Can you recommend some cheap stocks? You know, something under $100?

For the last few weeks, that's been the most frequent request in my email. And it's one I certainly understand. The speed of this year's

Nasdaq

rally, even considering the recent correction, has pushed many investor favorites well above $100, and in some cases, above $200 or even $300. The advance has been so frenetic that splits, coming as fast and furious as they have been, still haven't been able to keep prices in a range that many investors consider affordable.

Mathematically, of course, we can all do the calculations that show that whether you own 10 shares of a $20 stock or 1 share of a $200 stock, a 10% gain still puts $20 in your pocket. And most of us know intellectually that how "expensive" a stock is depends not on the price of a single share, but on the company's market capitalization.

But still, I realize that many investors feel that a $200 stock is just too risky for them, and that a $20 stock is more likely to double than a $200 stock.

Beware the Too-Cheap Stocks

I never like to recommend penny stocks -- those trading under $5. This part of the market carries risks all its own, since it's all too easy to manipulate an illiquid stock trading at just a few dollars a share. In a market that's already risky and volatile, I'm even more reluctant to recommend an illiquid stock that might be difficult or impossible to sell if equities in general turn south rapidly.

Many of your emails suggested that $30-$40 was an attractive price range. I originally told my editor that I'd focus on five stocks under $30. Actually, I'm going to cheat a bit and recommend one stock at about $33 because I think it demands to be on your radar screen.

One of these stocks --

E*Trade

(EGRP)

-- is already in Jubak's Picks, and I'd certainly recommend the shares at their current price. Another one --

Mattel

(MAT) - Get Report

-- is a stock that I've written about before, but it looks like it's finally putting in a bottom. Timing, not value, is the issue with Mattel. The other three stocks --

Oak Technology

(OAKT)

,

Rexall Sundown

(RXSD)

and

Healtheon/WebMD

(HLTH)

are new names. I've done enough research on them that I believe they're good candidates for you to do your own due diligence. Each combines good momentum and sound fundamentals with a price that makes them worth a look for an investor working with limited capital.

Five That Look Like Bargains

E*Trade

TST Recommends

. The brokerage group -- and especially the electronic brokerage group -- hasn't exactly been in favor so far this year. E*Trade, for example, was down 11% for the year as of March 14, when I was packing up to leave on a short vacation. But while the stock has been down and out, the company has made two moves that have decidedly added value. First, in January, it closed its acquisition of

Telebanc

, an online bank. That enabled E*Trade to add such banking services and products as certificates of deposit and checking accounts to its offerings of brokerage services. Second, on March 13, it announced the acquisition of

Card Capture Services

, a large independent ATM network, with more than 8500 cash machines in 48 states and three countries. The deal will give E*Trade a physical presence that eliminates one of the major barriers facing online banks -- their ability to deliver cash to their customers. On Feb. 8, I set a $53 a share target price for E*Trade in Jubak's Picks.

Mattel.

I can't name another company that has suffered from worse management in the last year than Mattel. And the board of directors certainly doesn't deserve any prizes, either. After taking forever to oust CEO Jill Barad (and paying her too much to empty her desk), the board is just as slow to hire a replacement. But even at Mattel, change does take place. At the beginning of March, pension funds that own a huge piece of the company succeeded in getting Ralph Whitworth, a specialist in putting the heat under slow-moving corporate boards, named to the Mattel board of directors. Wall Street analysts are now saying they'd be surprised if the company didn't name a new CEO in the next 90 days. And the stock, now trading at just 13 times estimated earnings for 2000, is so cheap that it may be spurring action, too. An acquirer could now snap up Mattel, which owns 22% of the retail toy market, for just a little more than $4 billion. Quite a bargain, considering that analysts estimate that a restructured Mattel could produce $700 million to $800 million in earnings before interest payments, taxes, depreciation and amortization (

EBITDA). Using that number, analysts estimate that Mattel is worth about $15 a share as a public company and about $18 a share in an acquisition, compared to a bit more than $10 as I write this.

Oak Technology.

Get your mind around this -- a market cap of $665 million (yes, that's million with an "m") for a company that has six of the top seven PC original equipment manufacturers as customers. What's the product? Oak Technology makes controllers that let read-write CD-ROM drives communicate with the rest of the PC. With read-write technology starting to show up in more and more PCs -- thanks to those of us who want to download music from the Internet onto a CD -- sales at Oak Technology are exploding.

Prudential Securities

estimates that revenue for the CD-ROM drive business will hit $8 million in the March quarter, up from just $1.4 million in the December quarter. For the entire company, Prudential estimates that quarterly sales will come in around $25 million, up from $11 million in the December quarter. Prudential has a target price of $22 on the shares, compared with about $16 as of mid-March.

Rexall Sundown.

I'm finally seeing some vigor in this maker of vitamins and herbal supplements. It's been a long while coming, I grant you. Industry price wars that ravaged margins resulted in the stock losing 53% of its value in 1998 and another 26% in 1999. But after putting in a strong base at $10 in late 1999, the stock has moved up strongly with a 67% gain so far in 2000. I don't think that's the end of the stock's run, however. Earnings are just starting to recover. While revenues were up 16% in the quarter that ended in November 1999, net income was essentially flat. (Earnings per share climbed 11% thanks to the company's share repurchase program.) For the fiscal year ending in August, analysts are projecting earnings per share to grow by 17% and then by 19% in fiscal 2001. The stock is still very cheap on those estimates: At the recent price of $16.63, Rexall Sundown traded at just 16.2 times projected fiscal 2000 earnings per share. I'd say the near-term target price on this stock is $22.

Healtheon/Web MD.

This stock has been savaged since it hit its all-time high of $126 in May 1999. And I think that's fair. The company hasn't done a good job of explaining its strategy or business model as they have changed over time. Since investors don't know what the company is all about, I think that stock performance is understandable, and the company's own fault. But the potential here deserves some patience, in my opinion. After a confusing flood of deals and acquisitions, Healtheon has managed to put together what could be the first business-to-business-to-consumer company in health care. Anybody who has sat in a doctor's office recently can readily understand the power of this business model. Healtheon wants to provide the software and the Internet sites to enable caregivers -- 400,000 physicians will be connected to the system after the dust clears -- to use the Internet to seamlessly integrate their information systems with those of payers such as insurance companies, and then to give consumers a way to get information out of the system on billing, reimbursement and the like. Putting this together hasn't been easy, and it's still not done. (For example, only recently has Healtheon realized that it shouldn't attempt to get doctors to replace their own practice management systems but instead give them a way to integrate existing systems with Healtheon's network.) But I think Healtheon currently has the best shot of anyone at pulling this off, and the rewards that would come with achieving that goal justify breaking my price range a little. The stock was recently trading just below $34.

Salomon Smith Barney

has a 12-month target price of $52 on the shares.

Those are five promising stocks under $30 -- well, almost. I hope that in a year or six months, readers will start badgering me again for "cheap" stocks, saying that E*Trade, Mattel, Oak Technology, Rexall Sundown and Healtheon/Web MD are all too expensive. That's a complaint that I'd be very glad to hear.

(I wrote this column just before going on vacation. I won't be able to reply to emails or post in the Market Talk community until I'm back in the office on March 27.)

Jim Jubak is senior markets editor for MSN MoneyCentral. At the time of publication, he owned or controlled shares in the following equities mentioned in this column: E*Trade. Holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. He welcomes your feedback at

mctsc@microsoft.com.

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