One of the interesting things I have heard repeated numerous times throughout the years is the attractiveness of finding good stocks trading at just under $5. This is based on the theory that since most institutional buyers are restricted or reluctant to buy stocks that under $5 a share and once the stock can get and hold the $5 level, institutional demand will come in and significantly lift the stock higher. Here are two stocks that are priced at just under $5 that have low valuations, good growth prospects and should soon be over $5.
SciClone (SCLN) :
SciClone Pharmaceuticals, Inc. engages in the development and commercialization of novel therapeutics for the treatment of oncology, infectious diseases, cardiovascular, urological, respiratory, and central nervous system disorders in the People's Republic of China and internationally. Its principal product is ZADAXIN for the treatment of hepatitis B and hepatitis C viruses, and certain cancers, as well as for use as a vaccine adjuvant or as a chemotherapy adjuvant for cancer patients with weakened immune systems. (Business Description from Yahoo Finance)
4 reasons SciClone is cheap at $4.75 a share:
- The median analysts' price target of $7.25 on SciClone and numerous insiders made several small purchases in the back half of 2011.
- The stock looks like it is gaining technical strength, just crossed its 100 day moving average and looks poised to move over the $5 threshold (see chart).
- The stock has a forward PE of just 11 and a five year projected PEG of less than 1 (.75).
- The stock has a pristine balance sheet with $.75 a share in net cash on the books. It is also is growing revenues rapidly. It grew sales north of 50% in FY2011 and analysts project over 25% sales growth in FY2012.
Giant Interactive (GA):
Giant Interactive Group Inc. develops and operates online games in the People's Republic of China. It primarily offers multiplayer online role playing games (MMORPGs). The company operates 11 games, including 9 MMORPGs, 1 casual massively multiplayer online game, and 1 strategy browser game. Its games include ZT Online, ZT Online PTP, ZT Online Green Edition, ZT Online 2, ZT Online Classic Edition, King of Kings III, My Sweetie, Giant Online, Dragon Soul, XT Online, and The Golden Land. (Business Description from Yahoo Finance)
4 reasons Giant Interactive has room to run at just over $4 a share:
- The company has approximately $1.25 in net cash on the books and pays a dividend of 4.2%. Sales growth was over 35% in FY2011 and analysts are looking for approximately 20% growth in FY2012.
- The stock has a very low five year projected PEG (.48) and is priced at just over 5 times forward earnings.
- The company has significantly beat earnings estimates for the last four straight quarters and estimates for FY2011 and FY2012 have been raised over the last ninety days.
- The median analysts' price target on GA is over $6 and the stock is priced at 6 times operating cash flow.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SCLN over the next 72 hours.