This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

3 Stocks Under $5 Trading at Huge Discounts


Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

It's been a slow road to ruin for women's apparel retailer Talbots (TLB). Shares have fallen from $25 in 2007 to $16 in 2010 all the way to a recent $2.50. At the current prices, the vultures are circling. The steady demise is the result of a series of merchandising missteps that sought to attract younger buyers. The fashion changes have been axed, and the current line-up of clothes reflects a return to more traditional roots. Still, the damage to the brand is done, and it will be a while before customers flock back to the stores in high numbers.

Acknowledging the new harsher reality, Talbots is closing more than 100 of its worst-performing stores (out of a current 580), while also expanding a set of revamped stores that evoke a French-couture environment.

>>5 Black Friday Short-Squeeze Stocks for 2011

Before any of this can happen, private-equity investors are circling while shares are so cheap. In early August, Sycamore Partners announced it had amassed a 9.9% stake in Talbots, with plans to discuss steps to unlock the stock's value with management. The stock temporarily rebounded $4 before pulling back again. That pullback may be due to a "poison pill" provision that makes it harder for anyone to pull off a hostile takeover. At this point, it's not clear if an outright sale will take place, or management simply stays the course and rebuilds the tattered reputation.

How cheap is this stock? Talbots earned nearly $2 a share every year back in the first half of the last decade. Assume peak earnings power will only rebound to half that level, and this still trades for less than three times potential profits.

>>20 Highest-Yielding Retail Stocks

The key to owing retail stocks is finding business models that have stumbled that aren't broken. Pier One Imports (PIR - Get Report) struggled mightily in 2008, and its shares fell to 10 cents in early 2009 before management implemented a back-to-basics turnaround strategy. Shares have rebounded all the way to $13. Teen-focused retailer Aeropostale (ARO - Get Report) saw its shares plunge below $10 in September, but a modest upturn in business trends has quickly boosted the stock back to $17. It's still unclear if Talbots will experience a similar renaissance, but the potential upside for these turnaround retail plays is simply too large to ignore.
3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
TLB $0.00 0.00%
ARO $0.04 0.00%
NPTN $11.45 0.97%
PIR $6.22 -3.42%
AAPL $93.24 -0.41%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs