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TheStreet Open House

5 Stocks Under $10 Hedge Funds Love

Rite Aid

One under-$10 name that Einhorn has initiated a massive new position in is Rite Aid ( RAD), which operates a retail drugstore chain in the U.S. This stock has been red hot so far in 2013, with shares up a whopping 150%.

>>3 Big Retail Stocks to Trade (or Not)

Rite Aid has a market cap of $3.09 billion and an enterprise value of $9.40 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 13.99 and a forward price-to-earnings of 13.08. Its estimated growth rate for this year 33.3%, and for next year it's pegged at 62.5%.

Einhorn's play here could be simply betting on Obamacare, since many analysts think the healthcare-retail sector will see a jump in sales once all the new consumers come online under the sweeping act. His position in RAD could also be a turnaround idea or even an acquisition target, since this company recently came out of tough cost cutting environment. Rite Aid is also turning itself wellness player, since its converting stores at a rapid pace into its next generation wellness store format.

During the second quarter, Einhorn bought 20.2 million shares of Rite Aid between $1.71 and $3.15 a share, with an estimated average price of $2.61 a share. Einhorn's position in RAD is worth somewhere near $70 million. Einhorn is already up solidly on this bet, but I would think he's planning on holding it much longer since the stock is uptrending strong.

From a technical perspective, RAD has been uptrending big for the last six months, with shares soaring higher from its low of $1.57 to its recent 52-week high at $3.62 a share. This stock has broken out multiple times during that uptrend and shares are currently not far from its 52-week high. That said, shares of RAD are bit overbought here and are due for a pullback. This one is probably worth a look near its 50-day moving average of $3.01 a share, or near $2.50 a share which its base low from this summer.

BioFuel Energy

Another under-$10 name that Einhorn is getting long here is BioFuel Energy ( BIOF), which is engaged in the production and sale of ethanol and its co-products. This stock has been hit hard by the sellers during the last six months, with shares off by 38%.

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