10 Bargain Stocks Under $10

NEW YORK (TheStreet) - US Airways Group (LCC), D.R. Horton (DHI), Micron Technology (MU), Amkor Technology (AMKR), Advantage Oil & Gas (AAV), Delta Air Lines (DAL), Xerox (XRX) and Gran Tierra Energy (GTE) are trading below $10 with an average of 58% of analysts calling for buy ratings and analysts estimating upside potential between 38% to 122%. We expect these stocks to outperform their peers and the broader markets, based on their respective 12-month price targets.

Spanning sectors such as housing, technology, banking, mining, energy, airlines and semiconductors, these stocks are listed in ascending order of upside potential.

10. D.R. Horton ( DHI) is a U.S.-based homebuilder operating in 26 states and 72 metropolitan markets. The company conducts its business through six homebuilding segments and a financial services segment. Home-building operations contribute more than 95% toward aggregate revenue.

For the third quarter ended June 2011, the company reported net income of $28.7 million, including pre-tax charges of $9.9 million. Net income for the second quarter of fiscal 2011 was $27.8 million. Home-building revenue was $975.4 million in the June quarter of 2011 compared to $733.1 million in the second quarter of fiscal 2011.

Housing affordability remains high with favorable interest rates. The company intends to focus on restricting construction costs and inventory levels and maintaining a strong balance sheet and liquidity. "Sequentially, our homebuilding revenues grew $242 million, home sales gross margins improved by 30 basis points and homebuilding SG&A decreased by approximately $10 million. Additionally, our net sales orders in the June quarter were about flat with the March quarter, reflecting a traditional seasonal demand pattern," said Donald R. Horton, the company's chairman. Among analysts polled by Bloomberg, 52% have a buy rating on the stock. The consensus estimate by analysts finds 38% upside potential for the stocks. It is trading at 19 times its estimated 2012 earnings.

9. Xerox ( XRX) provides a portfolio of services in document technology and software, and a diverse range of business process and information technology outsourcing support. The company operates in three segments: technology, services, and others.

Total revenue for the second quarter of 2011 increased 2% to $5.6 billion. Relative to other segments, the services segment contribution was higher at 48% of total sales, vs. 46% in the same quarter prior year. The technology segment contributed about 45% of sales.

Operating margin in the second quarter of 2011 stood at 10.4%, expanding 30 basis points from the same quarter last year. Net income stood at $327 million vis-à-vis $236 million in the same quarter of 2010. The scaling up of the high-margin service segment and operational enhancements boosted profitability. The stock is trading at 6.9 times its estimated 2011 earnings and a consensus of analysts expect 54% upside from the current levels. Of the analysts polled, 50% rate it a buy.

8. Amkor Technology ( AMKR) is a leading provider of semiconductor assembly and test services.

Net sales for the second quarter of 2011 stood at $688 million, up 3% sequentially. Gross margin was flat at 19%. Net income was $14 million, vs. $25 million in the prior quarter. Net income includes $16 million related to debt refinancing charges.

For the third-quarter, Ken Joyce, Amkor's CEO, said, "Strong demand for communications and the seasonal increase in gaming is expected to drive sequential revenue growth of 5% to 12%. To continue driving technology leadership and innovation and meet the capacity requirements of our leading customers, we are currently planning capital additions of approximately $225 million for the second half of 2011."

Gross margin for the third quarter is estimated between 17% and 20%. On average, analysts expect the stock to gain 58% over the next one year. Among analysts polled, 50% have buy rating. Shares are trading at 8.7 times estimated 2011 earnings.

7. Bank of America ( BAC) offers a range of services including investment, asset management and financial and risk management products and services.

Provisioning for credit losses in the second quarter of 2011 declined 60% compared to the corresponding quarter in 2010. Net charge-offs fell for the fifth consecutive quarter, indicating enhanced credit quality across the consumer and commercial portfolios and underwriting changes implemented earlier.

Bank of America extended credit worth $147 billion, including $84 billion in commercial non-real estate loans, $11 billion in commercial real estate loans, and the rest to consumers and small businesses.

Regulatory capital ratios were higher than the earlier guidance with the Tier-1 common equity ratio at 8.23% at the end of the quarter and Tier-1 common ratio above 8%. The stock trades at 6.4 times its estimated 2011 earnings with a consensus of analysts projecting an upside of 66% over the next the next year.

6. Delta Air Lines ( DAL) is a U.S.-based airline engaged in providing passenger and cargo services worldwide.

Delta's revenue during the June quarter grew $1 billion following a 1% increase in passenger traffic. Passenger revenue, forming about 88% of operating revenue, grew 13%, while cargo was the fastest growing segment during the quarter, at 25%.

Fuel costs were a major dampener during the quarter, increasing 39% year-over-year to $1 billion. While the company's liquidity position is strong, it holds $3.8 million in cash and short-term investments, and $1.8 billion in credit facilities. Operating cash flow during the June quarter was $1 billion.

Capacity reductions this December and rationalization of non-fuel costs would aid margins in the range of 7% to 9% during the third quarter of 2011. Hank Halter, Delta's chief financial officer, said, "With strong cash generation despite fuel price pressures, we are making solid progress on our debt reduction goals." He added, "In 18 months, we have reduced our net debt by over $3 billion, while still making significant investments in our product, fleet and facilities."

