Editor's Note: This was originally published as an alert at 11:20 a.m. EST on Dec. 23 to subscribers of TheStreet.com's Stocks Under $10. The stock prices and returns have been updated to reflect today's levels.

Earlier this month we put together a basket of five low-priced stocks that we believed would outperform the market in December due to increased investor demand for speculative stocks. The moves we were seeing in stocks like Sirius ( SIRI) and Genta ( GNTA) seeded this concept.

Here they are again, along with a performance table to track our performance:

Stemcells ( STEM) is up 22% at $3.62.
Aphton ( APHT) is off 2.5% at $3.14.
E-Loan ( EELN) is up 15% at $3.31.
Tut Systems ( TUTS) is up 2.4% at $3.84.
OpenTV ( OPTV) is essentially flat at $3.82.

Last night we had two double-digit gainers; Aphton and E-Loan, and today, we can add Stemcells to the list. News that stem cells could be used to treat often-fatal cystic fibrosis has the stock trading 15% higher to $3.58 a share. (Geron, our stem-cell play in the model portfolio, already has climbed 15% this week.)

We would be locking in gains in some of the names today if we owned them for our model portfolio, and now we want to elaborate on why this portfolio worked.

On the whole, the portfolio is 7% higher than the Dec. 8 entry prices, while the S&P 500 is up 2.97% during the same period. (Readers who took some gains off the table in Aphton on Dec. 10 and E-Loan on Dec. 10 and Dec. 15 have a 10.92% gain.)

We would close out of Aphton here for a 10.91% gain. No phase III data have been reported yet for its gastrointestinal cancer vaccine, and we view the risk/reward here as more negative than it was earlier this month.

We would also take E-Loan off the sheets here. Those of you who acted on our Dec. 10 and Dec. 15 alerts would be locking in a 22.4% gain in that position. And in light of today's news for Stemcells, we would sell half of the position as well for a 23% gain.

This exercise in speculation is a lot like how we run our Under $10 portfolio, and reveals a couple of important lessons. First, speculation isn't a dirty word designated for oil chasers in empty Texas fields. It plays an important role in most portfolios and often plays a key role in outperforming the indices.

Second, the more stocks you speculate in, the better your chances of winning. Taking a basket of catalyst-driven stocks, as we have done here, led to three hits and two misses. But the gains far outweighed the losses. Finally, having a defined sell discipline when speculating helps preserve gains. Aphton is down for the period, but we recommended booking gains when the stock was hot, taking much of the risk out of the position.

P.S. Remember, stocks priced under $10 have the potential to move quickly. So, you might want to get our current recommendations now with a free trial to TheStreet.com Stocks Under $10.
William Gabrielski is a research associate at TheStreet.com and is accredited with a Series 7 license. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Gabrielski welcomes your feedback and invites you to send your comments to william.gabrielski@thestreet.com.

Interested in more writings from William Gabrielski? Check out Stocks Under $10. For more information, click here.

David Peltier is a research associate at TheStreet.com In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Peltier welcomes your feedback and invites you to send your comments to david.peltier@thestreet.com.