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Stocks Under $10 With DavidPeltier

Stocks Under $10 Weekly Roundup

By David Peltier | 05/01/15 - 04:50 PM EDT

U.S. stocks bounced back Friday, starting May on a positive note. That said, the Russell 2000 index, the benchmark of the model portfolio, pulled back more than 3% this week.

We used the weakness to add to our positions in Pacific Sunwear (PSUN) and Unilife (UNIS) this week.

As earnings season pressed on this week, traders had to digest a lower-than-expected preliminary reading of first-quarter GDP growth. This caused many folks to retool bets on a Fed interest rate hike, which we maintain will likely be pushed into 2016.

Looking ahead to next week, we’ll get a look at the April jobs data on Friday. Economists are looking for the addition of 225,000 nonfarm payrolls and for the unemployment rate to tick down to 5.4%.

Here is a list of companies in the model portfolio that have confirmed earnings reporting dates:

May 4 -- ON Semiconductor (ON) May 5 -- Martha Stewart Living Omnimedia (MSO)

May 6 -- Atmel (ATML), SandRidge Energy (SD)

May 7 -- Cott (COT), Vantage Drilling (VTG)

May 11 – Ballantyne Strong (BTN), Unilife (UNIS)

As a reminder:

-- A Game Breaker is going to change the landscape of an industry, as Intel (INTC), Microsoft (MSFT) and Wal-Mart (WMT) did in their respective 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 that 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; $2.30; 3,050 shares; 3.79% 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 stock fell 4% this week, even though management posted better-than-expected quarterly results on Tuesday. The company is seeing higher product demand and expanding margins. We'd consider adding to our position on the next market pullback.

Atmel (ATML; $7.63; 1,000 shares; 4.12%, Inflection Point; $10 price target): The company makes microcontrollers used in electronics. The shares ticked higher this week. Atmel sold its XSense touchscreen technology on Friday to Unipixel (UPXL). The shares dropped 2% this week, ahead of the upcoming quarterly report on Wednesday. We believe management can continue to expand margins and the stock can trade up toward the double digits by the end of the year.

Ballantyne Strong (BTN; $4.66; 2,500 shares; 6.29%; Stealth Stock; $6.25 price target): The company distributes digital movie projectors and manufactures screens and lighting equipment for theaters. The stock dropped fractionally this week on little news. We maintain that Ballantyne deserves to trade at a premium to its tangible book value of $4.65 a share.

Sonus Networks (SONS; $7.89; 660 shares; 2.81%; Inflection Point; $26.25 price target): The company makes communications equipment, including session border controllers and diameter signal controllers. The shares declined 6% this week. Even so, management is cutting costs and we believe Sonus can move back into the double digits by the end of the year.

Standard Pacific (SPF; $8.20; 750 shares; 3.32%; Inflection Point; $11 price target): This homebuilder generates the majority of its revenue in California. The stock ticked lower this week, as management posted lower- than-expected quarterly results on Thursday. That said, pricing and order trends remain strong. We continue to believe shares can trade up toward the double digits in the coming quarters.

Synovus Financial (SNV; $27.53; 264 shares; 3.92%; 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.

Yamana Gold (AUY; $3.81; 1,350 shares; 2.78%; 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. It was a volatile week for the stock, which traded fractionally lower. Yamana posted quarterly results on Tuesday and core production continues to grow. Management is paying down debt and we maintain that shares can move up toward $5 in the coming quarters.

TWOS

Builders FirstSource (BLDR; $12.91; 600 shares; 4.18%; Inflection Point; $17 price target): The company distributes materials to homebuilders in the southern U.S. The shares rebounded fractionally this week. As management integrates the ProBuild acquisition over the coming quarters, we believe the stock can move up toward the mid-teens.

Cott (COT; $8.93; 950 shares; 4.58%; Stealth Stock; $10 price target): Cott produces and distributes soft drinks, noncarbonated beverages and bottled water, primarily focusing on private-label items for major retailers. The stock ticked higher this week, ahead of the upcoming quarterly report on Thursday. We continue to favor the company for its 2.7% dividend yield.

Huntington Bancshares (HBAN; $10.89; 600 shares; 3.53%; Inflection Point; $13 price target): This Ohio- based bank operates more than 600 branches across six states. It was a quiet week for the shares, which ticked higher. We believe the company can continue to take market share from its larger competitors in the coming quarters.

McDermott (MDR; $5.24; 800 shares; 2.26%; Inflection Point; $11.50 price target): This engineering- and-construction firm focuses on building and designing offshore oil and natural gas facilities. The stock bounced back nearly 5% this week. We believe management can continue to turn the business around in the coming quarters.

ON Semiconductor (ON; $11.81; 500 shares; 3.19%; Stealth Stock; $13.50 price target): The company makes analog, standard logic and discrete semiconductors for use in data and power management. The shares rebounded fractionally this week, ahead of the upcoming quarterly report on Monday. We maintain that ON Semiconductor is attractively valued at 12x expected full-year earnings.

