Two Ways To Find Stocks Under $10 That Could Double

profitability ratios

Some stock investors focus purely on stocks under $10. Imagine buying a little-known company by the name of Netflix back on Dec 1, 2011, when it was trading $9.59. Now, if you invested $10,000 in it and held until Aug 31, 2018, it would be worth more than $380K.

stocks under $10 nflx

Source: buyupside

Of course, returns like this are uncommon. But the potential to turn a small amount of capital to a larger sum is possible when you are trading stocks under $10.

That said, when you are looking at the prices of stocks, make sure to pay attention to the company’s market cap and shares outstanding.

For example, Lloyds Banking Group (NYSE: LYG), one of the world’s oldest financial institutions, trades under $5 per share. A novice might see that share price and think it’s a small company. However, Lloyds has a market cap of more than $50B.

On the hand, Union Bankshares, Inc. (NASD: UNB) stock’s price trades for more than 10 times that of Lloyds, but its market cap is more than 210 times smaller.

The price of a stock does not tell us anything about the size of the company. That said, when investors are on the hunt for stocks that trade under $10, they are primarily looking at small to mid-cap companies, often referred to as growth stocks.

Companies like Netflix, Nvidia, and Apple were once small to mid-cap growth stocks before they became household names.

Small cap stocks that trade under $10 are often overlooked by wall street analysts and mutual funds.

This creates an opportunity for savvy investors to do their own due diligence and potentially discover the next big market leader. An investor with a small trading account gravitates to lower-priced stocks because they appear affordable.

Despite the upside potential small cap stocks offer, it’s important to note they tend to experience greater volatility than large caps.

Finding The Best Stocks Under $10 – Fundamental Approach

Using a stock screener, like the one found on the finviz website is a great way to discover the best stocks under $10.

Here is one scan done with the following criteria: price of the stock under $10; market cap between $300M and $2B; a low long-term debt/equity ratio; positive eps growth over the last five years and for the next five; and a positive eps growth this year. 

The scan resulted in only 12 symbols, three of the most interesting included: Geron Corporation (NASD: GERN),  and Camtek (NASD: CAMT).

Geron is an oncology company which is best known for Imetelstat, a telomerase inhibitor. It is being developed for the potential treatment of hematologic myeloid malignancies. Geron has partnered with Janssen Oncology, a subsidiary Johnson & Johnson Company  (NYSE: JNJ).

Always impressive to land the world’s largest biotech company in the world as a partner, making Geron one of the hot stocks trading under $10 to watch.

stocks under $10 gern

Source: geron 

Camtek Ltd. (NASD: CAMT) , offers inspection and metrology tools and services for the semiconductor industry. Its business spans across the Asia Pacific, North America, and Europe.

That said the company has been experiencing excellent growth. During the second quarter of 2018, the firm reported record revenues.

stocks under $10 camt

Source: Camtek

Finding The Best Stocks Under $10 – Technical Approach

Using a stock screener, like the one found on the finviz website is a great way to discover the best stocks under $10.

Here is one scan done with the following criteria: stock performance up 30% or more ytd, stock price above 20, 50, and 200 day simple moving averages, the stock is trading near its 52-week highs, is trading under $10 per share, and has a market cap of $50M or more. 

Two of the names that popped up on the scan were Calix, Inc. (NYSE: CALX) and The One Group Hospitality, Inc. (NASD: STKS).

Calix, Inc. is a global communications service provider. The Calix platform helps businesses manage their infrastructure among subscribers and the cloud.  The company  was founded in 1999, and has over 700 employees.

calx stocks under $10

Source: infosys

The ONE Group Hospitality, Inc.  (NASD: STKS) develops, owns, and operates restaurants and lounges throughout the globe.

stks stocks under $10

Source: instagram

Forbes has ranked them among the best steakhouses in America. The company owns the following brands: Radio Rooftop, STK, Asellina, Bagatelle, and Heliot Steak House.

The company was founded in 2004, and is headquartered in New York City.

The Bottom Line

Investing in small cap growth stocks requires a stomach for risk. Of course,  day trading stocks under $10 can also be lucrative but these stocks are also typically volatile.

Make sure to size your positions accordingly to adjust for the additional volatility.

You can use a stock screener to help find trade candidates. In the examples above, two scans were created, one using fundamentals and another using technicals.

Sometimes you might be bullish or bearish on  a sector but don’t know which publicly traded companies are available to invest in. Doing a scan by sector can also be a way to find quality stocks under $10 per share.

Focus on stocks that have growth potential. It makes sense to do your research on management. Often times when you invest in a new company you are investing in the personnel and their ability to execute.

Many of the best companies in the world are recognized by its leaders: Tim Cook at Apple, Jeff Bezos at Amazon, Elon Musk at Tesla, and Mark Zuckerberg.

Don’t underestimate how important leadership is when investing in growth stocks under $10.

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