Profits are ultimately one of the drivers of stock prices. This week, we focused on earnings when searching for cheap stocks. We looked for companies that reported profits over the past twelve month period and are expected to report a profit in the current year.
We combined this requirement with a low price, requiring the stock to be trading under $5.
Many individual investors understand that low priced stocks could be appealing for two reasons. One reason is that the low price means they have little down side risk in dollar terms. The second reason is that low priced stocks are generally the ones that deliver the largest short term gains.
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One study looked at how low priced, or cheap, stocks performed relative to more expensive stocks. The study found that cheap stocks delivered more than six times the average return of the more expensive stocks in a typical quarter.
That’s why we limited our search for potential bargains by focusing on stocks priced at less than $5 per share.
Finally, we looked for stocks near new 52-week highs, indicating the potential for a strong breakout.
One way to find stocks meeting these requirements is with the free stock screening tool available at FinViz.com. At this site, you could screen for a variety of fundamental factors, high levels of institutional ownership and bullish institutional transactions. An example is shown below.
Seven Stocks Meet Our Strict Requirements
Remember, there is no guarantee any stock will increase in value. Also, it is important to remember when we search for stocks using quantitative measures, our goal is to identify stocks that meet those criteria. The screens we develop could be used as the cornerstone of long term investment strategies but any individual stock in the list could be a winner or loser.
Ceragon Networks Ltd. (Nasdaq: CRNT)
CRNT provides wireless backhaul solutions that enable cellular operators and other wireless service providers to deliver voice and data services worldwide. Its wireless backhaul solutions use microwave radio technology to transfer telecommunication traffic between base stations, small sells, and the core of the service provider’s network.
The company also provides wireless fronthaul solutions that use microwave technology for communication between LTE/LTE-advanced base band digital unit stations and remote radio heads.
In addition, it offers IP-20 Platform solutions for various short-haul and long-haul applications, including IP-20N/IP-20A, IP-20GX, IP-20F, IP-20G, IP-20C, IP-20C-HP, IP-20S, IP-20E, and IP-20V.
CRNT provides its services to smart-phone applications, such as Internet browsing, social networking, image sharing, music, and video applications; oil and gas companies; public safety organizations; business and public institutions; broadcasters; energy utilities; and private communications networks.
Denbury Resources Inc. (NYSE: DNR)
DNR operates as an independent oil and natural gas company in the United States. It holds interests in various oil and natural gas properties located in Mississippi, Texas, Louisiana, and Alabama in the Gulf Coast region; and in Montana, North Dakota, and Wyoming in the Rocky Mountain region.
As of December 31, 2017, the most recently reported data shows the company had 259.7 million barrels of oil equivalent of estimated proved oil and natural gas reserves.
Israel Chemicals Ltd. (NYSE: ICL)
ICL operates as a specialty minerals company worldwide. The company operates through two segments, Essential Minerals and Specialty Solutions. The company extracts potash from the Dead Sea; mines and produces potash, salt, and Polysulphate; and produces, markets, and sells pure magnesium and magnesium alloys, as well as produces dry carnallite and related by-products, including chlorine and sylvinite.
It also mines and processes phosphate rock; produces sulphuric acid, fertilizer-grade phosphoric acid, and phosphate fertilizers; manufactures phosphate-based food additives for livestock; and produces water soluble specialty fertilizers, liquid and soluble fertilizers, and controlled-release fertilizers.
This stock can be volatile as the chart below shows.
Lee Enterprises, Incorporated (NYSE: LEE)
LEE provides local news and information, and advertising services primarily in the Midwest, Mountain West, and West regions of the United States.
It publishes 47 daily newspapers with 0.8 million circulation units, as well as Sunday newspapers with 1.2 million circulation units; and 300 weekly newspapers and classified and niche publications in 22 states with print and related digital operations.
The company also offers retail, classified, national, and digital advertising services, as well as custom digital marketing services.
This is a thinly traded stock and if you trade stocks with low liquidity, consider using limit orders.
Superior Drilling Products, Inc. (NYSE: SDPI)
SPDI is a drilling and completion tool technology company, innovates, designs, engineers, manufactures, sells, rents, and repairs drilling and completion tools in the United States and internationally.
It is involved in the design and manufacture of new drill bit and horizontal drill string enhancement tools; and the refurbishment of polycrystalline diamond compact drill bits for the oil, natural gas, and mining service industries.
The company’s horizontal drilling tools include Drill-N-Ream, a dual-section wellbore conditioning tool; Strider, a drill string oscillation system; V-Stream, an advanced conditioning system; and dedicated reamer stingers to enhance dedicated reamer operations. It serves companies operating in the exploration and production of oil and natural gas.
This stock price has pulled back as the price of oil declined recently.
ServiceSource International, Inc. (Nasdaq: SREV)
SREV provides recurring revenue management, maintenance, support, and subscription for technology and technology-enabled healthcare and life sciences companies.
The company’s solutions include outsourced sales operations, customer onboarding, customer success management, cross-sell and upsell, warranty conversion, account-based marketing, and channel recruitment and enablement, as well as renewals management, including the sale of maintenance and support service contracts for the products used by its clients’ end-users.
This stock is also pulling back and appears to be near support.
Zynga Inc. (Nasdaq: ZNGA)
ZNGA develops, markets, and operates social games as live services in the United States and internationally. The company’s games are played on mobile platforms, such as iOS and Android operating systems, as well as on social networking sites, including Facebook.
It also provides advertising services comprising mobile and display ads, engagement ads and offers, and branded virtual goods and sponsorships to advertising agencies and brokers; and software licensing and maintenance services related to NaturalMotion technology, as well as licenses its own brands.
ZNGA has been pushing higher, a sign of investor bullishness.
Any of these stocks could be a potential winner and all worth further research. If you are uncomfortable doing your own research, there is a TradingTips.com trading service, Triple-Digit Returns, which uses a very specific system for choosing the right stocks to trade.
Triple-Digit Returns looks for companies that are misunderstood and potentially undervalued, lost darlings, mergers or spinoffs that could benefit share holders, or companies that show signs of strong interest by insiders who know the company best and see value.
This service provides a recommendation once a week. It could be used for trading or learning how to analyze stocks since each recommendation includes a detailed explanation of the company. To learn more, you can click here.