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5 Bargain Stocks Below $5

You don't have to pay a lot to get a lot in return

By InvestorPlace Experts

They’re Not Just Cheap, They’re Undervalued

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Top 11 Stocks for 2011

Everyone loves a good deal, but just because a stock is cheap, doesn’t mean it is the best stock pick. Overpaying for a bad stock, whether it’s $1, $10 or $100, is still a waste of money.

But as any good bargain hunter knows, you don’t necessarily have to spend a lot to get a lot in return. So we’ve put together a list of bargain stocks from our investing experts. None of these names will run you more than $5 per share but, more importantly, they’re undervalued and represent true bargains.

#1 – Zale Corp.

Zale Corp. Logo

Top 11 Stocks for 2011

Recommended by: Hilary Kramer, Editor, Breakout Stocks Under $5

Zale Corp. (NYSE: ZLC) had a great run in November and December, jumping to $5 last week. Since then, however, the stock has pulled back to $4. There hasn’t been any specific news to drive the stock down, but the company will announce its much-anticipated sales for November and December on Tuesday, and the Street apparently has its concerns.

However, jewelry was back in vogue this past holiday season and Zale was positioned nicely to take advantage of the consumer’s rejuvenated zeal for glittery and expensive presents. That’s why the stock ran up. Now, some investors are concerned that a respectable holiday season won’t be good enough to maintain the momentum as the company tries to return to profitability. Adding to the concern is the impact of the post-Christmas blizzard that hit us hard here in New York and along the East Coast — and put a big dent in after-holiday spending.

But if the company kept pace with overall jewelry sales gains during holidays, it could well lead to a positive earnings surprise. This isn’t a given, of course, but I still like the direction the company is heading, even with some of the air coming out of the stock in recent days. Buy ZLC on dips under $3.75.

#2 – Express-1 Expedited Solutions

Express-1 Logo

Top 11 Stocks for 2011

Recommended by: Louis Navellier, Editor, Emerging Growth

There is nothing exciting about the shipping business except that the growth in this industry can be exponential in an economy that is barely improving. Business conditions for shippers improve much more dramatically than the overall economy, and that’s exactly why you want to own shipping stocks in an economy emerging from recession — like we are right now — and avoid them in a slowing economy. Of all the shipping and transport companies out there right now, I like -1 Expedited Solutions Inc. (AMEX: XPO) the best because it grows faster from a tiny revenue base.

In November, XPO announced Q3 results that beat by 150%, coming in at 5 cents per share versus an analyst estimate of 2 cents. Revenue rose by 70% to $44.4 million, up from $26.1 million in the same quarter of last year. The stock soared flowing the report and should continue to gain as shipping and freight companies are the first to rebound in an economic recovery. Buy XPO below $3.

#3 – Paragon Shipping


Top 11 Stocks for 2011

Recommdended by: Nancy Zambell, Editor, Buried Treasures Under $10

We’ve already seen an increase in consumer spending, and I believe the demand for goods and services will greatly strengthen in 2011. And that means those goods and services have to be moved around the globe, so shipping demand will grow. Dry bulk shipping company Paragon Shipping, Inc. (NASDAQ: PRGN) has a modern, versatile fleet that is almost half the age of its competition.

During the downturn, Paragon sold off some ships, acquired new ones and kept its contracts stable. It has been setting itself up for the recovery, expanding and changing the composition of its fleet, and I think the company is in an excellent position moving forward. Plus, the stock has an annual dividend yield of 5.8%. Buy PRGN below $4.10.

#4 – Citigroup


Top 11 Stocks for 2011

Recommended by: Hilary Kramer, Editor, Breakout Stocks Under $5

I’m happy to say that I think 2011 will return to a more normal state of affairs when it comes to credit, and Citigroup (NYSE: C) has me excited right now for several reasons.

First, the government finally terminated their shares in the stock at the end of 2010, paving the way for institutions to buy in. Second, international expansion is another big key for Citigroup right now, and CEO Vikram Pandit announced the bank will move aggressively into Africa. And finally, data released in late December, showed credit card delinquencies continue to fall and are at their lowest levels for holders since the beginning of the year.

This all bodes very well for Citigroup in the coming months. Buy C below $5.

#5 – SMTC Corp.

SMTC Corp. logo

Top 11 Stocks for 2011

Recommended by: Louis Navellier, Editor, Emerging Growth

SMTC Corp. (NASDAQ: SMTX) is a Canadian company that provides contract electronics manufacturing services, such as surface-mount and through-hole circuit board assembly, product design, testing, packaging and supply chain management. Manufacturers use products built or assembled by SMTC in their computer servers, networking devices or communications products.

In its most recent earnings report, the company said Q3 sales rose 48% in the quarter to $65.4 million, and earnings per share were 16 cents, up from 3 cents in the same quarter of 2009. Eight of its top 10 customers increased orders as a result of strong market demand for electronics manufacturing. The addition of five new clients added $10 million to the company’s sales in the quarter. SMTX’s year-over-year gross profit more than doubled to $7.9 million, as a result. Generated cash flow reached $4.6 million and the company used much of this extra cash to pay down debt. That’s why SMTX’s debt was just $18 million at the end of the quarter, the lowest level in the company’s history.

SMTX is in an excellent position to profit from increasing electronics and technology demand, which will continue to climb next year. Buy SMTX below $4.

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