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Stocks Under $5 With Biggest 'Disconnects'

BOSTON (TheStreet) -- Several stocks that trade for less than $5, including Sprint Nextel (S), have had their earnings estimates increased or decreased by analysts, only to see their share prices head in the opposite direction. That presents investors with an opportunity, as those companies release financial results this week.

Cheap stocks typically rise in volatility amid earnings releases, as evident last week in Westell Technologies (WSTL), Compuware (CPWR) and Infinera (INFN).

As noted last week, analysts were revising-up quarterly estimates for Apple (AAPL) and Harley-Davidson (HOG), although share prices weren't moving in concert. That disconnect paid off for investors who followed analysts' moves, at least in the small sampling.

Predicting the direction of equities based on a quarterly-earnings report is a toss-up. Bespoke Investment Group said information collected over the past nine years shows that a stock has risen in 32,563 instances, or 49.9% of the time, on the day a company reports earnings. A winning trade has the same chances as a coin flip.

To improve the odds, perhaps, here are five stocks trading under $5. They belong to companies reporting earnings this week in which a disconnect exists between the share-price movement and analysts' earnings per share revisions over the past month.

Sprint Nextel shares have risen in the past month, thanks to better-than-expected sales by the HTC EVO 4G handset, considered a top rival to Apple's iPhone 4. After Sprint reported second-results last year, its stock jumped almost 10%. Still, the shares fell on second-quarter numbers in the three previous years.

Report Date: July 28, before market opens

One-Month Revisions to EPS: Eight research firms have cut their loss estimates for Sprint Nextel over the past month, including Morgan Stanley, Oppenheimer and Goldman Sachs. UBS raised its second-quarter target to a loss of 7 cents a share from 9 cents, making it the only firm to increase its estimate in the past month.

One-Month Stock Performance: 20.2%

Expectations: A Thomson Reuters survey of 25 analysts show they expect Sprint will report a loss of 19 cents a share. Wells Fargo Securities analyst Jennifer Fritzsche reiterated her "outperform" rating on Sprint ahead of the earnings release.

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