Ask what it means to "buy low," and different investors will give you different answers. For some, it means buying stocks with low price-earnings ratios. Others use valuation measures such as price-cash flow, or p-e-to-growth, or price-book value.
But some people eschew all that division and go for the simplest definition possible: low-priced stock. This does not mean a small-cap stock, nor does it mean a stock priced low when divided by some other metric. It just means the stock has a low price.
The idea is that even a small appreciation (in dollar terms) can translate into a big increase (in percentage terms) with a low-priced stock. For example, when a $10 stock rises by $1, it's a 10% gain.
By contrast, when a $100 stock gains $1, it's only up 1%. For the purposes of this week's screen, we defined "low-priced" as any stock with a current price of less than $10. We found five such stocks that also have 5-STARS (strong buy) rankings from Standard & Poor's equity analysts.
Not surprisingly, the upside potential for these stocks, as calculated using S&P analysts' target prices, averages 43%—even though the target prices are, in most cases, just a few dollars higher than the current prices.
Company
Ticker
S&P Target Price
Price (9/11/08)
Delta Air Lines
DAL
12
8.09
Evergreen Solar
ESLR
8
5.84
Flextronics
FLEX
14
8.33
Lawson Software
LWSN
9
7.74
On Semiconductor
ONNN
12
7.75