Small-cap companies can be some of the most innovative and profitable on the market. Though they are sometimes misinterpreted as only startups or brand-new companies, they are technically just companies whose total market value, or market capitalization (shortened to cap in “small cap”), ranges from about $300 million to $2 billion. Large-cap stocks, in comparison, have a market value of $10 billion or higher.
The appeal of small-cap stocks is that, because they are smaller to begin with and often trade at lower prices, they have a greater chance of big gains. The hope for investors is that one day they could become large-cap stocks – like Apple Inc. (AAPL) or Amazon.com, Inc. (AMZN). Back in March 2004, I actually recommended Amazon at a split-adjusted $2.14 a share. Anyone who held on through 2022 saw as much as 81-fold gains… which could have turned a $10,000 investment into $825,000.
But the reality is that greater growth comes with greater risk and volatility, and small-cap stocks can often lack stability. For example, the Russell 2000 – a market index made up of 2,000 small-cap companies – fell 20% year-to-date. So, if you pick the wrong small-cap stock and end up with an earnings dud, you can do some serious damage to your portfolio.
My point is this: A low price doesn’t always mean a good buy.
And this is why my Portfolio Grader is such a great, useful tool. It helps you easily avoid bad stocks with a simple rating system. And a highly rated superior stock at a low price is definitely a good buy.
My system analyses over 5,000 stocks and grades them according to the features listed in the chart below. The Quantitative Grade you see measures the buying pressure. The Fundamental Grade you see evaluates the stock’s fundamentals. Blend those two grades together (we do it with our proprietary system) and what you get is the Total Grade. The Total Grade gives you my current buy, sell or hold recommendation, just like the ones in school:
A stock with the highest growth and quality ratings gets an “A.”
A stock with miserable ratings gets an “F.”
And if a stock does earn a “D” or “F” grade, it’s a sell.
It really is as easy as A-B-C!
Today, I want to share 10 small-cap stocks that trade under $10 and have “F” ratings in my Portfolio Grader. This means that they’re sells and not a good investment right now, even for bargain hunters.
Here are 10 small-cap stocks trading under $10 to sell:
|Ticker||Company Name||Quantitative Grade||Fundamental Grade||Total Grade|
|BNED||Barnes & Noble Education, Inc.||F||D||F|
|BFI||BurgerFi International, Inc.||F||D||F|
|FLWS||1-800-FLOWERS.COM, Inc. Class A||F||D||F|
|RRGB||Red Robin Gourmet Burgers, Inc.||F||D||F|
|SFIX||Stitch Fix, Inc. Class A||F||D||F|
|TUEM||Tuesday Morning Corporation||F||D||F|
|VRA||Vera Bradley, Inc.||F||D||F|
|SPCE||Virgin Galactic Holdings Inc||F||D||F|
This doesn’t mean that you should avoid low-priced/small-cap stocks completely – far from it. You just want to make sure you’re picking up shares of ones that are backed by superior fundamentals. I’m talking about companies with strong fundamentals that also see persistent money flow, which ultimately earns them high ratings in Portfolio Grader. I’m pleased to say that my Breakthrough Stocks Buy List is chock-full of these companies.
In fact, my Breakthrough Stocks Buy List remains characterized by 43.3% average annual sales growth and 204.1% average annual earnings growth. I should also add that my Buy List stocks are currently trading at a median price-to-earnings ratio of just 10.9X current earnings and only 4.65X median forecasted earnings.
Join me at Breakthrough Stocks today and you’ll have full access to all my Buy List stocks – including two brand-new recommendations that I released on Thursday.
I’ll also send you my latest special report, 7 Breakthrough Stocks Under $10. In it, I further detail how my proprietary stock-picking system works, and I reveal seven stocks that have the potential to hand you an additional 1,000% in gains over the next few years.
These stocks are trading at discount prices thanks to a rare “Decoupling Event.” It’s been nearly 15 years since an opportunity like this one came around when investors can snap up stocks with world-class fundamentals at such low prices – and you won’t want to miss out.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
Amazon.com, Inc. (AMZN)