Low priced stocks are a great way to add some excitement and potentially huge returns to a portfolio. Smaller companies or small capitalization (small cap) companies often have stocks that trade for less than $7 per share. Often small cap companies are young and have potential for significant growth, and could turn into mid or large cap companies over time. In other cases, the companies are well-established but have very depressed share prices. The other allure of low priced stocks is that they are often more volatile and can be more rewarding than stocks that trade for $50 per share or more. For example, it is far more likely for a small company with a $5 stock to suddenly double in a day or two than it would be for a massive company like Exxon (XOM) to double. Of course with more potential reward, you have to be willing to take on more risk. However, small companies with low priced stocks can offer significant rewards without taking on excessive risks if proper due diligence is done. I like to see companies with profitable operations, a solid business model, high levels of insider ownership and/or recent insider buying, and finally ... a strong balance sheet. When those factors combine along with an undervalued stock price, chances are very high that investors will be rewarded. With that in mind, here are a few stocks that are trading well off the 52 week high and yet still have solid fundamentals and future upside potential.
Primo Water Corporation (PRMW) shares are trading at $2.74. This company provides purified drinking water in 3 to 5-gallon bottles that are reused multiples times and then eventually recycled. Primo is focused on addressing the environmental concerns that the bottled water industry has raised. The shares have traded in a range between $2.47 to $16.45 in the past 52 weeks. The 50-day moving average is $3.02 and the 200-day moving average is $8.70. Earnings estimates for Primo Water are for a loss of 14 cents per share in 2011, and a profit of 26 cents for 2012. The book value is $6.59, so the stock is trading at less than half that level. This company has a solid balance sheet and significant growth potential. The growth is likely to come from the "Primo Flavorstation" which enables consumers to create flavored beverages at home. Customers have a wide variety of flavors to choose from like a cola, fruit-flavored, and even energy drinks. Once again, this is considered by many to be a more environmentally solution since it reduces the use of plastic bottles and aluminum cans. The stock dropped precipitously in late 2011, after the company announced weaker then expected results. Due to this issue, the company has seen class action lawsuits filed against it. These types of suits are common and if the company can stay focused and grow sales, this will be a buying opportunity.
Exide Technologies (XIDE) shares are trading at $3.12. Exide is a leading maker of batteries for autos, boats, trucks, motorcycles, recreational vehicles, forklifts, as well as for other applications. The company also makes energy storage systems with power supply backup. These shares have traded in a range between $2.22 to $12.68 in the last 52 weeks. The 50-day moving average is $2.75 and the 200-day moving average is $5.78. Earnings estimates indicate a profit of 37 cents per share for 2011, and 80 cents for 2012. Based on the book value of $4.65 and the low PE ratio of about 4 times forward earnings, this stock is dirt-cheap. Exide shares dropped substantially in late 2011, after the company reported weaker than expected results. However, the company seems confident that 2012 will be better and it stated "We remain confident, however, in our ability to continue to improve the operating performance of the Company and expect full year fiscal 2012 operating income to be in the range of $160 million to $170 million, up from $95.8 million in fiscal 2011." If the company achieves those goals, the stock could easily double from the current bargain levels it trades at now.
Office Depot, Inc. (ODP) shares are trading at $2.60. This company is a specialty retailer of office supplies, furniture, electronics and other items. These shares have traded in a range between $1.75 to $6.18 in the last 52 weeks. The 50-day moving average is $2.27 and the 200-day moving average is $3.04. Office Depot is estimated to lose about 6 cents per share in 2011, and earn 7 cents for 2012. The book value is stated at $2.66 per share. An analyst at Barclays recently upgraded shares of Office Depot based on cost-cutting and other strategic initiatives. The analyst also pointed out that "Recent improvement in small business optimism is encouraging and may have positive implications for companies operating in the office supplies space,". This stock regularly traded well over $12 per share before the 2008 financial crisis. If the stock gets back to even half that level, it will be a double from here.
Huntington Bancshares (HBAN) is trading around $5.92. Huntington is a regional bank based in Ohio. These shares have traded in a range between $4.46 to $7.70 in the last 52 weeks. The 50-day moving average is $5.35 and the 200-day moving average is $5.61. HBAN is estimated to earn 60 cents per share in 2011, and 65 cents for 2012. Huntington shares offer a dividend of 16 cents which provides a yield of 2.7%. This company has a solid balance sheet and the book value is $5.83 per share. Insiders own a substantial amount of stock and they added a considerable number of shares last year. Recent economic data shows signs of improvement in both the housing and job market. If those trends continue, Huntington shares could be in for a multi-year run.
Parker Drilling (PKD) shares are trading at $6.35. Parker provides mostly land and barge drilling services and is based in Texas. The shares have traded in a range between $3.60 to $7.62 in the past 52 weeks. The 50-day moving average is $6.85 and the 200-day moving average is $6.07. Earnings estimates for PKD are 52 cents per share in 2011, and 75 cents for 2012. The book value is $5.44 per share. The company recently announced that its two new rigs were delayed and would need modifications. This resulted in a $171 million non-cash charge, which is expected to reduce fourth quarter earnings by about 95 cents per share. Because of this, the stock has come under pressure, but this looks like a buying opportunity on dips for longer-term investors.
The data is sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.