Best-Performing Stocks Under $5 in 2011

BOSTON (TheStreet) -- Small-cap stocks are mired in a bear market, but select companies trading under $5, such as TeamStaff (TSTF) and Majesco Entertainment (COOL), have more than doubled this year, easily surpassing gains by their large-cap rivals.

After a two-year bull market that followed the 2008 financial crisis, small-caps have been brutalized. The Russell 2000 index, a measure of share performance for smaller companies, is down more than 20% since the end of April. Investors have become more risk-averse and have sought safety in dividend-paying, large-cap stocks and U.S. Treasury bonds.

The flight to safety has been fierce, especially as the debt crisis in Europe worsens. Among equities, the Russell 2000 index has dropped 14% this year, while the S&P 500, which holds the companies with the largest market values, is down half that. At the same time, the yield on the 10-year U.S. Treasury has dwindled from 3.3% to less than 2%. Gold has also been a hideout for investors; the precious metal has jumped from about $1,400 in price at the end of 2010 to above $1,900 an ounce earlier this month.

Still, many inexpensive stocks have generated huge returns for lucky stock pickers. In September, as the S&P 500 has wilted 4% on worries Greece will default and the entire Eurozone will crumble, stocks like transportation logistics company Clark Holdings ( GLA) and medical-device maker Mela Sciences ( MELA) have more than doubled.

Given the volatility in the equity market, investors must be careful in searching out small-cap stocks worth the risk, as fortunes can be lost with one bad trade. Trucking giant YRC Worldwide ( YRCW) saw its shares plunge by 92% in September alone, while Virginia-based Commonwealth Bankshares ( CWBS) dropped more than 60% this month.

Some small-cap winners have doubled and, in some cases, quadrupled this year. The following pages detail the best-performing stocks under $5 this year on the New York Stock Exchange, Nasdaq and NYSE Amex, ranked by total return through the first three quarters of 2011.


10. Sify Technologies Ltd. ( SIFY)

Company Profile: Based in India, Sify Technologies is an Internet service provider. Sify also provides e-commerce services to companies in India.

Shares of Sify Technologies spiked higher in April to a high of $8.54 as a high-growth play for investors looking for exposure to India. The company this year has announced partnerships and plans for expansion, and the stock has rallied like fellow India Internet company Rediff.com ( REDF). Both Sify and Rediff.com have fallen steadily since the beginning of May along with the broader market.

Current Share Price: $4.48 (Sept. 28)

2011 Total Return: 100.9%

Analyst Ratings: No research analyst has coverage of Sify. TheStreet Ratings also does not have research on Sify.

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9. BioLase Technology ( BLTI)

Company Profile: BioLase Technology is a medical-technology company that makes lasers, related products and services focused on technologies for improved applications and procedures in dentistry and medicine.

Shares of BioLase hit a 52-week high of $6.78 in April, with the rally being sparked in January after the company issued annual revenue guidance for 2011 in the range of $55 million to $60 million, representing growth of 120% to 140% over 2010. Since then, however, shares have steadily retreated back below $4.

Current Share Price: $3.42 (Sept. 28)

2011 Total Return: 103.1%

Analyst Ratings: BioLase is rated "buy" by three research firms, which have an average price target of $6.93, according to Bloomberg. One other firm has a "sell" rating on the stock but no price target.

TheStreet Ratings has a "sell" ranking on BioLase, saying the company's biggest weakness has been "feeble growth in its earnings per share."


8. Saratoga Resources ( SARA)

Company Profile: Saratoga Resources is an independent exploration and production company, with acreage along the transitional coastline of Louisiana.

Last year, Saratoga Resources emerged from bankruptcy protection with debt obligations restructured to reduce the interest burden on the company. The company was successful in preserving 100% of the interests of shareholders. It paid creditors 100 cents on the dollar and extended the maturity on then existing credit facilities to April 2012.

The stock, which was added to the NYSE Amex in July, after Saratoga refinanced prior debt facilities, reduced total debt, raised over $35 million in new equity, and increased cash by 400%.

Current Share Price: $4.60 (Sept. 28)

2011 Total Return: 104.4%

Analyst Ratings: No research analyst has coverage of Saratoga Resources. TheStreet Ratings also does not follow the stock.

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7. ParkerVision ( PRKR)

Company Profile: ParkerVision develops RF technologies that have low power consumption for 2G, 3G and 4G wireless communications.

Shares of ParkerVision surged in July after the company announced it is suing mobile chipmaker Qualcomm ( QCOM) for patent infringement. The complaint accuses Qualcomm of "objective recklessness in its infringing activity and seeks an award of exemplary damages, attorneys' fees, and costs in bringing this action."

Current Share Price: 92 cents (Sept. 28)

2011 Total Return: 104.8%

Analyst Ratings: No research analyst follows ParkerVision.

TheStreet Ratings gives ParkerVision a "sell" based on "generally disappointing historical performance in the stock itself and poor profit margins."


6. Authentidate Holding ( ADAT)

Company Profile: Authentidate provides software applications and Web-based services for businesses.

