Top 3 Analyst Stock Picks Under $10

Includes: CNTY, KKD, LVS, PCYC
by: Simon Monger

Krispy Kreme Doughnuts (KKD), Century Casinos Inc. (NASDAQ:CNTY) and Pharmacyclics Inc. (NASDAQ:PCYC) are three top analyst stock picks trading under $10.00 per share.

Analysts Give Krispy Kreme $10 Price Targets

KKD, a retailer and wholesaler of doughnuts and packaged sweets with more than 580 total locations worldwide, received favorable price targets from two analysts. CL King and Sidoti both maintained $10.00 per share price targets on the stock, which represent a 14% premium over the current market price.

With plans to become a midday coffee destination across the U.S. and now Europe, the doughnut maker could see stronger results in the near future. Investors looking to capitalize on this potential may want to consider purchasing 7.50 Nov ’11 call options for $2.05 per contract. These options have a breakeven point of $9.05 and would yield a 46% return on investment, if the stock reaches $10.00 per share.

Two Catalysts Could Help Century Casinos

CNTY, an international casino entertainment company with numerous facilities located around the world, could move higher from a potential Switzerland casino license and second quarter results. The analysts reiterated their Buy rating on the stock with a $4.00 per share price target – a 47% premium over the current market price.

As investors look for these two catalysts to materialize, they may want to consider a pairs trade that isolates Century’s value and hedges against broad declines in the sector. To do this, investors can purchase long-term put options in larger industry players, like Las Vegas Sands Corp.’s (NYSE:LVS) 40 Jan ’12 puts trading for $6.35 per contract, which will gain value if the casino industry moves lower.

News Flow Could Push Pharmacyclics Higher

PCYC, a clinical-stage biopharmaceutical company focused on small molecule drugs for the treatment of cancer and immune diseases, could move higher in the coming months amid positive news flow, according to RBC Capital. The analysts maintained their Outperform rating and raised their price target to $15.00 per share – a 62% premium to the current market price.

Investors looking to capitalize on the potential positive news flow from its clinical trials and future plans may want to consider using long-term options in lieu of stock to enhance returns. Currently, the company’s 10 Jan ’12 calls are trading for $1.00 per contract. With a breakeven point of $11.00 per share, this trade would result in a 400% return on investment if the stock hit $15.00 per share.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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