6 Stocks Under $10 Undervalued But With Quarterly Gains

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Includes: AF, ARR, HOPE, IRDM, MWW, XRIT
by: MyPlanIQ

We continue to look for stock ideas that can help provide both growth and stability for long term investors. This may be something of a detour as I am picking up on a selection of stocks by Danny Guttridge from Kapitall Research:

Stocks under $10 that are undervalued according to the Graham Number but with quarterly gains. I take this to be a screen for companies that may be on the upswing.

Danny's list of six are:

  • ARMOUR Residential REIT, Inc. (NYSE:ARR): Invests in mortgage-backed securities issued by or guaranteed by U.S. Government.
    • Market cap at $1.2B
    • Graham Number fair value $9.0
    • Recent stock's price:$6.93
  • Monster Worldwide, Inc. (NYSE:MWW): Provides online employment solutions worldwide.
    • Market cap at $964.47M
    • Graham Number fair value $10.22
    • Recent stock price $8.66
  • Astoria Financial Corporation (NYSE:AF): Operates as the bank holding company for Astoria Federal Savings and Loan Association that provides various banking services in the United States.
    • Market cap at $855.32M
    • Graham Number fair value $12.39
    • Recent stock price $9.03.
  • Iridium Communications Inc. (NASDAQ:IRDM): Provides mobile voice and data communications services through satellites
    • Market cap at $620.55M
    • Graham Number fair value $11.39
    • Recent stock price $8.66
  • X-Rite, Incorporated (NASDAQ:XRIT): Develops a range of color management systems primarily in the United States, Europe, and Asia.
    • Market cap at $478.05M
    • Graham Number fair value $6.94
    • Recent stock price $5.54
  • Wilshire Bancorp Inc. (WIBC) Offers a range of financial products and services.
    • Market cap at $377.08M
    • Graham Number fair value $6.76
    • Recent stock price $5.23

Right at the outset, I admit that this should never be a core part of a long term portfolio. This is going to be volatile with potentially big swings. It might be worth considering for a part of a portfolio that can absorb these big swings.

Asset Fund in this portfolio
REAL ESTATE (NYSEARCA:ICF) iShares Cohen & Steers Realty Majors
CASH CASH
FIXED INCOME (NYSEARCA:TIP) iShares Barclays TIPS Bond
Emerging Market (NYSEARCA:VWO) Vanguard Emerging Markets Stock ETF
US EQUITY (NYSEARCA:DVY) iShares Dow Jones Select Dividend Index
US EQUITY (NYSEARCA:VIG) Vanguard Dividend Appreciation ETF
INTERNATIONAL EQUITY (NYSEARCA:IDV) iShares Dow Jones Intl Select Div Idx
High Yield Bond (NYSEARCA:HYG) iShares iBoxx $ High Yield Corporate Bd
INTERNATIONAL BONDS (NYSEARCA:EMB) iShares JPMorgan USD Emerg Markets Bond
Click to enlarge

Portfolio Performance Comparison

Portfolio/Fund Name YTD
Return
1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
Retirement Income ETFs Tactical Asset Allocation Moderate 2% 6% 66% 12% 110% 7% 57%
Retirement Income ETFs Strategic Asset Allocation Moderate 2% -1% -3% 10% 95% 1% 4%
6 Stocks Under $10 Undervalued By Graham With Quarterly Gains 14% 1% 2% 5% 18%
Click to enlarge

From this table, I worry that this may be chasing returns. This selection of stocks has done reasonably well over the past year but the results over the longer term are choppy. This is not surprising as the companies had to find a way to become undervalued. The real question is whether or not they are a good investment over the next six months.

Three Month Chart

One Year Chart

Three Year Chart

Five Year Chart

We have already said that these are not long term selections. I would worry about whether the banks will be caught up in the current Eurozone problems. They are more local banks so they may be more insulated. The other companies may have some potential.

This is a selection on which I am going to wait. There is not enough here to motivate me to look deeper into the companies to find out whether there is more here. The returns are good but, for a higher risk, higher return play, I think there are better alternatives.

More analysis...

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

Additional disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.