity stage of Braintree, but it provides the same services and then some. In other words, Spindle may also be an attractive acquisition for eBay or others. The company is trading at $1.35 with a 52-week range of $.31 to $3.00. I think this is the perfect company to buy and hold and watch this baby grow.
Infinity Augmented Reality
Infinity Augmented Reality, Inc. (OTCQB:ALSO) provides the augmented reality software platform to connect universally with digital eyewear, smartphones, tablets, smart TVs and connected cars. The company recently announced its development of Amazing Relevance that is "the brain center" for the technology that anticipates a digital device user's desires and uses that information to effectively expedite their wishes. In a nutshell, this technology will know, based on the user's habits, tweets, postings, etc., what the user wants and when he wants it. The technology allows advertisers to profit when the digital device prompts the user that it is time for coffee at his favorite coffee shop. The coffee house can send a coupon at the specified time, prepare the coffee in advance, and allow the user to pay from his digital device at that time. Of course, the technology can be used more broadly than simply prompting a coffee break and the unlimited options benefit both the user as well as merchants. As with many of these challenging over-the-counter stocks there is a great risk potential, but great reward as well. I believe this company is on the verge of something great with augmented reality technology and the upcoming release of Google Glass and suggest buying now and holding onto it.
Shanda Games Limited (NASDAQ:GAME) is one of those gems that once you learn about it, you just can't shake it loose. Shanda Games develops, sources, and operates online games in the People's Republic of China; where the appetite for online games just continues to build. According to the IDC, the Chinese gaming market is expected to grow by 16% per year to reach $22 billion by 2017. This past summer, Shanda Games purchased Mochi Media for $80 million expanding its global reach. Mochi Media's online game network helps developers distribute their games on blogs or Web sites like Facebook. Shanda Games has the advantage over some other gaming companies in that it can compete in the mobile gaming industry as well. The company's fourth quarter results show that nearly 60% of its revenue came from its mobile gaming. Shanda Games carries a P/E ratio of 4 and a market cap of about $740 million. In 2012, the company had a net profit of $177 million and in the past three years, the company has bought back over 23 million shares of company stock at a total cost of $107 million. In addition, in 2012, Shanda Games issued a massive dividend payout of $290 million or $1.02 per share to investors. The current stock price is around $4.79 and has a 52-week range of between $2.68 and $6.42. I would make this one a strong buy to hold and hold long.
Virtual Piggy, Inc. (OTCQB:VPIG) operates as a technology company that delivers an online ecommerce solution in the United States and Europe, allowing parents and their children to manage, allocate funds, and track their expenditures, savings, and charitable giving online. Basically, Virtual Piggy enables the under 21 demographic to make online purchases in a safe, parent-approved, and COPPA compliant way. The company announced this past summer that it has a membership of over 250,000 users and just recently that it has enhanced the fraud-detection and control features in its family payment system with comprehensive screening. The company makes money through its merchant relationships. It's been estimated that over 75% of kids under 18 in North America carry a smartphone. This demographic can use Virtual Piggy to organize their finances and make purchases. For example, if a grandparent sends a $50 Footlocker card from the Virtual Piggy online shop to one of their grandchildren, the grandchild can then go to Footlocker, either online or in store, and pay using the gift card on their Virtual Piggy app. While the concept for Virtual Piggy hasn't caught on as fast as it the company would like, it is picking up steam. The company now provides its youth-friendly payment system to Mobile Chilli, a leading provider of mobile content, offering ringtones from top artists, mobile games, and over six million music tracks for download. This relationship empowers Mobile Chilli to offer a more secure and complete customer service for their under age 18 users. The company's stock is trading around $1 and the 52-week range is between $.78 and $3.38. I see this company as one that will catch on as parents take more interest in their children's online purchases. I recommend buying this one for the long term.
There you have it. A half-dozen under a dozen bucks. Of course there are more great buys out there and of course, there will be comments about how speculative stocks are risky. I agree that they are, but like the ones mentioned here, some are worth the risk. The risks are calculated based on a thorough investigation. However, as a wise investor, look for yourself and see if these are truly worthy of adding to your investment portfolio. I believe you will come to the same conclusion.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.