Under $5 Stocks That May Be Headed Lower

BOSTON ( TheStreet) -- Stocks that trade for less than $5, because of increased volatility, can be a boon or a bust.

For some lucky investors, their penny-stock pick may double. For others, only one day of losses can erase a year's worth of gains.

Stocks trading under $5 present potential buyers and sellers with a unique problem. Most investment funds are forbidden from buying cheap stocks. In addition, investment research is hard to come by.

Uncovering under-$5 stock candidates that have a huge downside potential can help investors navigate the penny-stock minefield. To find those companies, TheStreet sought out $5 stocks that have the most to lose based on analysts' share-price targets. Each stock trades on the Nasdaq or New York Stock Exchange and is covered by more than one analyst.

5. Great Atlantic & Pacific Tea ( GAP) shares plunged in late July after the supermarket chain posted a first-quarter loss of $4.60 a share, much wider than analysts had forecast. The food retailer also said Sam Martin would become the second person named to the CEO post in 2010, replacing Ron Marshall. Great A&P said its turnaround strategy will work to create revenue and cut costs, but it will look to capital-raising activities, which may include the sale of assets.

Share Price: $3.82 (Aug. 6 close)

Average Price Target: $2.25, based on four analyst price targets of $2, $3, $1 and $3.

Loss Potential: 41.1%

2010 Performance: -67.6%

Analysts' View: Great A&P is the most widely followed of the five stocks on this list, with eight analysts covering the stock. Of those, only one recommends that investors buy the shares, while four suggest holding the stock and another three say investors should sell.

4. GTx ( GTXI) shares dropped to a 52-week low of $1.90 in May before rebounding slightly after the company said in June that Ostarine, its treatment for cancer-induced muscle loss, increased body mass and leg-press strength in women in a clinical study when compared with another drug. In October 2009, GTx shares traded north of $10 before free-falling after the Food and Drug Administration requested additional late-stage study data on the company's toremifene bone drug candidate. GTx will report quarterly financial results on Monday.

Share Price: $3.37 (Aug. 6 close)

Average Price Target: $1.875, based on two analyst price targets of $1.75 and $2.

Loss Potential: 44.9%

2010 Performance: -19.8%

Analysts' View: Six analysts cover GTx's stock and they are split between holding and selling shares. Citigroup and Lazard Capital Markets recommended in May that investors hold on to the stock, while Rodman & Renshaw and Cowen & Co. suggest dumping the shares.

3. Integra Bank ( IBNK) has announced sales of branches and loans to other institutions throughout 2010, including The Cecilian Bank, First Security Bank, United Community Bank, FNB Bank and Citizens Deposit Bank and Trust. On July 2, Integra received notification from the Nasdaq that it was not in compliance with the exchange's minimum bid price requirement and could face delisting, although shareholders have already approved a reverse stock split that would help the bank regain compliance.

Share Price: 93 cents (Aug. 6 close)

Average Price Target: 50 cents, based on a single price target from Keefe, Bruyette & Woods analysts.

Loss Potential: 46.2%

2010 Performance: 23%

Analysts' View: Three research firms have reiterated their view of Integra Bank during the past several weeks. Stifel Nicolaus and KBW analysts suggest that investors hold on to shares, while Hilliard Lyons recommends selling the stock.

2. PremierWest Bancorp ( PRWT) shares have traded below $1 for most of 2010, even though the company cut losses in the second quarter. PremierWest, which operates branches in Oregon and California, was also the subject of takeover speculation after a newsletter said it was a likely target of KeyCorp ( KEY). On the downside, PremierWest saw nonperforming assets rise in the second quarter from a year earlier. The bank has been operating under an order from the Federal Deposit Insurance Corp. to boost capital and cut nonperforming loans.

Share Price: 47.2 cents (Aug. 6 close)

Average Price Target: 25 cents. The only analysts covering the company each expect the stock to fall to 25 cents.

Loss Potential: 47%

2010 Performance: -65.9%

Analysts' View: D.A. Davidson and Sandler O'Neill are the only research firms covering PremierWest, and both have "sell" ratings on the stock.

1. Cascade Bancorp ( CACB), like several stocks trading under $1, is in danger of losing its listing on the Nasdaq as it is not compliant with the exchange's minimum bid price requirement. The bank's stock has dropped as it scrambles to raise capital to meet an order by the Federal Deposit Insurance Corp. In December, Cascade canceled plans to sell $93 million of common stock and instead has undertaken other efforts to raise the additional capital. Cascade has an agreement with two investors who will invest $65 million in the bank, although Cascade must first raise $85 million on its own. The deadline of the purchase agreements has been extended several times as Cascade has worked on the capital increase.

Share Price: 53 cents (Aug. 6 close)

Average Price Target: 10.5 cents, based on two analyst price targets of 10 cents and 11 cents.

Loss Potential: 80.2%

2010 Performance: -22.1%

Analysts' View: The only two research firms covering Cascade Bancorp (D.D. Davidson and FIG Partners) have "sell" ratings on the stock.

-- Written by Robert Holmes in Boston.

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