Stocks Under $10 Weekly Summary
Stocks moved higher for a third straight week on light summer volume. Traders reacted positively the earnings reports from several keys retailers and the economic data largely came in ahead of expectations.
Trading volume could continue to dry up next week, ahead of the Labor Day holiday, but we’ll still have several economic reports to digest. We’ll receive data on new home sales on Monday, following by durable goods’ orders and more housing data on Tuesday. Thursday brings a revision to second-quarter GDP, followed by some regional economic reports.
We did not make any trades in the model portfolio this week, but it’s worth noting that Depomed DEPO and Pacific Sunwear PSUN both posted double-digit percentage gains. We would consider taking some profits in Depomed if the shares move above $15.
As a reminder:
-- A Game Breaker is going to change the landscape of an industry, as Intel (INTC) , Microsoft (MSFT) and Wal-Mart (WMT) did in their sectors. Investors can make big money in these stocks by getting in before the crowd.
-- Inflection-Point stocks have a broken business model that's on the mend but have yet to be recognized by the market. Investors who recognize a turnaround early can pocket strong returns.
-- Stealth Stocks are often names unknown to the general public but can be hugely profitable investments -- especially when they have catalysts to boost their share prices.
Also, Ones are stocks that we would buy at their current quotes, Twos are stocks that we would buy on a pullback, and Threes are names that we would sell into strength.
ONES
Active Power (ACPW:Nasdaq; $2.24; 2,725 shares; 3.18% of the model portfolio; Game Breaker; $4.75 price target): Active Power's flywheel energy technology keeps its customers' mission-critical processes up and running. Its hardware uses half as much space as existing technologies do, but it generates twice as much power. It was a quiet week for the stock, which ticked lower. The company’s core business remains strong and we believe that management can grow sales across the globe.
Atmel (ATML:Nasdaq; $8.65; 900 shares; 4.05%, Inflection Point; $10 price target): The company makes microcontrollers that are used in electronics. The shares added nearly 6% to recent gains this week. Recent acquisitions in the sector have led traders to speculate that more deals could be possible. In the meantime, we believe management can continue to expand margins in the coming quarters.
Ballantyne Strong (BTN:Amex; $3.71; 2,500 shares; 4.83%; Stealth Stock; $6.25 price target): The company distributes digital movie projectors and manufactures screens and lighting equipment for theaters. It was a quiet week for the stock which ticked lower. We’d consider adding to our position on the next market pullback, as Ballantyne is trading at an 18% discount to tangible book value.
Builders FirstSource (BLDR:Nasdaq; $6.76; 1,300 shares; 4.57%; Inflection Point; $10.50 price target): The company distributes materials to homebuilders in the southern U.S. The shares added 7% to recent gains this week, as we received some positive housing reports. We maintain the stock can trade up toward the high-single digits in the coming quarters.
Cott (COT:NYSE; $7.35; 900 shares; 3.44%; Stealth Stock; $10 price target): Cott produces and distributes soft drinks, noncarbonated beverages and bottled water, primarily focusing on private-label items for major retailers. The stock pulled back fractionally this week, but we continue to favor the company for its 3.3% dividend yield. Extreme Networks (EXTR:Nasdaq; $5.33; 1,350 shares; 3.74%; Inflection Point; $8.75 price target): The company makes Ethernet switches and recently doubled its size with the acquisition of Enterasys Networks. The shares added more than 7% to recent gains this week. Even so, we believe that Extreme offers investors growth at a reasonable price.
McDermott (MDR:NYSE; $7.39; 875 shares; 3.36%; Inflection Point; $11.50 price target): This engineering-and-construction firm focuses on building and designing offshore oil and natural gas facilities. It was a quiet week for the stock, which ticked lower. We believe the new management team can continue to turn the business around in the coming quarters.
Pacific Sunwear (PSUN:Nasdaq; $2.20; 3,050 shares; 3.49%; Inflection Point; $4 price target): This specialty retailer operates more than 500 stores in the U.S., selling surf- and skating-style apparel to teens and young adults. The shares rebounded 11% this week, as the retail sector helped to drive the market higher. The company is scheduled to report quarterly numbers on Aug. 28, but management has already preannounced solid results. SandRidge Energy (SD:NYSE; $5.15; 1,325 shares; 3.55%; Inflection Point; $8 price target): The company explores for natural gas and oil in the U.S., primarily onshore. The stock ticked lower this week. On Wednesday, chief operating officer David Lawler announced his intention to leave SandRidge, to accept a position at BP (BP) . However, we believe the company has a strong bench and will be able to find a suitable replacement. In the meantime, we would consider adding to our position if the shares fall below $5.
