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TheStreet Open House

Under $5 Stocks That May Be Headed Lower

Stocks in this article: CACBGAP

BOSTON ( TheStreet) -- Stocks that trade for less than $5, because of increased volatility, can be a boon or a bust.

For some lucky investors, their penny-stock pick may double. For others, only one day of losses can erase a year's worth of gains.

Stocks trading under $5 present potential buyers and sellers with a unique problem. Most investment funds are forbidden from buying cheap stocks. In addition, investment research is hard to come by.

Uncovering under-$5 stock candidates that have a huge downside potential can help investors navigate the penny-stock minefield. To find those companies, TheStreet sought out $5 stocks that have the most to lose based on analysts' share-price targets. Each stock trades on the Nasdaq or New York Stock Exchange and is covered by more than one analyst.

5. Great Atlantic & Pacific Tea (GAP) shares plunged in late July after the supermarket chain posted a first-quarter loss of $4.60 a share, much wider than analysts had forecast. The food retailer also said Sam Martin would become the second person named to the CEO post in 2010, replacing Ron Marshall. Great A&P said its turnaround strategy will work to create revenue and cut costs, but it will look to capital-raising activities, which may include the sale of assets.

Share Price: $3.82 (Aug. 6 close)

Average Price Target: $2.25, based on four analyst price targets of $2, $3, $1 and $3.

Loss Potential: 41.1%

2010 Performance: -67.6%

Analysts' View: Great A&P is the most widely followed of the five stocks on this list, with eight analysts covering the stock. Of those, only one recommends that investors buy the shares, while four suggest holding the stock and another three say investors should sell.

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