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Small-Fry Investors Jump on the Sub-$5 Stocks
Posted at 11:36 a.m. EDT, Aug. 24, 2009

Retail investors are warming up to this market. You can see by the jumps in the low-dollar stocks. I just hope it is warming up to right low-dollar stocks. They are in love with Fannie (FNM Quote) and Freddie (FRE Quote), I imagine because they think these are the best plays on the turn in housing. I don't think the government has really spelled out how much money these companies must return to the government before figuring out what is left for the common. There is little research out on either, so it is pretty much a dice roll. Man, are they ever on the move, though. Same with Sirius Satellite (SIRI Quote). Not a lot of there there, at least for the common stock.

I have obviously been a huge supporter of Citigroup (C Quote), betting that it should trade back to book value, but I also don't have a case that it should go above book value of $5.75 until after we see the quarter, which will be additive to book. In the meantime, the government will be able to take its profit and the overhang can be easily chewed up. I do not know why the government doesn't declare victory rather than wait until Sept. 10. The government's playing the market, which isn't what we want.

I am a huge believer in Fifth Third Bank (FITB Quote) and Huntington Bancshares (HBAN Quote) and even Regions Financial (RF Quote), with the last two having a lot of room to romp and the former in good shape to do an acquisition. Given that we are waiting for hundreds of banks to fail, there could be ample opportunity. (Query -- why haven't more failed yet? Answer -- the FDIC is letting the bad banks run and run and run, bad banks meaning banks that have to pay up for hot money via high interest CDs that we will all be on the hook for.)

I like the mobile Internet plays on the move, notably RF Micro (RFMD Quote) and Triquint (TQNT Quote), ADC Telecom (ADCT Quote), Tellabs (TLAB Quote) (still very cheap), ON Semiconductor (ONNN Quote) and Cypress (CY Quote). They are all cheap on a multiyear-move basis. On the other hand, I don't know how people can buy Level 3 Communications (LVLT Quote) given that balance sheet. That's not a mobile Internet play.