The surge in Authentidate's stock started in early April after the company completed the sale of its wholly owned subsidiary, Authentidate International AG, to Switzerland's Exceet Group AG. The transaction yielded net cash proceeds of $1.3 million. During the second half of April, the Department of Veterans Affairs, Ameri-Quipt and Superior Oxygen & Medical Equipment selected Authentidate's services.

Current Share Price: 93 cents (Sept. 28)

2011 Total Return: 109%

Analyst Ratings: Sidoti & Co. is the lone firm with research coverage on Authentidate, rating the stock "neutral" with no price target.

TheStreet Ratings has a "sell" rating on the stock. The latest report on Authentidate says one of the most important negative areas for the company is the "overall disappointing return on equity."

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5. Hansen Medical ( HNSN)

Company Profile: Hansen Medical develops medical robotics designed for accurate positioning, manipulation and control of catheters and catheter-based technologies.

Shares of Hansen Medical jumped to a 52-week high of $5.28 in July, but the rally began in early February after Philips Electronics purchased the rights to develop and market Hansen Medical's Fiber Optic Shape Sensing and Localization, or FOSSL, technology for an upfront payment of $29 million. Hansen Medical is also eligible for $78 million in future payments.

Current Share Price: $3.49 (Sept. 28)

2011 Total Return: 129.5%

Analyst Ratings: JPMorgan and Lazard Capital analysts rate Hansen Medical a "neutral," while Piper Jaffray and Ladenburg Thalmann analysts say the stock is a "buy." The average price target of $4.75 represents potential upside of 36%.

TheStreet Ratings rates Hansen Medical a "sell," calling special attention to the company's weak operating cash flow.


4. 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: $4.68 (Sept. 28)

2011 Total Return: 162.2%

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 says Interphase's primary weakness is "feeble growth in its earnings per share."

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3. Majesco Entertainment ( COOL)

Company Profile: Majesco Entertainment makes video games mainly for the family-oriented, mass-market consumer.

Majesco's run this year started in January when the company announced it had shipped more than 500,000 copies of its Zumba Fitness video game for the Wii, Xbox 360 and PlayStation 3. Later that month, the company announced it regained compliance with the Nasdaq's minimum bid price requirement for continued listing.

In early March, shares of Majesco climbed higher after the company posted better-than-expected fiscal first-quarter financial results, with revenue jumping to $48.5 million from $29.2 million in the same period a year earlier. In June, Majesco upped its full-year revenue outlook as it expects to ship 17 new games this year across platforms like the Xbox Kinect, Facebook, Nintendo's 3DS and Apple's iPhone.

Current Share Price: $2.21 (Sept. 28)

2011 Total Return: 187%

Analyst Ratings: Majesco garners two "buy" ratings from Needham & Co. and Sidoti & Co. Majesco also receives a "neutral" rating from Wedbush. Needham analysts have a $5 price target on the stock while Wedbush has a $4 target.

TheStreet Ratings has a "hold" recommendation on Majesco Entertainment. The research report says robust revenue growth, a largely solid financial position with reasonable debt levels and return on equity are strengths that are countered by the company's weak profit margins.


2. Acceler8 Technology ( AXK)

Company Profile: Acceler8 Technology develops materials and instrumentation for applications in medical instrumentation, basic research, drug discovery and bio-detection.

The stock surged in the absence of any headlines in January, prompting an inquiry from the NYSE for the unusual volume activity. Acceler8 shares again spiked in February after the company said an evaluation agreement with Novartis ( NVS) was extended to June 30. Novartis will pay the company a monthly fee for an exclusive-rights extension.

Current Share Price: $3.05 (Sept. 28)

2011 Total Return: 203%

Analyst Ratings: No Wall Street firm covers Acceler8 Technology.

TheStreet Ratings has a "hold" rating on Acceler8's stock, arguing that the company's "robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity" are counterbalanced by the company's poor profit margins.

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1. TeamStaff ( TSTF)

Company Profile: TeamStaff is a staffing provider specializing in health-care, logistical, information-technology and office administration personnel.

Shares of TeamStaff initially popped in May after the company was chosen as the single source for integrated medical support for the Department of Veterans Affairs' Consolidated Mail Outpatient Pharmacy program, an award that carries a total maximum value of $140 million. The company has also been awarded other contracts, including the Navy SeaPort-e "prime" contract in July, which allows TeamStaff access to bid on $5.3 billion of services via task orders issued under the SeaPort-e program.

Current Share Price: $1.69 (Sept. 28)

2011 Total Return: 214.4%

Analyst Ratings: No Wall Street research analysts follow TeamStaff.

TheStreet Ratings has a "sell" rating on TeamStaff, noting the company's "disappointing return on equity, weak operating cash flow and poor profit margins."

>>To see these stocks in action, visit the Best-Performing Stocks Under $5 in 2011 portfolio on Stockpickr.

-- Written by Robert Holmes in Boston.

>To contact the writer of this article, click here: Robert Holmes.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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