Wednesday, September 24, 2008

5 Stocks Under a Buck

The troubled economy has caused many problems in several different ways. One positive result of this is that stock prices have decreased sharply. This is bad if you owned stock in one of these companies. But it creates an opportunity to cash in and buy up some of these bargain stocks. Rick Aristotle Munarriz writes on The Motley Fool about 5 stocks which are under a buck currently and might be a steal at the price and have potential to swing back up allowing you to cash in big. (Read Story)

The Motley Fool has a great reputation for providing sound advice. I agree with all of their recommendations except for Vonage. When Vonage announced their IPO I was a customer of theirs and was offered a chance to invest. The Motley Fool saved me a lot of money because they recommended against the buy. The stock opened at $17 a share at the IPO and has dropped ever since. The competition for Voip services has greatly increased with the phone and cable companies offering bundled services for a cheap price. Also, many people are dropping home phone service all together and just use their cell phones. I don't think Vonage will be able to survive the battle with their debt burden.

I do agree with their recommendation of Sirius XM Radio. I have been buying this stock off and on ever since they announced the merger. It was around $3 when I started buying and now is under a buck. The merger was held up by regulators for a long time. Now that they are one company they can quit fighting each other and combine their efforts. The cost savings and continued subscriber growth will allow them to start making a profit eventually.

I am also intrigued by their look at Rite Aid. I think they could be bought out by one of the other chains. Whether that will result in a benefit to stock holders is questionable. Citadel Broadcasting and Six Flags are also potential bargains.

Just do the simple math. If you buy 1000 shares at $1 that equals a $1000 investment. If the stock goes up to $5 a share your value is now $5000, or $10 a share is now $10,000. To get the same return from owning a stock like Google would take a long time. Happy bargain hunting.

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