From Playboy to Joe's Jeans, these companies will be making waves and their stock prices are cheap.
I must admit that I frequently find myself rooting for the little guy. In fact, I'm especially fond of "little" stocks with big upside potential. When I say "little," I am not referring to the size of the company; rather, I am talking about companies whose share price is very low. Specifically, stocks that currently trade below $5.
Most low-priced stocks are priced that way for a reason, meaning their value is right about where it should be. However, if you look close enough with a trained eye, it is possible to identify low-priced stocks with the potential to breakout big time--and when I say big time, I'm talking some 50% to 200%. Of course, finding these stocks is no easy feat. It takes a lot of research, investigation and analysis. But if you're like me, you love the challenge, as it gives you the opportunity to be part detective, part scholar and part investment analyst.
So which stocks under five bucks do I think have the potential to be big winners? Well, the list is long; too long, in fact, to detail in just one article. So let's limit our discussion to five of my favorites: Joe's Jeans ( JOEZ - news - people ), MoneyGram International ( MGI - news - people ), Playboy ( PLA - news - people ), PMI Group ( PMI - news - people ) and Synovus Financial ( SNV - news - people ).
Joe's Jeans
Nothing, not even the Great Recession, comes between consumers and their designer blue jeans. Even amid the shakiest of consumer spending environments, turnaround denim sales rose by 3.2% in 2009. Recent retail sales at the high-end have also been quite strong. These two factors translate into a market sweet spot for fancy denim, and Joe's Jeans is just the brand to fill this niche.
Joe's sells affordable luxury with jeans that typically cost from $159 to $179. This might seem like a lot when compared to $40 Levis, but Joe's is not competing with Levis. It's competing with other high-end denim merchants, like True Religion ( TRLG - news - people ), who often price their wares at more than $200. As such, Joe's occupies what it believe is a unique slice of the retail market.
MoneyGram International
Many people can be described as "under banked" or even "unbanked." These are people who have either no relationship with a bank or who don't have a checking account, or people who find it more convenient to use money transfer services as opposed to a bank. In 2009 the Federal Deposit Insurance Corporation conducted an industry inquiry where they determined that approximately 26% of Americans are unbanked or under banked. This number is likely higher in underdeveloped and emerging economies.
What this means to a savvy investor is that the money transfer business is big business and one great company in the space is MoneyGram International. The company's products include money transfers, bill payments and money orders--products directly aimed at servicing the under banked and unbanked population.
Playboy
The Playboy Bunny is one of the world's most recognizable logos. To most people, Playboy magazine means entertainment, fun, leisure and, of course, pretty girls. But Playboy is a business just like any other and their goal at the Playboy corporate offices is to make money.
The company has seen hard times lately, as the publishing industry in general is having a difficult time due to fierce competition from the Internet and online magazines and books. Still, Playboy's iconic symbol alone should continue making the company money and it will give them the opportunity to come back off the canvas and to regain its status as a successful, money-generating entertainment enterprise.
PMI Group
When you think about the root cause of the financial debacle of the last few years, one word jumps out: mortgages. Too many loans, too little collateral and overaggressive lending all played a major role in the fiscal crisis. Now, however, the economy is beginning to improve and the U.S. housing market is beginning to gain firmer footing. As home sales increase, companies offering protection to the lenders against mortgage defaults are in a position to see substantial growth.
PMI stands for "private mortgage insurance," and it is an integral part of the residential housing market. PMI Group's mortgage insurance protects lenders and investors against defaults on loans in which the home buyer's down payment is less than 20% of the total price. If the economy and home sales continue getting stronger, then so will PMI Group.
Synovus Financial
This financial services holding company has approximately $33 billion in assets, and that's by no means little. Synovus provides commercial and retail banking services, as well as investment, financial management, insurance and mortgage services to customers throughout the growing economies of the Southeast, including Georgia, Alabama, South Carolina, Florida and Tennessee.
As the fallout from the financial sector turmoil of the past few years settles, Synovus has managed to solidify itself and its market-leading position. The bank is the sixth largest in the Southeast, as ranked by customer deposits, and I especially like its focus on traditional community-based, customer-service banking model. While some competitors remain distracted with management-intensive reorganizations and merger integrations, Synovus is just out there making money.
While these five stocks under five bucks have big upside potential; they also come with a sizable amount of risk. But if you're an investor who is willing to trade a little risk for the potential of big rewards, then these little but potentially big stocks are a good place to start.
From Forbes published on 06.25.10, 03:00 PM EDT
