Cheap stocks under $10 are attractive to many investors because they seem like bargains. Also, many traders think that because they can buy more shares of a cheap stock, they inherently have more exposure.
But simply math should tell you this is not the case.
Let’s say you invest in a single share of Google (GOOG) right now at around $570. That’s actually not any different than investing in 100 shares of a stock that is $5.70, because your initial buy-in is still $570.
The only difference, really, is the underlying stock. And you can bet that a cheap stock under $10 probably doesn’t have a $390 billion market cap or $60 billion in the bank like Google does.
Remember, many cheap stocks under $10 get cheap for a reason. Take RadioShack (RSH), which has plummeted from more than $20 a share in 2012 to a mere 60 cents currently thanks to the elimination of its dividend, slumping sales and serious questions about its ability to pay the bills.
Do you really want this kind of investment just because it’s nominally cheap?
Wall Street is littered with cheap stocks that are cheap for a reason. So I’ve screened for the worst performers on major exchange that trade for under $10 a share currently and have fallen by as much as 68% since January.
| NAME | TICKER | 1 MO | YTD | MKT CAP | SECTOR |
| Quicksilver | ZQK | -22% | -68% | $485M | Apparel |
| Walter Energy | WLT | -8% | -65% | $387M | Coal |
| Molycorp | MCP | -12% | -62% | $513M | Materials |
| Valhi Inc. | VHI | -10% | -62% | $2.2B | Chemicals |
| Oi SA | OIBR | -16% | -60% | $3.7B | Telecommunications |
| Himax Technologies | HIMX | -1% | -54% | $1.1B | Information Technology |
| Millennial Media | MM | -24% | -54% | $358M | Media |
| Ply Gem Holdings | PGEM | -15% | -53% | $573M | Building Products |
| Alpha Natural Resources | ANR | -9% | -52% | $759M | Coal |
| Bancorp Inc | TBBK | -25% | -50% | $335M | Financials |
| Vivus | VVUS | -12% | -49% | $474M | Biotechnology |
| Hercules Offshore | HERO | -19% | -49% | $533M | Energy Services |
| Portugal Telecom | PT | -32% | -48% | $1.8B | Telecommunications |
| Scientific Games | SGMS | -20% | -47% | $719M | Casinos and Gaming |
| Angie’s List | ANGI | -35% | -47% | $486M | Professional Services |
| Uti Worldwide | UTIW | -9% | -46% | $1.0B | Shipping and Logistics |
| Geron Corp. | GERN | -18% | -45% | $378M | Biotechnology |
| Enzymotec | ENZY | 5% | -45% | $214M | Consumer Health Products |
| National Bank of Greece | NBG | -19% | -44% | $7.33B | Financials |
| Galena Biopharma | GALE | -10% | -43% | $327M | Biotechnology |
Some — like Vivus (VVUS), Geron (GERN) and Galena Biopharma (GALE) — are high-risk development-stage biotechs that never actually developed a cure for anything.
Others are foreign stocks in troubled markets, like the National Bank of Greece (NBG), Brazil’s Oi SA (OIBR) or Portugal Telecom (PT).
Then there are also, of course, select stocks like Angie’s List (ANGI) that have unique challenges to their specific business model that are standing in the way of profitability.
But as different as they are, these 20 cheap stocks under $10 have one thing in common: big losses year-to-date in 2014, and serious risks to investors.
Remember these dogs before you go chasing cheap stocks. Because sometimes a low share price is a sign of a stock that has fallen for a reason.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
