5 Stocks Under $10

The market's been rallying since mid-March, and low-priced stocks have been some of the torrid run's biggest beneficiaries. I have been singling out attractive opportunities since my original "5 Stocks Under $10" eight years ago. The past few months have been exciting times in this space.

Let's go over the five picks from March to prove my point.

The average gain of 192% in just eight months is remarkable. Sirius XM Radio (Nasdaq: SIRI) and Ford (NYSE: F) were on the brink of bank of bankruptcy before battling back, and have gone to more than triple.

The next few months are unlikely to be as rewarding. Stocks trading in the single digits are risky, and bound to be more volatile than the general market. Low-priced stocks are still a niche worth exploring, but I'm certainly not holding out for another 192% average return over the next eight months.

Let's go over this month's picks.

Infinera (Nasdaq: INFN) -- $7.80
Life's been tough on companies that are at the mercy of telecommunications, but Infinera is starting to turn the corner. The specialist in photonic integrated circuits may have posted a modest loss in its latest quarter, but revenue still grew on a year-over-year basis and surged big time sequentially.

Analysts see revenue continuing to grow next year, though a return to profitability is unlikely this year or next. Then again, by the time that Infinera is booming and in the black, it also won't be trading in the single digits. Its cash-rich balance sheet will keep further stock losses in check, as long as the company continues to improve financially.

Southwest Airlines -- $9.16
Airlines have historically been crummy investments, but Southwest isn't some deficit-riddled legacy carrier. Southwest has thrived as a low-cost player. If you've seen its recent "bags fly free" television ads, you know that the popular airline hasn't had to resort to nickel-and-diming its passengers with additional fees.

Southwest makes the cut because it managed to increase its passenger miles last month, despite flying a lot fewer flights than it did a year ago. The end result of tactfully scaling back is that its jets flew at a 79.2% load factor last month, relative to just being 70.4% full a year earlier.

The carrier did post a small loss in the first quarter, but it flew to profits in the June and September quarters and has been historically profitable. It's a good place to be.

Crocs (Nasdaq: CROX) -- $5.64
It's easy to laugh at Crocs as a passing fad. The funky shoemaker's world certainly appears to have come undone over the past two years. However, there are a few things that stand out from the company's quarterly report earlier this month.

• Revenue actually increased during the third quarter.
• Crocs surprised analysts with a juicy profit for the period.
• The bread-and-butter wholesale channel is slipping, but retail and Internet sales are booming.
• Revenue is growing so well in Asia that it is catching up to dwindling sales in North and South America.

I'm not naive. I realize that the top-line growth was solely the result of the planned sale of $11.5 million in impaired footwear. Its guidance for the current quarter also calls for a significant sequential dip and a return to red ink.

However, just as tobacco and David Hasselhoff have unearthed growth prospects overseas as their domestic popularity fades, I think cynical stateside investors aren't giving Crocs enough credit as a financially feasible company playing in a global playground.

Knoll (NYSE: KNL) -- $9.34
I won't sugarcoat the office furniture company's latest quarter. Revenue and net income took 36% and 76% hits, respectively. Knoll's backlog fell by a problematic 40%, reminding investors that things aren't going to get any better in the near term.

However, what else would you expect from a company that makes high-end ergonomic work chairs and functional workplace furniture? Until the economy turns, struggling corporations aren't going to be flooding Knoll with orders. If anything, companies that have gone through waves of layoffs probably have a surplus of work chairs in storage.

Knoll still makes the cut because a 76% decline in net income still translates into a company that is profitable. When the economy bounces back, Knoll shares will be a slingshot ride.

Cott Group (NYSE: COT) -- $9.04
The trend is undeniable. Consumers are turning to retailer brands over premium ones to save money at the grocery store, and this Canadian company is the leading maker of retailer soft drinks.

Revenue in its latest quarter inched higher after backing out the foreign exchange impact. Cott also generated a healthy profit, trading at a bargain price of 14 times this year's projected profit and just 11 times next year's earnings target.

Five for the road
These five stocks aren't trading in the single digits by accident. If I'm right about the catalysts, though, they may not be trading in the single digits for too much longer.

Finding promising stocks while they're still cutting their baby teeth is at the heart of the Motley Fool Rule Breakers newsletter that I write for. You can check it out for free this month with a 30-day trial subscription. There are more than a half-dozen active stock recommendations in the growth stock research service trading for less than $10 at the moment, including Infinera. Check those out, and I'll be back with more on the third Monday of next month.

© 2009 UCLICK, L.L.C.