I recently noted
, there is ample reason for investors to use caution right now, so
selling winners looks like a sound move. At the same time, we're
also being presented with opportunities to redeploy cash into
vastly oversold stocks. I track a wide number of stocks, and a
number of them are now trading at levels that will -- in hindsight
-- prove to be great windows of opportunity.
Here are five stocks that are now below $10 per share that could
double by mid-decade.
1. Maxwell Technologies (Nasdaq:
This company is a leading provider of ultra-capacitors, which can
store a lot of energy and then unleash it in a burst. These devices
have a range of applications in the transportation, industrial and
power generation sectors.
Maxwell's stock has fallen from $21 back in February to a recent
$6.50 on concerns that demand in China -- a key
-- is slowing. Yet Maxwell's long-term prospects are quite bright,
as a range of new products that are hitting the market in the next
year or two will feature the company's ultra-capacitors.
Investors are likely fretting that management will again cut
guidance when second-quarter results are released, but
appear to have support in the $6 range -- with considerable upside
down the road. Company insiders certainly think so -- they started
buying shares at $10 in late April and have done more buying at
ever-lower levels since then.
2. Polycom (Nasdaq:
This provider of audio and video-conferencing equipment was above
$30 a year ago but is now below $10. Polycom has noted a slowdown
in key markets, and analysts expect sales growth to be flat this
year, with only single-digit gains in 2013 to around $1.6
Clearly, this company benefits from a strong global
, but a weak global economy can also help: Many companies implement
video-conferencing equipment to cut down on costly business travel
when business slows, holding virtual meetings instead of
face-to-face meetings. Good times or bad, Polycom has generated at
least $74 million in
free cash flow
for each of the past seven years, which has pumped up net cash
above the $600 million mark. That's roughly one-third of the
3. Take Two Interactive (Nasdaq:
This video game maker continues to suffer from a lack of
. Many investors are avoiding it simply because near-term results
will likely be uninspiring due to a dearth of hot new gaming
titles. Yet the company's fiscal fourth quarter, ending next March,
should see the release of a pair of hotly anticipated titles: Grand
Theft Auto 5 and Bioshock: Infinite.
Right now, there is some debate whether the release dates for
those titles will be pushed out by 90 days, which is why this stock
is now down below $10. Still, with potential
power in excess of $2 per share in either fiscal (March) 2013 or
2014 (depending when those games ship), and a widely-respected
product development team, this stock should move back into favor,
and perhaps above $20, when it becomes more timely.
4. Peerless Manufacturing (Nasdaq:
This maker of industrial filtration equipment and other
environmental products has seen its stock pummeled from $27 in
early February to a recent $8 due to a recent slump in gross
margins. Yet an expansion in international markets should help
blunt pricing pressures. A number of countries in the Middle East
and Asia are enacting stricter environmental standards, and
management recently noted that the level of bidding activity for
new contracts outside the United States now exceeds domestic
Sales are expected to rise at a double-digit pace in coming
years, which should help earnings rise at an even faster pace,
perhaps hitting $0.50 a share by fiscal (June) 2014. The promise of
projected strong growth is why this stock was nearly 250% higher
early this year, and if you have a multi-year time frame, then a
return to that level is possible if management can convert the
current pipeline of discussions into orders.
5. Allscripts (Nasdaq:
I profiled this company
roughly two months ago
, and we're just weeks away from the new management team's
introduction to investors. When second-quarter results are
announced, look for a discussion of how
margins and sales momentum can be restored, which may attract
bottom-fishers into this beaten-down stock.
It's important to remember that the migration to electronic
medical records is a powerful long-term investing theme, and this
company should remain a major player in the movement.
Risks to Consider:
Until the market rebounds, these stocks could move
Action to Take -->
A floor appears in place for these beaten-down stocks. When the
market eventually rebounds, these stocks possess outsized upside
potential and could perhaps double or more.
-- David Sterman
David Sterman does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.
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