Many investors are partial to stocks selling under $10.
Any finance professor will tell you that the absolute price of a stock doesn’t matter, as it’s an artifact of how many shares a company chooses to issue. Yet many traders feel that stocks below $10 have a certain roguish charm, and provide more “action” than higher-priced stocks.
Here are five stocks selling under $10 a share that interest me now.
Advanced Semiconductor
Advanced Semiconductor Engineering Inc. (ASX, Financial) is based in Taiwan and traded on the New York Stock Exchange. Despite its name, the company doesn’t make semiconductors. It makes semiconductor packaging and test equipment.
Business has been good the past couple of years and analysts expect it will continue to improve. Sales were $6.7 billion in 2012, and are expected to rise to more than $11 billion next year.
At Friday’s price of $6.52, the stock sells for 13 times recent earnings and only 9 times next year’s projected earnings.
Blackrock Capital
Blackrock Capital Investment Corp. (BKCC, Financial), formerly Blackrock Kelso Capital Corp., is a business development company based in New York City. It makes loans to medium-sized businesses in exchange for interest payments, an equity stake, or both.
In the past three years, total revenue has been stagnant (about $111 million in 2014) but earnings have increased. At $9.31 a share, the stock sells for about 10 times this year’s expected earnings. If it maintains its dividend at 84 cents a share, it is yielding more than 8% in dividends.
NL Industries
NL Industries Inc. (NL, Financial), based in Dallas, Texas, makes a wide variety of locks, both mechanical and electrical. It also makes exhaust pipes, mufflers and other accessories for boats. The company is debt free and has shown rising earnings lately.
While the market value of the stock is $360 million, it trades like a smaller stock. Most of the shares are closely held by the Harold Simmons family and by Valhi Inc. (also controlled by the Simmons family). So be prepared for volatility.
At $7.40 a share, the stock trades for about 10 times recent earnings. The company is debt-free, a quality I like.
Nomura Holdings
Nomura Holdings Inc. (NMR, Financial) is the holding company for one of the largest brokerage houses and financial firms in Japan. It is based in Tokyo but listed on the New York Stock Exchange. At $6.52 it sells for 13 times earnings.
Like most brokerage houses, Nomura carries more debt than I would prefer. However, I think it is a timely stock now, since Japan is loosening monetary policy and at the same time moving towards a more business-friendly regulatory climate.
Republic Airways
Republic Airways Holdings Inc. (RJET, Financial) is a subcontractor airline. It owns about 244 planes and flies about 1,200 flights a day to approximately 100 cities. The bookings are usually made by United, Delta or US Air. But on smaller routes, the big boys leave the actual flying to outfits such as Republic.
It’s a tough business and profit margins aren’t great. But they have been improving lately because the price of oil (which determines the price of jet fuel) has fallen. After peaking in mid-2014 at about $100 a barrel, oil seems to be settling into a range of $50 to $70. At those levels, I expect Republic can make good money.
Track Record
The record of my stock picking on stocks under $10 is bad. Why should you pay any attention? Only because, if you’ve been reading this column for a while, you probably have concluded that my stock picking in general is strong.
This is the 10th column I’ve written on stocks selling for $10 or less. The average gain for the previous nine columns was 2.75%, versus 8.79% for the Standard & Poor’s 500 Index. Figures include reinvested dividends.
Five of the nine columns were profitable, but only three beat the S&P 500.
My five selections from a year ago included two good picks and three poor ones. Journal Communications Inc. (formerly JMRN) got a takeover offer from Scripps and soared 84%. And Huntington Bancshares (HBAN) managed a nice gain of 22%.
