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Stocks Under $10 With DavidPeltier

Stocks Under $10 Weekly Roundup

By David Peltier | 09/04/15 - 04:53 PM EDT

The recent market volatility has continued into the first few days of September, which has been a notoriously negative month for investors in the past few decades. As a reminder, U.S. financial markets will be closed on Monday for the Labor Day holiday. That said, market watchers will still be paying close attention to China, where the stock markets have been closed since Wednesday.

We sold Vantage Drilling (VTG:NYSE) from the model portfolio on Wednesday, which gives us room to add another new name. We have been focusing our efforts to identify potential new investment candidates for when the market offers another buying opportunity.

In the meantime, next week will be relatively quiet on the economic front. Pacific Sunwear (PSUN:Nasdaq) is scheduled to report quarterly results after the close of trading on Tuesday.

As a reminder:

-- A Game Breaker is going to change the landscape of an industry, as Intel (INTC:Nasdaq), Microsoft (MSFT:Nasdaq) and Wal-Mart (WMT:NYSE) did in their sectors. Investors can make big money in these stocks by getting in before the crowd.

-- Inflection-Point stocks have a broken business model that's on the mend, but have yet to be recognized by the market. Investors who recognize a turnaround early can pocket strong returns.

-- Stealth Stocks are often names unknown to the general public, but can be hugely profitable investments, especially when they have catalysts to boost their share prices.

Also, Ones are stocks we would buy at their current quotes. Twos are stocks that we would buy on a pullback and Threes are names that we would sell into strength.

ONES

Active Power (ACPW:Nasdaq; $1.92; 3,700 shares; 4.22% of the model portfolio; Game Breaker; $4.75 price target): Active Power's flywheel energy technology keeps its customers' mission-critical processes up and running. Its hardware uses half as much space as that of existing technologies, but it generates twice as much power. The shares added 5% this week, as Rodman & Renshaw started coverage of the company on Monday with a Buy rating. Active Power has a lot of operating momentum and we believe the stock has 20%-plus upside potential by the end of the year.

Ballantyne Strong (BTN:NYSE; $4.74; 2,850 shares; 8.02%; Stealth Stock; $6.25 price target): The company distributes digital movie projectors and manufactures screens and lighting equipment for theaters. The stock bounced back more than 5% this week. We believe management can continue to unlock shareholder value in the coming quarters.

Pacific Sunwear (PSUN:Nasdaq; $0.63; 7,800 shares; 2.92%; Inflection Point; $4 price target): This specialty retailer operates more than 500 stores in the U.S., selling surf- and skating-style apparel to teens and young adults. The shares digested recent gains this week and fell 8%. The company will post quarterly results on Tuesday and we will provide a full preview earlier in the day.

Sonus Networks (SONS:Nasdaq; $6.47; 860 shares; 3.31%; Inflection Point; $26.25 price target): The company makes communications equipment, including session border controllers and diameter signal controllers. The stock dropped 6% this week on little news. That said, we believe management can continue to restructure the business in the coming quarters.

Standard Pacific (SPF:NYSE; $8.34; 750 shares; 3.72%; Inflection Point; $11 price target): This homebuilder generates the majority of its revenue in California. It was a quiet week for the shares, which moved fractionally lower. The company has strong pricing power and we believe the stock can trade into the double digits in the coming quarters.

Yamana Gold (AUY:NYSE; $1.72; 2,300 shares; 2.35%; Inflection Point; $12.50 price target): This gold-and- copper exploration company operates seven mines and several ongoing development projects in Brazil, Argentina and Chile. The stock fell 12% this week, as Yamana was downgraded at Scotiabank on Monday to Sector Perform. Even so, we believe management can boost production and cut costs in the coming quarters.

TWOS

Atmel (ATML:Nasdaq; $7.77; 1,000 shares; 4.62%, Inflection Point; $12 price target): The company makes microcontrollers used in electronics. The shares dropped 5% this week on little news. That said, we believe management can continue to expand margins in the coming quarters.

Builders FirstSource (BLDR:Nasdaq; $15.32; 475 shares; 4.32%; Inflection Point; $17 price target): The company distributes materials to homebuilders in the southern U.S. The stock bounced back more than 5% this week. We maintain the pending ProBuild acquisition will add materially to future earnings.

Huntington Bancshares (HBAN:Nasdaq; $10.55; 450 shares; 2.82%; Inflection Point; $13 price target): This Ohio-based bank operates more than 600 branches across six states. The shares lost 3% this week. Even so, we believe management can gain market shares and the stock also sports an attractive 2.3% dividend yield.

McDermott (MDR:NYSE; $4.69; 1,100 shares; 3.06%; Inflection Point; $11.50 price target): This engineering and construction company focuses on building and designing offshore oil and natural gas facilities. The stock ticked higher and added to recent gains this week. We believe management can continue to turn the business around in the coming quarters.

ON Semiconductor (ON:Nasdaq; $9.66; 500 shares; 2.87%; Stealth Stock; $15 price target): The company makes analog, standard logic and discrete semiconductors for use in data and power management. It was a volatile week for the shares, which fell 2%. We maintain that ON Semiconductor holds value at 9x expected full-year earnings.

SandRidge Energy (SD:NYSE; $0.49; 2,600 shares; 0.75%; Inflection Point; $8 price target): The company explores for natural gas and oil in the U.S., primarily onshore. The stock dropped 3% this week. Even so, we believe SandRidge is better hedged and has relatively less debt than its peers.

Synovus Financial (SNV:NYSE; $29.92; 225 shares; 4.00%; Inflection Point; $33.25 price target): This Georgia-based bank operates branches throughout the Southeast. The shares ticked lower this week. We believe the company can continue to deliver above-average growth in the coming quarters.

TherapeuticsMD (TXMD:NYSE; $6.22; 1,000 shares; 3.69%; Game Breaker; $9.50 price target): The company develops hormone-replacement medicines for women. It was a quiet week for the stock, which gained fractionally. We maintain that TherapeuticsMD has an attractive clinical pipeline, with multiple potential catalysts.

Unilife (UNIS:Nasdaq; $1.34; 4,400 shares; 3.50%; Game Breaker; $6.50 price target): This manufacturer of retractable and prefilled syringes offers products with convenience, safety and comfort advantages. The shares bounced back 8% this week, as management said on Wednesday that the company has retained Morgan Stanley to explore strategic alternatives. In the meantime, the company will continue to ramp production in the coming quarters to meet customer demand.

Whiting Petroleum (WLL:NYSE; $18.52; 123 shares; 1.35%; Inflection Point; $51 price target): The company explores for oil and gas in the Permian Basin, Williston Basin and Green River Basin. It was a volatile week for the stock, which added 5% to recent gains. We believe management can continue to boost production in the coming quarters.

Zix (ZIXI:Nasdaq; $4.54; 1,700 shares; 4.58%; Stealth Stock; $6.25 price target): Zix is a leading producer of email-encryption software that enables doctors to automatically send information to pharmacies. The shares moved more than 2% higher this week on little news. The company has a lot of sales momentum and we believe the stock can move up through $5 in the coming months.

THREES

Cott (COT:NYSE; $10.16; 700 shares; 4.22%; Stealth Stock; $12 price target): Cott produces and distributes soft drinks and noncarbonated beverages. The stock pulled back 4% this week. We continue to favor the company for its solid 2.3% dividend yield.

Regards,

David Peltier & TheStreet Research Team

Exiting Position in Deepwater Drilling Firm
Stocks in Focus: VTG

We believe Vantage Drilling has lost its advantage.

09/02/15 - 10:58 AM EDT
Unilife Comes Alive on Third-Party Interest
Stocks in Focus: UNIS

Shares surge as company explores strategic alternatives.

09/02/15 - 10:22 AM EDT
Buying More Unilife
Stocks in Focus: UNIS

We'll boost our stake on recent weakness ahead of upcoming results.

08/28/15 - 10:04 AM EDT
Stocks Under $10 Weekly Roundup

As market volatility persists, dropping one holding from model portfolio makes room for more.

09/04/15 - 04:53 PM EDT

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Chart of I:DJI
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Stocks Under $10 Holdings

Holdings 1

Stocks we would buy right now

Symbol % Portfolio
Weighting
Industry Trade Now
ACPW 4.22% Industrial
AUY 2.35% Metals & Mining
BTN 8.02% Consumer Durables
PSUN 2.92% Retail
SONS 3.30% Telecomm
SPF 3.71% Materials & Construction
Holdings 2

Stocks we would buy on a pullback

Symbol % Portfolio
Weighting
Industry Trade Now
ATML 4.61% Electronics
BLDR 4.32% Materials & Construction
COT 4.22% Food & Beverage
HBAN 2.82% Banking
IWM 17.29% Financial Services
MDR 3.06% Energy
ON 2.87% Electronics
SD 0.75% Energy
SNV 4.00% Banking
TXMD 3.69% Drugs
UNIS 3.50% Health Services
WLL 1.35% Energy
ZIXI 4.58%