Pacific Sunwear (PSUN; $2.02; 3,550 shares; 3.87%; 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. We bought 300 shares on Wednesday, as the stock fell 18% this week. The company was downgraded at DA Davidson, from Buy to Neutral. That said, we continue to believe Pacific Sunwear can drive traffic to its stores with exclusive and private-label brands.

SandRidge Energy (SD; $1.92; 1,600 shares; 1.66%; Inflection Point; $8 price target): The company explores for natural gas and oil in the U.S., primarily onshore. The shares bounced back more than 4% this week, ahead of the upcoming quarterly report on Wednesday. It was a volatile week for the energy sector, which moved higher, along with underlying commodity prices. We maintain that SandRidge is better hedged and has relatively less debt than its peers.

TherapeuticsMD (TXMD; $6.62; 1,000 shares; 3.57%; Game Breaker; $9.50 price target): The company develops hormone-replacement medicines for women. The stock was hit with some profit-taking and fell 7%. We continue to believe TherapeuticsMD has an attractive clinical pipeline, with multiple potential catalysts.

Unilife (UNIS; $3.32; 2,250 shares; 4.03%; Game Beaker; $6.50 price target): This manufacturer of retractable and prefilled syringes offers products with convenience, safety and comfort advantages. We bought 200 shares on Friday, as the stock lost 6% this week. That said, we believe the company can ramp production and will sign more pharmaceutical partnerships in the coming quarters.

Vantage Drilling (VTG; $0.39; 6,000 shares; 1.27%; Inflection Point; $2.25 price target): This offshore driller contracts its rigs for the exploration of oil and natural gas. The stock rebounded 3% this week, ahead of the upcoming quarterly report on Thursday. We believe the company's prospects can continue to improve with underlying commodity prices in the coming quarters.

Whiting Petroleum (WLL; $37.68; 123 shares; 2.50%; Inflection Point; $51 price target): The company explores for oil and gas in the Permian Basin, Williston Basin and Green River Basin. The shares added nearly 6% to recent gains this week, as management posted solid quarterly results on Wednesday. We'd consider paring back our position above $40, as Whiting has rallied significantly from its recent lows.

Zix (ZIXI; $4.47; 2,250 shares; 5.43%; Stealth Stock; $5.75 price target): Zix is a leading producer of email-encryption software that enables doctors to automatically send information to pharmacies. The stock was hit with some profit-taking and fell fractionally. That said, the company has strong sales momentum and we believe that shares can move up through $5 in the coming months.

THREES

Martha Stewart Living Omnimedia (MSO; $5.71; 600 shares; 1.85%; Inflection Point; $7 price target): The company operates in the home-goods segment, publishing magazines, producing broadcasts and licensing products to retailers. The shares dropped 4% this week, ahead of the upcoming quarterly report on Tuesday. We believe management can continue to unlock value from Martha Stewart's core brands in the coming quarters.

Regards,

David Peltier & TheStreet Research Team

Accumulating Unilife on Weakness
Stocks in Focus: UNIS

We believe the company will ramp production and continue to sign new pharmaceutical partners.

05/01/15 - 01:45 PM EDT
Standard Pacific Earnings Disappoint
Stocks in Focus: SPF

Still, we believe the company is trending in the right direction.

05/01/15 - 10:33 AM EDT
Standard Pacific Results Due
Stocks in Focus: SPF

Slight increase in EPS is expected.

04/30/15 - 03:08 PM EDT
Stocks Under $10 Weekly Roundup

This week, we added to 2 portfolio positions amid market weakness.

05/01/15 - 04:50 PM EDT

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Markets

DOW 18,056.19 +32.13 0.18%
S&P 500 2,108.29 +22.78 1.09%
NASDAQ 5,005.3910 +63.9670 1.29%

Stocks Under $10 Holdings

Stocks we would buy right now

Symbol % Portfolio
Weighting
Industry Trade Now
ACPW 3.84% Industrial
ATML 4.13% Electronics
AUY 2.79% Metals & Mining
BTN 6.29% Consumer Durables
SNV 3.93% Banking
SONS 2.83% Telecomm
SPF 3.40% Materials & Construction

Stocks we would buy on a pullback

Symbol % Portfolio
Weighting
Industry Trade Now
BLDR 4.17% Materials & Construction
COT 4.63% Food & Beverage
HBAN 3.54% Banking
MDR 2.31% Energy
ON 3.19% Electronics
SD 1.68% Energy
TXMD 3.57% Drugs
VTG 1.27% Energy
WLL 2.56% Energy
ZIXI 5.34%

Stocks we would sell on strength

Symbol % Portfolio
Weighting
Industry Trade Now
MSO 1.85% Media

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