Five Cheap Stocks Under $15 (BAC, NAK, SD, RIMM, ELN)
By Diane Alter, Contributing Writer, Money Morning
A certain group of equities have been out of favor lately. Beaten down, they have landed into the cheap stocks barrel. Yet some of the richest rewards come from these battered and overlooked stocks. So don't let a low share price deter you.
While it is not recommended that you fill up an entire, or even a major, portion of your portfolio with stocks under $15, the addition of a few carefully selected "cheap stocks" could be worthwhile.
Admittedly the odds of picking the next Apple Inc. (NASDAQ: AAPL) are long, but the right low-priced stocks can be worthy as a trade with the prospect of a huge upside - if timing is right.
The following are five stocks under $15 that have taken a beating and offer the kind of potential that make them worthy of a closer look.
Here's the breakdown... Five Cheap Stocks Worth a Look
Bank of America (NYSE: BAC) was one of the hardest hit victims of the Great Recession and the 2008 financial crisis. The bank took over troubled Merrill Lynch, suffered mortgage-related losses and lost revenue as consumers defaulted on loans, stopped paying credit card bills, and all but halted investing.
Its once-shiny reputation became tarnished, and the stock has languished since. However, things may be improving for BAC.
In late 2011, investment guru Warren Buffett struck a deal with BAC which gave him a lucrative dividend and a stash of long-dated warrants. Reuters reported Buffet declared after his investment that BAC is a "fabulous business." He also acknowledged that "it has a lot of problems from the past that may take years to fix."
To that end, BAC is betting on a new, massive reduction program dubbed the "New BAC," in which it plans to cut some 30,000 jobs and get rid of assets to raise the capital necessary to meet new industry standards in 2013.
Seventeen out of 23 analysts surveyed maintain a hold rating on the stock, with a few "Buys" scattered around, according to Thomson/First Call. The median target price is around $10 with a high of $14 -- which would be a 70% bounce from its current price of $8.19.
Northern Dynasty Mineral Ltd. (NYSE: NAK) engages in the acquisition, exploration and development of mineral properties in the United States. The company's principal properties include the Pebble copper-gold-molybdenum deposits and 650 square miles of direct and indirect interest in mineral claims in southwest Alaska.
Northern Dynasty accounts for 1.77% of the First Trust ISE Global Copper Index Fund ETF (NASDAQ: CU). Forbes noted that the stock entered into oversold territory last Wednesday. It has an RSI reading of 29.0, below the industry average of 41.6.
The stock currently trades around $5.60 a share. The mean target estimate for NAK is $18.85, data from Thompson/First Call reveals. If NAK reaches that target, investors would bank a 236% gain.
SandRidge Energy (NYSE: SD) is an oil and natural gas company with its principal focus on exploration and production. The Oklahoma City, OK-based corporation's shares have fallen as natural gas stores have swelled and natural gas prices have tumbled to decade lows. But several industry analysts are counting on natural gas prices to reverse course, and SandRidge shares could be fueled higher.
SandRidge just closed a deal to acquire Dynamic Offshore Resources, adding to its cache of facilities and operations. It also closed a successful private offering. The median price target is $10 a share, with a low of $6 and a high of $18. It last traded at $7.32. The high-end target equates to a 145% gain.
Research in Motion (NASDAQ: RIMM) has been hurt by competition from Apple's iPhone and smartphones running Google's Android operating system, causing many investors and analysts to hang up on the stock. But Blackberry users, a loyal and steadfast bunch, are still calling for more devices from RIMM.
Bloomberg News reported last week that the struggling mobile communication device maker is in talks with bankers about "strategic options." Shares rose on the news and could ring higher on confirmation that RIMM is in talks with financial advisors about the path of the company.
Talks of a takeover have hovered above RIMM for sometime. It is not always prudent to buy a stock on takeover rumors, but there are other reasons to consider RIMM. The company is launching new gadgets and expanding overseas. Shares are well off their 52-week high of $57.32 and currently trading at $13.19-- right at the median price target. However, the high target is currently a robust $40/share.
Elan Corp. (NYSE: ELN) is a drug and development company currently working with industry giants Pfizer (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ) to create a game-changing treatment for Alzheimer's disease.
Results from pivotal trials are due in the third quarter of this year. Tim Anderson, who covers the pharmaceutical industry for Bernstein Research, told Barron's if the drugs being developed from Elan and its collaborators, and separately from Eli Lily, are a success, "They could become the next Lipitor."
Barron's notes that Elan and Lily's shares offer the biggest payoffs. Elan shares may have a 10% downside if the drug fails, but a 50%-plus upside if it scores.
Elan is trading at $13.43. With a high target price of $20.00, ELN offers a potential upside of 52%.
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