5 Stocks Trading Under $10 That Could Surge Higher

 |  Includes: ANIP, ARIA, AUQ, BPA, MTOR, SIRI
by: Vatalyst

Still reeling from what you heard on the Kennedy tapes and wished you had been sitting on a blockbuster about to happen? Then maybe you can consider some of these cheap stocks to make your day when the timing is just right. Here is my analysis of some great picks:

Meritor, Inc (NYSE:MTOR) –With the current U.S. economic climate over the last two years and the significant reduction in vehicle sales that came with it, one would find it hard to predict that Meritor, a key player in the automotive industry, actually saw its share price increased by 43 times from $0.5 to $22 during the same period. However, Meritor serves mainly commercial, defense, and aftermarket customers internationally, so that may be one of the reasons for its resilience in the face of tough market dynamics. However, Joseph Mejaly, President of Aftermarket & Trailers explains in an interview for a popular trade magazine about a new state-of-the art facility in the Australian state of Victoria that pay cuts (including bonuses) and other cost-cutting measures taken by the men and women behind the wheel of the company were in a large part responsible for the company's ability to weather the global financial crisis. Currently trading under $10, analysts are mostly of the opinion that this is as good a time to buy as any, with earnings fundamentals set to rise. However, Meritor insiders on the top rungs of the ladder let go of a number of shares in early May. Director William Newlin recently bought a number of shares before the onset of the current decline in share price, as Meritor announced its third quarter results and a 55 percent increase in earnings and announced the addition of new members to its flagship product line.

Sirius XM Radio, Inc (NASDAQ:SIRI) – Over the last year, Sirius renewed contracts with all of its major content providers and has brought its content to the satellite radio broadcasting platform. Over the same period, Sirius has exhibited an acceptable growth with its share price hovering around and not going lower than $1.50, with exceptional performance for some weeks in May, June and July (at which time, the price was testing the $2.50-level). According to one analyst, branding and promotion are very critical to ratings, which in effect, give life to the radio stations, both for the traditional and those that are internet-only.

Furthermore, with the increasing impact of technology in broadcasting and its ability to reach a broader audience, there has been growing competition from online music streaming sites, internet-only radio stations, and to some extent, digital music players. Against this backdrop, Sirius is facing numerous challenges on how it can consistently achieve positive financial results, with the automotive industry facing broadly similar challenges, given significant reduced consumer expenditures as a result of the uncertainty in the current economic climate. However, current price/sales ratio and cash flow figures have been generally positive for Sirius. Thus, while the share price appears to have a downward trend, there is a future for Sirius to get back on track, as evidenced by a significant stake currently held by its institutional investors.

Northgate Minerals Ltd (NXG) – As we all know, the price of gold had an impressive run as a result of the financial crisis. This drove a lot of investors to purchase gold, focusing its historical stability. Similarly, copper, through technical innovations, has been slowly becoming a popular alternative source of value with its role in industrial society and technological developments. Taking into account these factors, it would not come as a surprise for Northgate Minerals' share price to spike in value, given Northgate's principal activities as a gold and copper producer.

Following the Greek debt crisis this past July, there was a resulting move towards gold. Over the same period, Northgate's share price increased by almost 23.5 percent to an average share price of 3.31 in August 2011, from an average price of 2.68 in June, 2011. A downfall in Northgate's share price eventually took place with the price of gold stabilizing by mid-September. However, based on current forecasts, Northgate exhibited a positive 50-day moving average and an acceptable price to sales ratio, although there is reason to believe that this was highly influenced by the proposed acquisition by Northgate of Aurico Gold. More information regarding this potential acquisition can be found here.

BioSante Pharmaceuticals, Inc (BPA) - Over the past few years, the U.S. biotechnology industry has witnessed positive and exciting developments with regard to research and development and advantageous government regulations. However, as with most biotech companies, funding is mostly sourced from the private sector. In July, BioSante announced a public offering for its common stock. On the closure of this offer on 2 August, its share price went down by approximately five percent which may be attributed to the dilutive effect of the stock issuance to all shareholders.

Since this announcement, BioSante had not made it past the $3 mark. In addition, a 50-day moving average chart shows a further downward trend in the share price. As a company which mostly relies on shareholder sentiment and market feedback on announcements pertaining to milestones in its products, BioSante will remain a high-risk high reward investment at this time. While the market for the company's products may be classified as stable since it is a specialty company, the long process of securing approvals and licenses for its innovations may appear costly for some investors. Nevertheless, insiders for the company are the ones buying so we may be in for some surprises.

Ariad Pharmaceuticals, Inc (NASDAQ:ARIA) – The global pharmaceutical industry is one of the most competitive sectors as most companies need to have a good strategy towards the manufacturing and marketing of their pharmaceutical innovations, with a focus on research and development expenditures, taking into account high rates of spending (without immediate returns) and little government financing. Further to this point, significant announcements made by Ariad in December and January 2011 helped its share price achieve positive growth, particularly with the success of clinical trials for treatments against leukemia and soft-tissue or bone sarcomas in June 2011. A further announcement in July on the submission for its new drug application in the US resulted into a marginal upward movement to Ariad's share price.

Although performance in August was inferior (monthly average of $9.31 from July average of $12.33, or a reduction of approximately 25 percent), Ariad has shown moderate upside with a to-date average share price of $9.87. This followed the announcement of long-term results of the Phase 1 study for its BCR-ABL inhibitor, Ponatinib, as an effective treatment for cancer. With cash flows from operations flowing in well enough and a major breakthrough for medical science on the cards, reported earnings may just exceed analyst expectations like they did last June.

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