Analysts' consensus estimate pegs average gains for the stock at 67% over the next one year with buy 87% rating. The stock is trading at 7.2 times its estimated 2011 earnings.

5. Hecla Mining Company ( HL) is the largest producer of silver in the U.S. with two mining properties. It has total four exploration properties in the U.S. and Mexico.

Revenue for the second quarter of 2011 was $118 million, up 33% from the same period last year, benefiting from stable production and higher silver prices.

The company's margins improved during the quarter. Gross profit margin rose to 57.5%, vs. 43% in the corresponding quarter prior year. Gross profit increased from $38 million during the second quarter of 2010 to $68 million during the quarter under review. Net income margin was higher at 28.1% compared to 19.3% in the equivalent quarter 2010.

Hecla's cash position was $377 million, up from $197 million during the same period in 2010. Capital expenditure totaled $26.4 million for the quarter. Analysts expect the stock to gain around 77% over the next one year. It is trading at 9.9 times its estimated 2011 earnings with 38% of analysts giving it a buy rating.

4. Micron Technology ( MU) provides semiconductor and memory solutions, including DRAM and Flash memory.

For the third quarter of fiscal 2011, the company repaid $327 million debt and had cash and short-term investments of $2.4 billion. Micron reported operating cash of $589 million and capital expenditure at $534 million for the period.

Consolidated gross margin improved sequentially to 22% from 19% on lower manufacturing costs. Net income stood at $75 million on total revenue of $2.1 billion.

During the quarter, the company sold its wafer fabrication facility in Japan to Tower Semiconductor. Analysts polled by Bloomberg project 78% upside over the next one year. The stock is trading at 8.7 times its estimated 2012 earnings and 57% of analysts have a buy rating on it.

3. Gran Tierra Energy ( GTE) is a Canada-based upstream energy company with oil and gas properties in Colombia, Argentina and Brazil.

Revenue and other income for the second quarter of 2011 increased 93% to $162 million. Net income nearly doubled to $31.6 million during the quarter. The company reported production of 18,141 barrels of oil equivalent per day, increasing 36% due to additional production from recent discoveries and existing fields. Following the acquisition of Petrolifera, management expects 2011 production to average between 17,500 and 19,000 boe per day.

Higher production ensured healthy operating cash flow of $64 million over $50 million reported in the same quarter prior year. Cash and cash equivalents were $211.4 million. Management estimates 2011 capital expenditure of $357 million with $190 million allocated to drilling, $87 million for seismic acquisition and $79 million for infrastructure.

Analysts surveyed by Bloomberg expect the stock to gain 87% over the next one year. Of the analysts covering the stock, 88% have a buy rating.

2. Advantage Oil & Gas ( AAV) produces oil and natural gas at its Glacier property in Alberta, Canada.

Increased production and lower costs during the second quarter ensured robust cash flows from operations at $36.6 million, including hedging gains of $6.2 million. The company pegs capital expenditure at $216 million over the next 12 months, with $200 million likely to be invested in Glacier.

The company reported second-quarter 2011 production of 23,719 boe per day, increasing 22% following the completion of the phase III development program at Glacier. Management expects phase IV development work underway at Glacier to drive production growth of 24% over the next year. Operating expenses for the quarter declined 17%.

The company has reduced its overall debt by 64% to $103 million during the past six months. Analysts surveyed by Bloomberg expect the stock to have 99% upside over the next one year. Of analysts covering the stock, 67% recommend a buy on it.

1. US Airways Group ( LCC) operates more than 3,200 passenger flights per day serving 80 million passengers each year. The company is part of the Star Alliance Network and offers scheduled services in the U.S., Europe, the Middle East and South America.

Total revenue during the second quarter of 2011 was $3.5 billion, up 10.5% from the same quarter prior year and total revenue per available seat mile rose 7% from the earlier year to 15.36 cents. The significant improvement in overall demand coupled with higher passenger yield boosted its top-line.

Net income stood at $106 million for the second quarter 2011. Doug Parker, US Airways Group's CEO, said in a press statement, "We are pleased to report a profit for the second quarter of 2011 -- particularly in spite of a 47% year-over-year increase in fuel price. Overall demand for our services remained strong during the quarter with revenues up more than 10%, while our mainline unit cost excluding special items, fuel and profit sharing increased only one percent." Analysts surveyed by Bloomberg foresee 122% upside for the stock over the next year. Of analysts polled, 53% have a buy rating.

>>To see these stocks in action, visit the 10 Bargain Stocks Under $10 portfolio on Stockpickr.

More from Opinion

Throwback Thursday: Intel Edition

Throwback Thursday: Intel Edition

Intel's Next CEO Should Try Harder to Protect Its Flanks Against AMD and Others

Intel's Next CEO Should Try Harder to Protect Its Flanks Against AMD and Others

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

Wednesday Wrap-Up: GE and Facebook

Wednesday Wrap-Up: GE and Facebook

PayPal Strikes Again, Facebook, and AT&T -- 3 Tech Stories You Must Know

PayPal Strikes Again, Facebook, and AT&T -- 3 Tech Stories You Must Know