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In order to make above-average gains in the stock market, it often pays to look for stocks that are "off the beaten path." If you only consider well-known stocks that scores of analysts cover and many investors already own, chances are strong that your portfolio returns will be much like everyone else's. A stock that is widely followed and owned, like Coca-Cola (NYSE:KO), could certainly provide gains over time; however, those gains are not likely to substantially outperform the market.

Stocks that are not widely covered or well-known are often smaller companies that have low-priced stocks. These types of stocks are more likely to be miss-priced by the market. Low-priced stocks are generally more volatile and can be higher risk. But, that is where the opportunity lies for well-informed and patient investors.

It makes sense for investors to own stable "blue chip" stocks, but it also makes sense to have at least some money invested in low-priced stocks that have high potential. Shares of Coca-Cola are not likely to double anytime soon, but small-cap stocks trading in the single digits could see significant gains.

I have been following many low-priced stocks for the past year. The companies below recently reported financial results which confirm the business model, solid growth, and upside potential for each of these stocks.

Even though it has not reported results recently, I included Renren (NYSE:RENN) in this group of high-potential stocks because it is also trading in the single digits, it has impressive growth potential in China, and because it could benefit from the upcoming Facebook IPO. Here are a number of high-potential stocks to consider for gains in 2012:

Exide Technologies (XIDE) offers battery and energy storage solutions to the automotive, marine and industrial sector. In the past 12 months, the stock was trading as high as $12.24 per share, but the company has faced challenges and some investors appear to have given up on this stock. The company recently reported earnings which disappointed some investors. Results were impacted by warmer than usual weather, weakness in the Euro currency as well as slower sales coming from Europe. However, the company still reported profits of $68.2 million or 84 cents per share for fiscal 2012 third quarter, which were partially aided by favorable tax benefits. With a book value of $5.45 per share, the stock appears undervalued. Just a few weeks ago, analysts at Maxim Group put a buy rating and a $7 price target on the shares.

Here are some key points for XIDE:

  • Current share price: $3.07
  • The 52 week range is $2.22 to $12.24
  • Earnings estimates for 2012: 83 cents per share
  • Earnings estimates for 2013: 55 cents per share
  • Annual dividend: None

Radian Group, Inc. (NYSE:RDN) is a financial services company offering mortgage insurance. Falling real estate and foreclosures have had a very negative impact on the financial results at this company. The stock has dropped by about 50% from the 52-week high. However, recent housing data supports the idea that housing is at or near a bottom. The company announced financial results which also supports the belief that chances for a rebound are growing. Radian reported a fourth-quarter net loss of $121.5 million, or 92 cents per share, which compares very favorably to a net loss of $1.1 billion, or $8.55 per diluted share in the fourth-quarter of 2010. This stock has a book value of $8.55 per share, and it could see strong gains into 2013, as profits are expected to return.

Here are some key points for RDN:

  • Current share price: $3.62
  • The 52 week range is $1.80 to $7.50
  • Earnings estimates for 2012: a loss of $1.39 per share
  • Earnings estimates for 2013: a profit of 6 cents per share
  • Annual dividend: None

E-Commerce China DangDang Inc. (NYSE:DANG) is already considered by many to be the Amazon.com (NASDAQ:AMZN) of China. It offers a wide variety of products and it also has an E-book reader. It has a strong balance sheet with about $220 million in cash. Considering the population growth in China, rising incomes, and the surge in online commerce which is expected to continue for years, it's hard not to realize the huge potential market for this company.

The stock is trading for a fraction of the 52-week high, which is $28.29. This seems to be due the fact that the company is losing money, however just like Amazon.com in the early years, that is to be expected. DangDang is focused on growth and that is coming through as the company recently reported a revenue increase of 73% for 2011. These shares pulled back after earnings were released and it makes sense to average into the stock on dips.

Here are some key points for DANG:

  • Current share price: $6.32
  • The 52 week range is $4.11 to $28.29
  • Earnings estimates for 2012: a loss of 74 cents per share
  • Earnings estimates for 2013: a loss of 78 cents per share
  • Annual dividend: None

Renren, Inc. operates a social networking website, and is often referred to as the "Facebook of China." The IPO for Facebook is expected to value the company at about $100 billion. Renren has a current market capitalization of about $2 billion, which is a mere fraction of the estimated value of Facebook. However, when you consider that Renren has about $1.2 billion on the balance sheet, that brings the enterprise value well below $1 billion, which makes this stock look even more undervalued. Facebook might be the dominant social networking site globally; however, China has a huge and growing population, so if Renren dominates in China, this stock could perform like Baidu (NASDAQ:BIDU) in the long-term. These shares have rebounded from recent lows, but it still trades way below the 52 week high of $24. I expect this stock will see another burst of interest when Facebook begins trading.

Here are some key points for RENN:

  • Current share price: $5.24
  • The 52 week range is $3.21 to $24
  • Earnings estimates for 2011: a profit of 1 cent per share
  • Earnings estimates for 2012: a loss of 8 cents per share
  • Annual dividend: None

Phoenix Companies, Inc. (NYSE:PNX) provides life insurance and other financial products. This stock is trading way below book value, which is $9.67 per share. This company has been slow to rebound from the financial crisis that impacted many life insurance companies, however,
it is seeing improved financial results. Phoenix recently reported full year 2011 net income of $8.1 million, or 7 cents per share, and operating income of $42 million, or 36 cents per share. That compares favorably compare with 2010 losses of $12.6 million, or 11 cents per share. A few weeks ago, analysts at FBR Capital put a buy rating and a $3 price target on the shares. With the stock at about $2 per share now, that would provide potential gains of 50%.

Here are some key points for PNX:

  • Current share price: $2.16
  • The 52 week range is 97 cents to $2.77
  • Earnings estimates for 2012: 42 cents per share
  • Earnings estimates for 2013: 49 cents per share
  • Annual dividend: None

Data is sourced from Yahoo Finance.

Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.

Source: 5 Low-Priced Stocks With High Potential For Gains