After a rollercoaster ride in equity markets this year, investors are more than willing to put 2010 in the rearview mirror and look ahead to opportunities in 2011. The case has already been made for investors to pile into quality, large-cap stocks, as money managers expect them to thrive after a decade of sluggishness.
Others may find more value in stocks trading under $5 (U.S.), which typically don't receive attention from mutual funds due to their miniscule share prices. Many of these low-priced stocks have proven to be winners, including SMTC Corp. , Wabash National and Callon Petroleum , all of which more than tripled this year.
In January, Jamie Dlugosch of InvestorPlace offered five penny stocks that offered potential rewards in 2010. Some fared incredibly well, while others languished.
■Sirius XM SIRI-Q is up 130% this year
■Denny's DENN-Q has rallied 67%
■MoneyGram International MGI-N has fallen about 10%
■Majesco Entertainment COOL-Q is down 35%
■Oilsands Quest BQI-A is down 64%
For potential winners of the coming year, analyst recommendations are a good opinion source. Stocks trading under $5 typically have no analysts' coverage -- never mind a "buy" rating -- leaving investors to do the homework for themselves. However, a select few boast of favourable coverage from analysts, which can have a strong effect on share-price movements.
The following 10 U.S. stocks trade at less than $5 and have garnered the most "buy" ratings from analysts, which could lead to high returns over the next 12 months.
10. Achillion Pharmaceuticals
Company Profile: Achillion Pharmaceuticals is a biopharmaceutical company that focuses on the discovery, development and commercialization of innovative treatments for infectious diseases.
Share Price: $3.03 (Dec. 17)
2010 Stock Performance: -2.6%
Analyst Consensus: Seven research analysts have a "buy" rating on Achillion shares. Another two analysts suggesting holding onto shares, while no firm has a "sell" rating on the stock.
Bullish Case: Wedbush analyst Katherine Xu in an Oct. 28 research note reiterated an outperform rating on Achilion with a $5 price target. Xu notes Achillion's drug pipeline, which could "position the company well for further advancement or acquisition, if all goes well."
"We believe Achillion's pipeline, while early, is well-differentiated and broad," Xu wrote. "The dataset on the portfolio the company plans to deliver will build towards a significant value inflection in the next two years, in our opinion."
9. General Maritime
Company Profile: General Maritime is a provider of international seaborne crude-oil transportation services.
Share Price: $3.18 (Dec. 17)
2010 Stock Performance: -54%
Analyst Consensus: General Maritime garners seven "buy" ratings from analysts. Another six have a "hold" rating and five more have a "sell" on General Maritime.
Bullish Case: In a Nov. 2 research note, Credit Suisse analyst Gregory Lewis -- who has a buy rating and an $8 price target on General Maritime -- wrote that market expectations of a common equity increase are premature.
"We believe GMR offers a compelling entry point at the current stock price," Lewis wrote. "We expect eventual vessel sales to pave the way for a turnaround in the stock. Should tanker rates surprise significantly to the downside, we could see a scenario where the company could issue a preferred security. We view this as a potential scenario only in a prolonged distressed freight rate environment."
8. Allos Therapeutics
Company Profile: Allos Therapeutics is a biopharmaceutical company focused on developing and commercializing innovative small-molecule drugs for the treatment of cancer. The company's Folotyn (pralatrexate) is designed to treat T-cell lymphoma.
Share Price: $4.35 (Dec. 17)
2010 Stock Performance: -34%
Analyst Consensus: Seven analysts say investors should buy shares of Allos Therapeutics. Three other analysts recommend that investors hold shares. No researcher has a "sell" rating on Allos.
Bullish Case: In a Dec. 13 research note, ThinkEquity analyst Brian Skorney said the firm has a "buy" rating and a $10 price target on Allos, noting several new clinical analyses of Folotyn.
"New data in T-cell malignancies show compelling efficacy compared to potential competitors and provides additional rationale for oncologists to adopt Folotyn as an important therapy for patients," Skorney wrote.
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- SMTC Corp$1.490.00(0.00%)
- Wabash National Corp$13.650.00(0.00%)
- Callon Petroleum Co$14.280.00(0.00%)
- Achillion Pharmaceuticals Inc$9.220.00(0.00%)
- Quantum Corp$0.640.00(0.00%)
- Synovus Financial Corp$32.180.00(0.00%)
- ARIAD Pharmaceuticals Inc$10.600.00(0.00%)
- Sprint Corp$6.120.00(0.00%)
- Citigroup Inc$46.590.00(0.00%)
- Updated August 23 8:18 AM EDT. Delayed by at least 15 minutes.