Standard Pacific (SPF:NYSE; $8.37; 750 shares; 3.27%; Inflection Point; $11 price target): This homebuilder generates the majority of its revenue in California. The shares added more than 5% to recent gains this week. The sector is seeing renewed momentum and we believe the stock can trade up toward the double digits in the coming quarters.
Synovus Financial (SNV:NYSE; $23.95; 264 shares; 3.29%; Inflection Point; $33.25 price target): This Georgia-based bank operates branches throughout the Southeast. The stock gained 3% this week. We continue to believe the company can deliver above-average growth in the coming quarters.
TherapeuticsMD (TXMD:NYSE; $5.37; 1,925 shares; 5.38%; Game Breaker; $9.50 price target): The company is developing hormone-replacement medicines for women. The shares moved nearly 4% higher this week on little news. We believe that TherapeuticsMD has an attractive clinical pipeline that includes several potential catalysts.
TWOS
Depomed (DEPO:Nasdaq; $14.80; 250 shares; 1.93%; Game Breaker; $15.75 price target): The company markets specialty drugs around its oral drug-delivery system, Acuform, which are used to treat Type 2 diabetes as well as post-shingles pain. The stock added more than 16% to recent gains this week, as Depomed won a court case on Tuesday, protecting its Gralise pain medication from generic competition for another 10 years.
Huntington Bancshares (HBAN:Nasdaq; $9.84; 600 shares; 3.07%; Inflection Point; $11 price target): This Ohio-based bank operates more than 600 branches across six states. The shares moved 2% higher this week, along with the broader market. We remain convinced that the company can gain market share from its larger competitors in the coming quarters.
Martha Stewart Living Omnimedia (MSO:NYSE; $4.51; 1,350 shares; 3.17%; Inflection Point; $5.75 price target): The company operates in the home-goods segment, publishing magazines, producing broadcasts and licensing products to retailers. The stock fell 2% this week on little news. We believe that management can continue to unlock shareholder value from Martha Stewart’s core brands in the coming quarters.
ON Semiconductor (ONNN:Nasdaq; $9.47; 700 shares; 3.45%; Stealth Stock; $11 price target): The company makes analog, standard logic and discrete semiconductors for use in data and power management. The shares added nearly 8% to recent gains this week and we would consider booking some profits if the price moves above $10.
Unilife (UNIS:Nasdaq; $2.28; 2,350 shares; 2.79%; Game Beaker; $6.50 price target): This manufacturer of retractable and prefilled syringes offers products with convenience, safety and comfort advantages. It was a quiet week for the stock, which moved fractionally higher. We continue to believe that management will sign new pharmaceutical partnerships in the coming quarters.
Vantage Drilling (VTG:Amex; $1.78; 5,900 shares; 5.46%; Inflection Point; $2.25 price target): This offshore driller contracts its rigs for the exploration of oil and natural gas. The shares ticked lower this week, along with the underlying price of crude oil. But the company’s fleet is already booked for the remainder of the year and we believe the stock can move above $2 in the coming months.
Yamana Gold (AUY:NYSE; $8.38; 1,025 shares; 4.47%; Inflection Point; $12.50 price target): This gold-and-copper exploration company operates seven mines and several ongoing development projects in Brazil, Argentina and Chile. The stock fell 3% this week, along with the spot price of gold. That said, management remains focused on maximizing margins and we believe that the shares can trade back above $10 by the end of the year.
Zix (ZIXI:Nasdaq; $3.85; 2,050 shares; 4.11%; Stealth Stock; $5.75 price target): The company is a leading producer of email-encryption software that enables doctors to automatically send information to pharmacies. The shares gained 4% this week on little news. Zix has a lot of sales momentum and we believe the stock can move back up toward $5 in the coming quarters.
THREES
Kodiak Oil and Gas (KOG:NYSE; $15.54; 300 shares; 2.43%; Inflection Point; $17 price target): The company explores for oil and gas in the Williston Basin and the Green River Basin. The stock bounced back 4% this week. We assert that Kodiak can trade up toward the high teens in the coming months.
Swift Transportation (SWFT:NYSE; $21.35; 125 shares; 1.39%; Inflection Point; $27 price target): This trucking company transports goods throughout the U.S. and Mexico. The shares added 3% this week to recent gains. We believe that management can continue to deliver solid growth in the coming quarters.
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