Today, I want to focus on some of my favorite low-priced stocks. While the financial media may not always give $5 or $10 stocks their due, some of my best investments have been in overlooked low-priced stocks. And I know many new investors don’t like putting down $10,000 or $15,000 for only 100 shares of stock. If you count yourself among these ranks, I don’t blame you, and I have some good news to share with you.
The good news is that lower-priced stocks tend to come from some of the most innovative smaller companies. Larger organizations can be overly bureaucratic and slow to change. So if you’re looking for momentum mid-cap stocks trading under $10, a good place would be with these two stocks.
My first recommendation, JetBlue Airways Corp. (JBLU) has been cleared for takeoff. Based in Forest Hills, New York, this passenger airliner operates some 700 flights daily with a fleet of 175 aircrafts. JetBlue transports passengers to 71 destinations in 22 states, Puerto Rico and Mexico, as well as to 12 countries in the Caribbean and Latin America.
In addition to its low-cost fares, the company differentiates itself from the competition by offering in-flight entertainment to all passengers at no additional cost and its customer Bill of Rights. The company has been aggressively expanding its presence at many of the nation’s largest airports while also increasing passenger revenue per available seat mile, an important metric in the airline industry. The fact that the company hedges its fuel costs also helps keep profit margins fat.
For the current quarter, JetBlue is expected to post 120% annual earnings growth—nearly five times higher than the industry average (25%). This outperformance is expected to continue through the end of the year, with 73% forecast growth for the following quarter and 37% growth for FY 2014. JBLU shares are currently trading just over $9 and are a B-rated Buy.
Headquartered in Chicago, Orbitz Worldwide Inc. (OWW) is best known for operating online travel booking website Orbitz.com. This website alone facilitates 1.5 million flight searches and one million hotel searches each day! On top of this, the company also operates online travel companies CheapTickets and ebookers in Europe.
Living up to its ticker symbol, OWW shares took a beating in late 2013 after the company missed Q2 and Q3 earnings estimates by a wide mile. The stock developed a reputation as being heavily shorted and the stock price plunged. However, lately travel booking site has started to turn itself around by investing in improving its airline-ticket business and accelerating its shift to mobile technologies. Last quarter, the company reported a profit of $0.05 per share, blowing away analyst’s break-even estimates.
Looking ahead to this quarter, the company is expected to post a loss of $0.02 per share, but the consensus estimate keeps rising. All told, this year the company is expected to earn $0.36 per share, and the following year that estimate widens to $0.47 per share. So I’m becoming more convinced that what was once a cautionary stock for the travel industry is going to turn heads in 2014. And at less than $10 a share, there’s little chance of sticker shock here. OWW is a B-rated Buy.
The key takeaway I want to leave you with is that there’s no need to be afraid of low-priced stocks. As long as you do your proper research and use every tool at your disposal (like my Portfolio Grader stock screener), there are plenty of profit opportunities in this arena.