July brought new highs to the stock market, even if the week of July 29 was rather mixed. Many investors are wondering what to do, and they are now looking for new ideas to make money ahead. One theme that keeps coming up is that investors want upside, and the stocks with either low market caps or the stocks trading under $10 often bring that opportunity.
24/7 Wall St. reviews dozens of analyst research reports each morning. This ends up being hundreds of analyst reports each week, and we are trying to find new investing and trading ideas. When it comes to stocks that analysts want you to buy, the speculative stock category can come with far greater upside than Dow and S&P 500 stocks. The safer stocks will come with upside targets in the range of 8% to 15% at this stage of the bull market, but the projected upside in speculative companies is often more than 25%, 50% or even 100%.
It is very important not to believe that every upside target will come to pass. Some serious issues can get in the way, and analysts often get their views entirely wrong. Sometimes outside forces or unexpected events wreck a company. And sometimes management just falls short on its ability to deliver.
24/7 Wall St. warns its readers over and over that there is no free lunch when it comes to investing. That is true for stocks, bonds, commodities and just about every other asset class. It may not seem fair that you can make projections that come true only to find out that the market refuses to value it with the same upside. This is the unfortunate possibility in investing. Sometimes companies even implode and disappear.
Again, readers need to understand that low-priced and small-cap stocks generally come with big risks, despite an analyst saying that there is huge potential upside.
The following are stocks with big upside in the under-$10 segment from the week of July 29.
On Friday, InvenSense Inc. (NYSE: INVN) closed down 2.6% at $6.78, largely ignoring a big analyst upside call. Northland Capital raised InvenSense’s rating to Outperform from Market Perform. It also assigned a $10 price target, which would imply upside ahead of more than 47%. The company has a $626 million market cap and a 52-week trading range of $5.42 to $13.94. Note that the consensus analyst target is down at $7.50.
InvenSense is into sensor systems on a chip and offers accelerometers, gyroscopes and microphones for the mobile, wearable, smart home, gaming, industrial and automotive market segments. Any of those could be big ahead (and there is that chip consolidation wave taking place).
Groupon Inc. (NASDAQ: GRPN) proved that it can turn around under the right circumstances. Its earnings created a jump of 28% to $4.87 as short sellers scrambled for cover. Friday’s close of $4.82 was down only 1%. Deutsche Bank has a Buy rating and raised its target to $6. FBR Capital still has an Underperform rating but raised its target to $4 from $3, and Wedbush has a Neutral rating but raised its target to $4.50 from $4.00. Another firm, called Ascendiant Capital Markets, has a Buy rating and a $6 price target.
Despite seeing its rating raised to Buy from Hold by HSBC, Yamana Gold Inc. (NYSE: AUY) traded down nearly 2% at $5.33 on Monday. Then came earnings mid-week, and HSBC’s target had been raised to $7.20 from $5.00. Yamana closed at $5.71 on Friday, in a 52-week range of $1.38 to $5.99, and with a consensus price target of $5.69.
Is there more gold in them thar hills? A firm called GMP Securities in Canada also maintained its Buy rating and the C$9.00 price target implied 17% upside when converted into U.S. dollars.
Ballard Power Systems
FBR Capital Markets raised Ballard Power Systems Inc. (NASDAQ: BLDP) to Outperform from Market Perform on July 28. Its price target was doubled to $3 and compared with a close of $2.04 before the call. A drop of 4% took Ballard shares back to $1.93 by Friday’s close. The stock has a 52-week range of $1.07 to $2.12.
This company has been around forever and has remained a low-priced stock for the same time despite a $300 million market cap. Ballard Power’s CEO will present data on the company at the Jefferies Industrials Conference on August 11.
Shares of Brightcove Inc. (NASDAQ: BCOV) were trading at $9.70 when its Buy rating was reiterated at Dougherty on July 29. They rose almost 8% to $10.47 on Friday after earnings, so it will take a pullback before this is officially in the sub-$10 stock club again. Dougherty raised Brightcove’s price target to $13.00 from $10.50, implying upside of 24%. It actually hit a 52-week high of $11.56 at one point, and the consensus price target is $13.40.
On July 28, Needham raised AXT Inc. (NASDAQ: AXTI) to Buy from Hold. The price target was set at $5.50, versus a $3.66 prior closing price. Friday’s close of $3.75 still leaves an implied return of almost 47%, if Needham’s assumptions come true. The stock has a 52-week range of $1.90 to $4.01, and the consensus analyst target is $4.95. Just keep in mind that this maker of compound and single element semiconductor substrates has a mere $119 million market cap.
Needham not only reiterated a Buy rating for AudioCodes Ltd. (NASDAQ: AUDC) on July 27, and the firm also raised its price target to $5.50 from $5.00. The stock closed out the week at $4.11 a share, and the company has a mere $149 million market cap.
If you are tired of stocks at all-time highs and bond yields close to all-time lows, here are 10 alternative investing strategies outside of stocks and bonds.