As Warren Buffett likes to say “Price is what you pay; value is what you get.” It’s the reason why Berkshire Hathaway (NYSE:BRK.A) at $300,000 per share is actually cheap, while a $2 stock could be very expensive. But there can be value to be had in many low-priced stocks under $10. There can be plenty of great returns as well.
Need proof? Just take a look at the returns for the Fidelity Low-Priced Stock Mutual Fund (MUTF:FLPSX) over the long haul. Over the last ten years, FLPSX has managed to return nearly 13% annually. Before its recent closure, the Royce Low-Priced Stock Fund (MUTF:RLPHX) reported similarly high results.
The point is, low-price stocks can offer your portfolio a jolt and boost your overall returns.
The catch is in choosing the right stocks to buy. Generally, firms don’t see their share dwindle under a Hamilton for a reason. There are some big risks for low-priced stocks. From high debts and scandals to generalized poor performance, there are many pitfalls with these firms. However, selecting the right stocks to buy can help low price-seekers mitigate and limit these risks.
So, which are the best low-priced stocks under $10 to buy? Here are five that offer high rewards for their risks.
VEREIT Inc. (VER)
Most recent stock price: $9.74
Often legal troubles can push a stock’s price down to low-price territory. That has certainly been the case with real estate investment trust (REIT) VEREIT (NYSE:VER).
VER’s story starts with real estate mogul Nicholas Schorsch and American Realty Capital Properties. After combining a few various non-traded REITs, Schorsch launched publicly traded American Realty – with the combination becoming one of the largest single property REITs in the country. Even bigger than investor favorite Realty Income (NYSE:O) in terms of the number of properties.
Then an accounting scandal hit. Several executives went to jail and VER stock sank hard. VER has been scraping the bottom ever since. But this is perhaps unfair.
Replacing management and changing the name to VEREIT, as well as a restatement of earnings, helped the firm get back on a fair footing. At the same time, the REIT has pruned its portfolio and moved into different property types such as warehouses. All of this has helped right the ship at VER. The best news for the firm came at the beginning of September when VEREIT was able to settle all its pending ligation into its accounting scandal for only $300 million.
This is all wonderful news for VER and it can now get back to the business of running a real estate portfolio. And it runs it pretty well — with FFO and rents rising over this whole time. Meanwhile, it pays a 5.65% dividend.
At $9.71 per share, VER could be of the best low-priced stocks under $10 to buy for income seekers.
3D Systems (DDD)
Most recent stock price: $8.21
Hop back in a time machine and set the dial to just a few years ago, and you’ll see one of the biggest trends in all of technology was 3D printing. The ability to create three-dimensional objects out of metals, plastics or even biopolymers was seen as revolutionary.
3D printing went from a niche hobby to a trend affecting everything from industrial manufacturing to healthcare. That sent stocks like leader 3D Systems (NASDAQ:DDD) up to into the stratosphere. At one point, DDD stock was nearly $100 per share.
Today, not so much. A share of DDD can be bought for the cost of an extra value meal.
The problem is that DDD hasn’t lived up to the hype in recent years. Revenues have stagnated and the firm continues to see losses at its operations in both GAAP and Adjusted earnings.
So why buy 3D Systems? Well, finally the long outlook matches a cheapness in shares. As 3D printing has gotten better and faster, more manufacturers are turning to it in their operations. Wohlers Associates estimates that worldwide 3D printing revenues will grow to more than $35.6 billion by 2024. Secondly, as one of the leaders in the sector, 3D Systems has one of the biggest caches of intellectual property around. And finally, the firm continues to move towards a “razor blade and handle” model to keep recurring revenues flowing. This has already shown up in its recent sales reports.
In the end, DDD stock is a stock under $10 for a reason. But so is the whole sector with rival Stratasys (NASDAQ:SSYS), which has also dropped like a stone in recent years. The long term picture for 3D printing is still rosy and shares may be worth a gamble today.
Sirius XM (SIRI)
Most recent stock price: $6.28
A blast from the past has never been more popular as a stock under $10. I’m talking about Sirius XM (NASDAQ:SIRI). It’s easy to forget about the paid satellite radio provider in this era of streaming music, but believe it or not, SIRI has never had this many subscribers before. At the end of June, the radio provider had more 34.3 million total subscribers to it platform.
The growth has come from its acquisition of streaming service Pandora and the fact that more traditional radio hasn’t been bleeding subscribers. The combination has actually worked well since its integration at the beginning of the year. Average revenue per user (ARPU) has risen 4% over the past year as SIRI has been able to pull more in from each of its subscribers. Better still is that the firm has been able to pass on higher music royalty rates to consumers. This has helped pad its bottom line and improve its margins.
All of this should continue down the road. With the addition of Pandora, Sirius now has the ability to upsell customers to both platforms and more full-featured service plans. Meanwhile, the streaming service addition has allowed the firm to “future-proof” its operations as connected cars, 5G, and continued streaming dominance does take hold.
With steady profitability and even a growing dividend under its umbrella, SIRI is one of the low-priced stocks under $10 that is truly mispriced.
Kinross Gold (KGC)
Most recent stock price: $4.57
There are gold stocks under $10 as well. Global strife and worry are making some low-priced gold stocks shimmer once again. That includes former star Kinross Gold (NYSE:KGC). Shares of KGC are up 50% year to date. However, it can still be had for less than $5 per share.
Kinross’s issues stem from the last period of gold exuberance. The high price for gold back during 2010-2011 sent many firms on huge acquisition sprees. This included KGC. Debt levels exploded and the resulting crash in gold price sent many stocks into the proverbial toilet. Since then, Kinross has scrapped the bottom of the barrel despite being one of the largest gold miners on the planet. But things could be different now.
For one thing, rising gold prices have boosted its bottom line. Even better is that it recently reported that its All-In Sustaining Cash Costs clocked in at just $925 per ounce. That’s lower than predictions and the difference between the price of gold and that floor is all profit for a gold miner. Better still is that KGC plans on bringing its cash-costs down to just $730 for the rest of the year.
And the firm doesn’t seem to be falling into the high price trap of the previous boom. Recent expansion projects for Kinross have been “slimmed down” to better position itself for the longer haul and not succumb to debt issues.
General Electric (GE)
Most recent stock price: $8.96
I’d never thought I’d be writing about General Electric (NYSE:GE) on a stocks under $10 article, but here we. Truth be told, GE is a disaster. From fraud allegations to slowdowns in key businesses, General Electric is a shell of its former self. But it could be a big-time buy and things are getting better.
CEO Larry Culp is basically taking an ax to GE’s overall portfolio. Selling businesses, cutting costs, and transforming General Electric into a smaller version of itself. This includes GE unloading another huge batch of Baker Hughes (NYSE:BHGE) shares, culling its biotech division as well as getting rid of its aviation lending unit. Culp estimates that all these unit sales should bring in more than $38 billion into GE’s coffers. That will be used to reduce debt and shore up its balance sheet.
Meanwhile, its struggling and massive power division seems to be coming back. Organic orders for turbines and other equipment have stabilized, while renewables and grid equipment realized large jumps. This could signal that the worst may be over for the division — socially with natural gas prices once again cratering.
The combination of asset removal and improving results at its remaining divisions should bode well for GE over the long haul. However, there are risks that remain — I’m looking at you GE Capital. But in the end, risks may seem contained and Culp is trying to get GE back on track.
As a low-priced stock of about $9 per share, GE stock may be worth a gamble for long-term investors today.
At the time of writing, Aaron Levitt did not hold a position in any stock mentioned.