View Full Version : The 10 Highest-Rated Stocks Under $10

12-05-2005, 08:02 PM
For each of the high-rated companies trading below $10 a share there is a success story to be told. For investors, though, it's more important to know how well these businesses are growing than what exactly they do.

One company works in the arcane parts of the microchip manufacturing process. Another provides specialized document services to architects and engineers. And there's one firm whose equipment helps computer systems connect with each other.

Investors are smart to focus more on how the companies are growing their sales and profits. Seven of the 10 companies on this list have three-year sales growth rates of at least 17%. Some are as high as 58% or 136%. The three-year earnings per share growth rates of some companies top 25%. Some have lower growth rates of 15% or even less, although some of these are early in their development.

The key point is that strong growth is a principal reason these companies can rank among the top-rated stocks.

To compile this list, IBD searched for the stocks priced under $10 that have the highest IBD performance ratings. Specifically, the list shows stocks with the highest Composite Ratings, which combine the five IBD Ratings into a comprehensive figure. Secondarily, the stocks were sorted by earnings growth (measured by IBD's Earnings Per Share Rating).

The results, compiled using Custom Screen Wizard at investors.com, are from Wednesday, Nov. 30.

But bear in mind that historically, low-priced stocks have gone on to higher-priced ones. Research by IBD found the most successful stocks are typically priced over $15 a share when they begin their major advances.

Institutional investors normally avoid cheap stocks because they lack the liquidity major investors look for. Without the huge buying power of mutual funds, insurance firms, pension funds and other major investors, it's pretty hard for a stock to make a meaningful, sustained advance. Often, spikes in low-priced stocks are short-lived.