Most of my portfolio is in value stocks, cash and income producing plays in energy MLPs and Business Development Companies. The rest of my portfolio (5% to 10%) is in very aggressive small cap stocks. Here are two stocks that are selling at less than $3 a share that look like good high risk/high reward plays for long term, patient investors.
Lionbridge (NASDAQ:LIOX) - "Lionbridge Technologies, Inc. provides language, development, and testing services. Its Global Language and Content segment provides product localization services, such as creating foreign language versions of its clients products and software applications, including the user interface, online help systems, and documentation; and content translation services, such as translating and maintaining clients." (Business description from Yahoo Finance)
4 reasons LIOX has solid upside in store from under $3 a share:
- Earnings are due for a turnaround. Lionbridge only made 3 cents a share in FY2011. However, analysts have it pegged to earn 17 cents a share in FY2012 and 26 cents a share in FY2013.
- The stock has a five year projected PEG of under 1 (.81) and sells for just 36% of annual revenues.
- The stock is selling at just over 10 ½ times forward earnings, substantially below its five year average (26.2).
- The five analysts that cover the stock have a median price target of $4.50 on Lionbridge.
Aviat Networks (NASDAQ:AVNW) - "Aviat Networks, Inc. engages in the design, manufacture, and sale of a range of wireless networking products, solutions, and services worldwide." (Business description from Yahoo Finance)
4 reasons AVNW is a solid high risk/high reward play at $2.50 a share:
- The company has over $70mm in net cash on its balance sheet (over 40% of its market capitalization).
- The company is selling at book value and is selling at just 35% of annual revenues.
- Aviat has easily beat earnings estimates the last three quarters and has a forward PE of 15, below its five year average (26)
- The median analysts' price target by the five analysts that cover AVNW is $3.25 a share. Earnings are heading in the right direction. The stock lost 10 cents a share in FY2011, is scheduled to make a cent in FY2012, and analysts have it making 17 cents a share in FY2013.
Disclosure: I am long AVNW.