Fascinating Ideas for Under $10
I am gearing up for a big weekend here at Chez Melvin. There are huge college football games, including Maryland vs. West Virginia, as well as the Navy playing the highly ranked South Carolina. Baseball pennant races are heating up, and the AL East has two important series this week -- and, of course, we cannot forget week two of the NFL on Sunday. Somewhere in there I need to do research for the book projects I have under way, and I'll have to attempt doing enough errands that my wife will overlook the sports extravaganza. Before I head off into the weekend, however, I want to wrap up my look at stocks in the Value Line low-priced, high-ranked portfolio. Over the past few days we looked at a few of the stocks under $10 with the highest rankings in price and earnings momentum. Today I want to look at a few of the issues that receive the second-highest ranking. Some really interesting stocks have made the list that are worth consideration for long-term value-oriented investors. One stock making the cut was PDL BioPharma (PDLI). This is one of my favorite stocks right now, and I believe most investors should have a position in the shares. The company has patents on most humanized antibodies that are used in a fairly wide range of drugs, and it receives royalties from several large drug companies that use the antibodies. In addition to the drugs already being marketed that use the company's patents, several more are in Phase II and Phase III trials, so the revenue stream should continue to flow for years to come. The shares yield a little over 10% right now, although that could decline based on royalty payments in the future. PDL is looking to acquire new products that will extend its royalty stream beyond the expirations of its current portfolio. In addition to the dividend stream, I believe the stock could double from current levels over the next few years. The leading milk company in the U.S. is also on the list. Dean Foods (DF) rose earlier this year after hedge fund manager David Tepper announced he had accumulated a pretty big position in the stock. Tepper still has 4.9% of the company, but he reduced that stake by more than one-third last quarter, and the stock has fallen back into the single digits. The company settled a major lawsuit in the second quarter that led to a loss -- but, on an operating basis, it was a decent quarter. Margins are being hit by rising commodity costs, but management has undertaken a fairly aggressive cost-cutting program to protect the bottom line. Dean's specialty lines, such as soymilk and the Horizon Organic dairy lines, continue to do well, and they should be a source of earnings growth going forward. I would like to see the company be more aggressive about paying down debt, but that may need to wait until the economy begins to provide for some real job growth. I am in no rush to buy the shares outright, but this is a strong candidate for selling the October and December put options on broad down days. There a few other stocks worth a look at current prices. Names such as bearings manufacturer NN (NNBR) and metals company Gibraltar Industries (ROCK) may see their shares languish in the single digits until the economy and real estate markets improve. Still, when that does finally occur, they could explode. The hotel, resort and movie-theater industries are also not exactly barn burners in a weak economy, but a recovery should give a lift to Marcus (MCS), another stock that made the list. The same holds true for Great Wolf Resorts, an operator of water parks and family entertainment facilities. I have found over the years that the Value Line low-priced high-rank system has been a great source of stock ideas while making for strong returns. The current list of names has proven to be no exception.
There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.
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