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But not all stocks selling below $10 present buying or investment opportunities. I've identified several that show no ability to appreciate in the futures and should remain in the single digits. These stocks are not necessarily on their way to bankruptcy, but they do not exhibit the qualities that are precursors to improving fundamental performance.
>>Forget Zynga -- Buy These Stocks Instead
Don't get trapped into thinking that these companies will resurrect their fortunes. Here are
eight stocks under $10 to avoid.
Martha Stewart Living Omnimedia
I have a long history with
Martha Stewart Living Omnimedia(MSO). I was one of the stalwart shorts when the company's namesake, Martha Stewart, was on trial several years ago. Even many dyed-in-the-wool short-sellers were long Martha Stewart stock.
Stewart was later convicted and served time in a federal penitentiary. After being released from jail, she and the company engaged in many failed attempts to resurrect the brand and her image. Do you remember the failed Martha Stewart "Apprentice" show? These moves were well-publicized and caused short-term pops in the stock but resulted in long-term failure.
The company's revenues have consistently declined since Stewart's legal woes, and the balance sheet that was once
cash-rich has deteriorated. Up-and-coming younger personalities such as Rachael Ray are supplanting Stewart.
Recently, the company announced an agreement with
J.C. Penney(JCP) whereby the department store agreed to buy 11 million new shares at $3.50 each amounting to a 16.6% stake. The hope is that store-within-a-store and online sales of the Martha Stewart brands would bolster results for both companies. Martha Stewart stock is up nearly 50% since the deal was announced. I am not a buyer of the euphoria as I have seen this movie before.