Penny stocks are those that trade under $5. We’ll call stocks that trade between $5 and $10 near-penny stocks. According to Finviz.com, there are 687 U.S.-listed stocks with a market capitalization of over $300 million that are under-$10 stocks.
Finviz says almost half of these (330) are Russell 2000 Index stocks. The smallest 2,000 stocks of the Russell 3000 Index represent approximately 7% of the market cap of the companies in the Russell 3000.
According to Investopedia, the three largest sectors by weight in the Russell 2000 are industrials (18.56%), financials (15.43%) and healthcare (14.07%).
I’ve picked a stock that qualifies with a market cap of $300 million or more and trades for $10 or less from each of these sectors.
Acacia Research (ACTG)
Acacia Research (NASDAQ:ACTG) is a name investors need to familiarize themselves with. It currently has a market cap of $512 million. Its stock is up more than 30% year to date and 64% over the past five years.
The New York City-based company has a trio of reportable segments, the biggest being its Intellectual Property Operations, which helps patent owners obtain compensation for third-party patent infringement. It’s a very litigious business.
But it can also be quite lucrative.
In 2023, it generated $125.1 million in revenue, 71% generated by its Intellectual Property Operations. Another 28% was garnered from its Industrial Operations, which generates revenue through the sale of line matrix printers for mission-critical industrial printing. The remaining 1% is from its 50.4% interest in Benchmark, an Austin-based independent oil and gas company.
The most exciting aspect of its business? It’s controlled (34.2% of the stock) by Starboard Value LP. In October 2022, this prominent New York-based activist investment firm invested $245 million to create a flexible corporate acquirer of public and private companies.
I would watch this one closely. It’s sleepy in a good way.
WisdomTree (WT)
WisdomTree (NYSE:WT) is the 10th-largest ETF provider in the U.S., with approximately $78 billion (U.S.-listed) in assets under management (AUM) invested in 78 ETFs, which averages $1 billion per ETF.
At the time of writing, its share price is up nearly 35% YTD.
In October 2022, I recommended WisdomTree when it traded under the symbol WETF. At the time, it traded under $5, valued at 2.3x sales. I suggested it should have a market cap of $1.13 billion. Today, it’s $260 million higher than that.
On April 3, Northland Securities upgraded WisdomTree stock from market perform to outperform while raising its target price $3.50 to $12, 31% higher than where it’s currently trading. Investing.com reported the Northland analysts’ comments.
“We believe WT’s growth is accelerating as higher fee funds take center stage and optionality exists with WT Prime and tokenization. As such, we upgrade to OP from MP and increase PT to $12 from $8.50.”
As of April 5, Europe had net outflows of $493 million, while U.S. business had net inflows of $2.03 billion. Overall, it has net inflows of $1.54 billion, bringing its global AUM to $107.21 billion.
With revenues and profits growing by double digits, WisdomTree won’t be trading in single digits for much longer.
OraSure Technologies (OSUR)
OraSure Technologies (NASDAQ:OSUR) was another stock I recommended in my October 2022 article. It, too, has moved higher; up 50% in the 18 months since publication.
I suggested long-term profitability was around the corner for the healthcare diagnostics and data analytics company. The good news is that it had expected margins to move higher, leading to positive cash flow. The bad news is that it obtained a big chunk of its revenue from Covid-19, which is moving into the rearview mirror.
Looking at its Q4 2023 and full-year results, the revenue setback could have been much worse. In the fourth quarter, its Covid-19 revenue fell 53% to $41.7 million, while its 2023 Covid-19 revenue was $257.8 million, 6% higher than a year earlier. Overall, revenues grew 5% year over year to $405.5 million.
Its gross profit margin in Q4 2023 was 46.3% (580 basis points higher) and 45.5% for the entire year (540 basis points higher). Its non-GAAP operating margins were also higher. So, despite lower revenue in the fourth quarter, it still made GAAP and non-GAAP profits.
In 2023, it generated $141.6 million in positive cash flow, up from $47.2 million in 2022. Based on a free cash flow of $131.3 million and an enterprise value of $166.1 million, its shares will be down 30% in 2024, with a free cash flow yield of 79%. OraSure Technologies is on track to build a business that can sustain profits without its Covid-19 business.
With almost $4 cash on its balance sheet at the end of December, you’re getting its operating businesses for nearly nothing.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
