BOSTON (TheStreet) -- Stocks under $5, such as Capital Trust (CT) and Majesco Entertainment (COOL), have more than doubled this year, easily beating the broader market much to the surprise of investors who have never heard of these penny-stock companies.Small-cap stocks have been the big winners during the two-year bull market that followed one of the worst global recessions. Even though money managers argue that now is a time for investors to get defensive and move into less-risky asset classes like large-cap equities, small-cap stocks continue to lead the way.
10. Level 3 Communications ( LVLT) Company Profile: Level 3 Communications is an integrated Internet networking services provider. In April, the company said it would acquire fellow communications services company Global Crossing ( GLBC) for $2 billion. Shares of Level 3 have steadily increased this year, with a big rise last week on news the company was able to lower its borrowing costs through a $600 million bond sale. Earlier in the month, Level 3 reported an adjusted first-quarter loss that beat analysts' forecasts. Current Share Price: $2.30 (May 27) 2011 Total Return: 126% Analyst Ratings: Level 3 is one of the most widely followed stocks on this list, garnering 12 overall ratings from analysts. D.A. Davidson is one of only two firms with "buy" ratings on the stock. Another seven firms, including Oppenheimer, suggest investors hold on to shares, while three firms rate the stock a "sell." TheStreet Ratings has a "sell" rating on the stock, which it has maintained for two years. The latest report says Level 3's "primary weakness has been its feeble growth in its earnings per share."
8. Interphase ( INPH) Company Profile: Interphase is a telecom-equipment maker. The company provides services for LTE and WiMAX, interworking gateways, packet processing, network connectivity, and security for key applications for the communications and enterprise markets. Interphase shares more than doubled on Feb. 11, a day after the company reported fourth-quarter financial results. The company said revenue in the quarter jumped 24% to $5.8 million as it swung to a quarterly profit. The stock hit a high of $7.59 in March but has been steadily pulling back since. Current Share Price: $4.22 (May 27) 2011 Total Return: 134% Analyst Ratings: There are no research firms covering Interphase currently. TheStreet Ratings has a "sell" rating on the stock, which it has maintained since downgrading the stock from "hold" in July 2009. The latest report calls attention to Interphase's "feeble growth in its earnings per share."
6. USA Technologies ( USAT) Company Profile: USA Technologies is a supplier of cashless, remote-management, reporting and energy-management services. Shares of USA Technologies ramped higher in January after the company said revenue in its fiscal second quarter jumped 60% from a year earlier to $6 million, while its net loss narrowed to a penny a share from a loss of 19 cents. Shares pulled back slightly in March after USA Technologies announced it raised nearly $11 million in a private placement of common stock. In April, USA Technologies announced a collaboration with Verizon Wireless for connectivity that enables wireless point-of-sale payments at vending machines via credit and debit cards. Current Share Price: $2.50 (May 27) 2011 Total Return: 142% Analyst Ratings: Northland Securities has an "outperform" rating and $3 price target on USA Technologies. The only other research firm covering the company, Janney Montgomery Scott, rates the stock "neutral" with a price target of $1.25. TheStreet Ratings has a "sell" recommendation on USA Technologies, citing "unimpressive growth in net income and poor profit margins."
4. Dynatronics ( DYNT) Company Profile: Dynatronics makes medicine and aesthetic products used by physical therapists, chiropractors, sports-medicine practitioners, podiatrists and physicians. In March, Dynatronics announced that it signed a contract with FirstChoice Cooperative, the third group-purchasing-organization contract the company signed in two months. In April, the company regained compliance with the Nasdaq's listing requirements, as the stock climbed above $1 a share to satisfy the minimum bid price requirement. Current Share Price: $1.60 (May 27) 2011 Total Return: 154% Analyst Ratings: No research firm currently follows Dynatronics. TheStreet Ratings has a "hold" rating on the stock after upgrading from "sell" on Sept. 30, 2009. The latest report notes the company's "revenue growth, solid stock price performance and largely solid financial position with reasonable debt levels by most measures." However, those strengths are countered by disappointing return on equity.
2. Capital Trust ( CT) Company Profile: Capital Trust is a finance- and investment-management company that specializes in credit-sensitive structured financial products. The company is focused on the commercial real estate industry. The stock spiked in April after Capital Trust announced a debt restructuring deal, which was financed by a new $83 million mezzanine loan provided by an affiliate of Five Mile Capital Partners. Current Share Price: $4.72 (May 27) 2011 Total Return: 204% Analyst Ratings: There are no analysts following Capital Trust. TheStreet Ratings has a "sell" rating on the stock, which it has maintained for two years. The latest report highlights Capital Trust's "feeble growth in its earnings per share, deteriorating net income and weak operating cash flow."