This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How to Best Invest $1,500: Go Cheap or Go Big?

Stocks in this article: NOK ALU FTR SIRI RIMM

NEW YORK ( TheStreet) -- If you look around the Internet, you find no shortage of writers and message board regulars pumping the snot out of low-priced stocks such as Alcatel-Lucent (ALU), Frontier Communications (FTR) and Sirius XM (SIRI).

As I noted Monday in an article where I discussed selling two low-priced stocks, including SIRI, and long plays on two others, there's nothing necessarily wrong with dipping into the sub-$5 netherworld.

As long as you take bullish touts for the ALUs, FTRs and SIRIs of the world with a grain of salt and limit your exposure, there's no reason not to take part in this type of speculation. Who am I to tell you that my bull case for an investment in Nokia (NOK) carries any more validity than the conviction that underlies your long position in ALU, FTR, SIRI or some other sub-$5 stock?

However, if you're looking to invest a relatively small sum, say $1,500, or speculate in a sub-section of your portfolio, you really need to assess why you're going the low-priced route.

Be Weary of Back-of-the-Envelope Math

Dateline August 2000: ALU hits a high of $82.88. It's been practically all downhill since then. The stock now trades for about $1.58. It used to pay a dividend. That's long gone.

But you still have folks who give themselves handles such as "Global Value Investor" asking questions such as "Can Alcatel Lucent Hit $5 Per Share?" with the flimsiest of cases supporting a long position.

And, despite FTR's 76% move down since August 2000 and slashed dividend, you still have tortured longs getting excited over one dead cat bounce after another.

Then, of course, you have SIRI. This stock traded as high as $61 in 2000. It certainly created more bag-holders than penny stock millionaires, thus the full-force pumping we endure from SIRI loyalist longs on a daily basis.

When a stock craters relentlessly from such heights over the course of many years, there's generally a reason. It's not market manipulation. Nor is it a scenario where a gaggle of permabulls gets it, while the rest of the world wanders around in a clueless stupor. Beware of the notion that some set of external forces created not only the decline, but the persistent stagnation in a stock that fell from grace.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs