Part of the difficulty with the global economy reaching escape velocity is the fact that many industries are still in midst of transitioning from pre-digital models to digital work models.
But the companies that have made the transition will take off first and fastest as the economy recovers. They will usually be small, nimble players like these seven top-rated stocks under $10 per share: Gray Television (GTN), Reading International (RDI), Armada Hoffler Properties (AHH), Earthlink (ELNK), Edap TMS (EDAP), Teekay Tankers (TNK) and Vonage (VG).
What’s more, these small firms are also drawing the attention of the big fish in their particular streams and there’s always a chance that they will be snapped up for sizable premiums by the big players.
There are two times when M&As usually occur — at the bottom when good companies are struggling to hang on and get sold at discounts, and on the upswing when strong companies have proven their mettle and sell at premiums.
We’re looking at the latter scenario with these seven stocks to buy.
A-Rated Stocks Under $10: Gray Television (GTN)
Gray Television (GTN) owns and operates television stations in 45 markets across the U.S., but focuses on the South, Midwest and Southwest, which have served it well in the past few years.
GTN almost crashed and burned when the financial crisis hit. But since then it has come roaring back, acquiring stations around the nation at a breakneck pace and consolidating its influence in third- and fourth-tier cities.
August definitely set the stock back on its heels, however. GTN was off almost 50% during the correction. But it remains up 26% year to date and has regained about 50% of its August losses.
Growth continues to drive the company: In the past month, GTN has spent more than half a billion on its two newest acquisitions, Schurz Communications, a radio and television broadcaster and newspaper publisher and an ABC affiliate in Cedar Rapids, Iowa. The Schurz deal will add stations in six states.
A-Rated Stocks Under $10: Reading International (RDI)
Reading International (RDI) is a stock with momentum on its side of late.
In the past 5 days it’s up 11% — including 6% on October 8 alone.
Basically RDI owns a number of movie theaters and real estate developments around theaters (entertainment themed retail centers, or ETRCs) in the U.S., Australia and New Zealand.
Reading International has been focused on deleveraging its holdings and focusing on getting the most out of its real estate holding. And in Q2, it became apparent that its efforts were working.
RDI announced the best revenue, operating income and EBITDA in the company’s history. It has sold off unproductive assets and has used the money to pay down debt.
And it looks like the sector is also going to help out at least through the end of the year. So far this year, box office revenues are up 6% over the 2014 year-to-date figure, and the expectation for Q4 is very optimistic, given the holidays are packed with awards contenders and all the blockbusters that couldn’t wrap up for summer releases.
A-Rated Stocks Under $10: Armada Hoffler Properties (AHH)
Armada Hoffler Properties (AHH) is also a real estate company, but it’s built as a real estate investment trust (REIT), which is a pass-through company where the REIT is obligated to share almost all of the profits with the shareholders. This is usually done with a healthy dividend.
And AHH is no exception. It’s currently yielding 6.7%, and that’s after a 6% year-to-date return on share price alone.
This REIT has a very specific region — the Southeast and Mid-Atlantic U.S. And it has specific properties it builds and develops — office, retail and multi-family apartment buildings.
Its projects are widely dispersed in its market, but most of the retail projects are leased to major retailers like Harris Teeter, Dick’s Sporting Goods, and Cheesecake Factory, so the tenants are stable. Occupancy is also very high.
Funds from operations (FFO), the real growth number for REITs came in big in Q2, up more than 20% from the year ago quarter. And AHH raised its guidance for the rest of the year — all bullish signs.
A-Rated Stocks Under $10: Earthlink (ELNK)
Earthlink (ELNK) was one of the first upstarts in the burgeoning Internet revolution. In 2003, after a merger with Mindspring, it was the No. 2 Internet Service Provider with 3 million customers.
And it was the first company to offer voice and data over the Internet.
But the intervening years saw it lose market share as much bigger players got into the game and the company lost its way. Earthlink didn’t have the same kind of growth dynamics that other players had. Also, its two founders left the company about eight years ago, and ELNK had to redefine itself in a crowded and dynamically changing environment.
ELNK has remained in the space and developed network and cloud-based services as well, focusing on its customer service and long-running reputation for multi-location businesses. It went public last year.
Earthlink’s Q2 numbers were strong, and it would be a very attractive addition to any number of large and mid-size ISP players looking to bring on a dedicated customer base. ELNK stock is up almost 80% year-to-date.
A-Rated Stocks Under $10: Edap TMS (EDAP)
Edap TMS (EDAP) sells a unique healthcare device for prostate cancer treatment. It has been a major player in the ultrasound device market specializing in urology, since 1979.
The device’s main benefit is that ultrasound therapies are minimially invasive, which is something most insurance companies are very interested in supporting, since it means the cost of doing certain procedures is reduced significantly.
High-intensity focused ultrasound (HIFU) has been used with great success on early-stage prostate cancer, and EDAP is in the process of getting it fully robotic Ablatherm HIFU approved in the U.S. It has already been approved in the E.U., Canada and Australia.
The system has been in operation in one form or another since the early 1990s, but it is still awaiting approval in the U.S. That is the key factor in keeping this stock from really taking off.
In Q2, earnings were up 109% over the year-ago quarter, and EDAP stock is up 75% YTD. Once it receives approval for its new device, EDAP will certainly have some interested suitors.
A-Rated Stocks Under $10: Teekay Tankers (TNK)
Teekay Tankers (TNK) is a contrarian play on a very straigthforward concept: When oil is cheap, countries that have the cash want to add to inventories. And that is precisely what is happening now.
China has been buying cheap oil literally by the boatload. Tanker day rates have just hit new highs. Day rates have breached $100,000 per day — a price that the industry hasn’t seen since 2008. And TNK will reap the benefits.
Also, as winter approaches, many firms are looking to get oil to markets in the Northern Hemisphere. This seasonal demand, coupled with bargain prices has been a boon.
TNK stock is up more than 30% in the past six months, and it’s very likely that business will be strong well into 2016.
A-Rated Stocks Under $10: Vonage (VG)
It may not go back as far as ELNK but Vonage (VG) is also one of the pioneers of Internet services we take for granted today.
VG was the first company to offer nationwide voice-over-internet protocol (VOIP) for consumer use. Basically, it was the first company to offer phone service over the Internet.
German philosopher Arthur Schopenhauer said all truth passes through three stages: First it is ridiculed, then it is violently opposed, and finally it is accepted as being self-evident. That’s exactly what happened with VOIP technology.
It was about as disruptive a move in the traditional phone business as mobile technology would become. The thing was, in the early days of the Internet, bandwidth was not conducive to millions of people using telecommunications online in real time. It was a product for early adopters who were happy to put up with the inconsistent voice quality and connectivity issues.
But as the Internet grew, the quality of the VOIP became as good as traditional phone lines and more consistent than the nascent mobile industry. And VG’s prices were stunningly low.
There’s no ridiculing VOIP at this point.
VG’s market share and potential is now self-evident; the company just boosted full-year guidance. Buy now before it really takes off.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.