This screen is a bit of a departure from my normal stock screens. Usually I require my screens to have a minimum price of $10 per share.
But I do at times scan for stocks under $10. And that’s one of the screens I’m running for myself right now.
The Value of Penny Stocks
One 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 is all too common in stocks under $1.00. But some, 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, for example, seems easier than investing in a $50 stock or $100 stock and seeing that double or triple.
The Value of $5 Stocks
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. And since institutional investors are usually the ones that can move a stock; having stocks that are open to them is usually a bonus.
And quite frankly, lots of cheap stocks are cheap for a reason, i.e., that’s all they’re worth.
But 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.
The Value of Stocks Under $10
My minimum has typically been $10 per share. With over 10,000 stocks out there, this minimum quickly lets me cull down several thousand stocks with a click of a button. That doesn’t mean there aren’t any good stocks below that price point, because there are.
And I can recall several sub-$10 stocks in the past that worked out exceptionally well. Maybe it’s because I use them sparingly. Or maybe it’s because I’m ultra picky in selecting them. Either way, there can be a place for cheaper stocks in your portfolio sometimes.
And that’s what we’re looking at today.
Our Stock 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 (any two out of three weeks)
(I 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.)
• # of Analysts in Rating greater than or equal to 2
(Minimum of at least two analysts covering the stock.)
• % Change F1 Earnings Estimate Revisions — 12 Weeks greater than or equal to 0
(Preferably upward earnings estimate revisions, but definitely no downward revisions.)
5 Stocks Under $10 to Buy
Here are 5 stocks that made it through this week’s screen:
- Arbor Realty Trust (ABR)
- Affymetrix (AFFX)
- Gladstone Investment (GAIN)
- ORBCOMM (ORBC)
- Sirius XM (SIRI)
I think each one of these picks has big potential. And the entire list is worth a thorough analysis.
I would not suggest filling up an entire portfolio of stocks under $10 though. But adding a careful selection of some of the best cheap stock names could add some excess returns to your bottom line, not to mention a little excitement to your stock picking process as well.
Get the rest of the stocks on this list and start screening for the best stocks under $10 for yourself. And don’t forget to backtest your strategy so you’ll know how successful it’s been before you put any of your money at risk. You can do it.
Sign up for a free two week trial to the Research Wizard today.
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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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: http://www.zacks.com/performance.
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SIRIUS XM HLDGS (SIRI): Free Stock Analysis Report
ORBCOMM INC (ORBC): Free Stock Analysis Report
GLADSTONE INVES (GAIN): Free Stock Analysis Report
AFFYMETRIX INC (AFFX): Free Stock Analysis Report
ARBOR RLTY TRST (ABR): Free Stock Analysis Report
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