The $10 Bin – 5 Cheap Stocks to Buy

Sometimes, I do scan for stocks under $10 even though that departs from my normal stock screens, which I usually require to have a minimum price of $10 per share. Here’s a look at some of the upsides as well as dangers of trading stocks at certain low price thresholds.

Penny Stocks

cheap stocks to buyOne dollar is a common threshold when screening for stocks. A lot of investors actively avoid penny stocks due to the speculative nature, the often wide bid/ask spreads and the excessive volatility that are all too common in stocks under $1.

Some penny stocks, of course, work out spectacularly well, and that’s probably what keeps people interested in them.

Seeing a stock make a 100% return or 200% return or more from a base of 50 cents  seems easier than investing in a $50 stock or $100 stock and seeing that double or triple.

Stocks Under $5

Five dollars is another common minimum when screening for stocks since many institutional investors won’t even consider a stock if it’s trading under $5. Since institutional investors are usually the ones that can really move a stock, having stocks that are open to institutions is usually a bonus.

Still, being over $5 does put them into a different category of consideration. Maybe not the best category but a step up from stocks less than a dollar.

Stocks Under $10

My minimum has typically been $10. With over 10,000 stocks out there, a $10 minimum quickly helps me cull down several thousand stocks with a click of a button.

However, I can recall several sub-$10 stocks in the past that worked out exceptionally well. Maybe the key is to buy $10 stocks sparingly, or maybe it’s because I’m ultra-picky in selecting them.

Either way, cheaper stocks can find a useful place in your portfolio sometimes, and that’s what we’re looking at today.

Screen Parameters

  • Price less than or equal to $10
  • Average Dollar Volume greater than or equal to $1,000,000 (Price x volume shows you how much money is trading in and out of the stock on a daily basis)
  • Weekly Volume greater than Previous Week’s Volume for any two out of three weeks (Want to see increasing volume to show greater investor interest and demand)
  • Zacks Rank less than or equal to 3 (No “sells” or “strong sells”)
  • Average Broker Rating less than or equal to 3.5 (Average Broker Rating of a “hold” or better)
  • Number of Analysts in Rating greater than or equal to 2 (Minimum of at least two analysts covering the stock)
  • Percent Change F1 Earnings Estimate Revisions — 12 Weeks greater than or equal to zero (Preferably upward earnings estimate revisions, but definitely no downward revisions)

Stocks to Buy

Here are five stocks that made it through this week’s screen:

Planar Systems (PLNR)

DCT Industrial (DCT)

PMC-Sierra (PMCS)

Huntington Bancshares (HBAN)

Sequenom (SQNM)

I would not suggest filling up an entire portfolio of stocks under $10, but adding a careful selection of some of the best cheap stocks could add some excess returns to your bottom line. Get the rest of the stocks on this list and start screening for the best stocks under $10 for yourself.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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