White Paper: Investing in Low-Priced Stocks

Investors come to the market with different goals and objectives, but many have one thing in common, an appetite for the excitement and volatility characteristic of stocks that are priced below $10 a share.

By nature, low-dollar stocks have a large degree of obscurity, due in part to the lack of institutional following and news coverage of their companies. Much to our delight, the result is an underfollowed universe of stocks that have the potential to become big winners in the future.

We have spent a lot of time here at TheStreet.com to develop a service that would provide investors with guidance into this profitable, but volatile space of the market. Our goal is to bring you unbiased, profit-driven analysis and commentary that remove the fears and unknowns of undiscovered stocks, ultimately making you money and enabling you to become a better investor.

To achieve this goal, we've developed an alert-based service called Stocks Under $10. We create and manage a model portfolio of single-digit stocks, send out timely alerts on breaking news, earnings, potential catalysts, and analyst actions for our portfolio stocks, and offer an overall sense of the Under $10 space. (Under our guidelines, 80% of our model portfolio stocks must be priced below $10 a share when we make a purchase.)

Given the sheer volume of issues in the Stocks Under $10 market, we cull the list by running a screen for stocks that meet a set of minimum criteria: Stocks must have market capitalizations of at least $100 million, 30-day average trading volumes of 100,000 shares, and a current price greater than $1 a share. These requirements, which sometimes limit our selection process, set a framework that keeps us from investing in bulletin board stocks that can be easily manipulated by Wall Street at the expense of the investing public.