by Ian Harvey
August 20, 2014
Trading stocks under $10.00 can be very profitable for short-term trading, as many of these stocks are making big moves – on massive volatility – which can lead to acceptable profitability.
When a stock makes a large-percentage move, it is often just the start of a new major trend -- a trend that can lead to huge profits.
Stocks that are making big-percentage moves either up or down are usually in play because their sector is becoming attractive or they have a major fundamental catalyst such as a recent earnings release. Sometimes stocks making big moves have been hit with an analyst upgrade or an analyst downgrade.
Also, looking at stocks under $5.00 tend to be ignored by fund managers, due to arbitrary rules established by boards of directors at funds... but one that the rest of us can profit from.
Once a stock reaches $5.00, a lot of these same fund managers start to consider such stocks -- and if they like what they see, they'll push shares yet higher as they take a stake.
Here are four stocks that may fit the above profiles…..
Cott Corporation (USA) (NYSE:COT)
Cott Corporation (USA) (NYSE: COT), a producers of beverages on behalf of retailers, brand owners and distributors, is moving very close to triggering a big breakout trade. This stock is off to a slow start in 2014, with shares down by 8.5%.
If you take a glance at the chart for Cott, you'll notice that this stock has been uptrending over the last few weeks, with shares ripping higher from its low of $6.60 to its recent high of $7.42 a share. During that move, shares of COT have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of COT within range of triggering a big breakout trade.
The stock has a 50-day moving average of $6.99 and a 200-day moving average of $7.61. The company’s market cap is $684.0 million.
Cott last released its earnings data on Thursday, July 31st. The company reported $0.17 earnings per share (EPS) for the quarter, meeting the consensus estimate of $0.17. The company had revenue of $550.90 million for the quarter, compared to the consensus estimate of $552.98 million. During the same quarter in the previous year, the company posted $0.20 earnings per share. The company’s revenue for the quarter was down 2.3% on a year-over-year basis. Analysts expect that Cott will post $0.35 EPS for the current fiscal year.
There are also many positives surrounding Cott:-
• The business has stabilized after a tough couple of years and is poised for growth.
• Cott trades at less than 6x my estimate of 2015 free cash flow.
• The company will increase returns to shareholders via dividends and buybacks.
• A return to rationality by Coke & Pepsi in the North American soda market could boost Cott's EBITDA by 25%.
• As the market appreciates the improvement in Cott's business, there is an expectation for shares to appreciate considerably.
Cott has received a consensus rating of “Hold” from the nine ratings firms that are presently covering the company. Seven investment analysts have rated the stock with a hold rating and one has given a buy rating to the company. The average 12-month price target among analysts that have updated their coverage on the stock in the last year is $8.73.
COT has been the subject of a number of recent research reports. Analysts at JPMorgan Chase & Co. reiterated a “hold” rating on shares of Cott in a research note on Friday, August 1st. They now have an $8.50 price target on the stock, up previously from $8.25. Separately, analysts at Jefferies Group initiated coverage on shares of Cott in a research note on Monday, June 9th. They set a “hold” rating and a $7.80 price target on the stock. Finally, analysts at Goldman Sachs cut their price target on shares of Cott to $8.00 in a research note on Friday, May 9th.
While Cott has struggled over the past couple of years, it is believe that the worst is behind the company. With a strong balance sheet, benefits from new business, and a shrinking share count, expect shares to appreciate over 100% in the next few months as the market realizes the business has stabilized.
STOCK TRADE: Buy COT at market price (approx. $7.54), good for the day. Place a protective stop-loss at $6.50 and a pre-determined sell at $12.00.
Sequans Communications SA ADR (NYSE:SQNS)
Sequans Communications SA ADR (NYSE: SQNS), a fabless designer, developer and supplier of fourth generation (4G) semiconductor solutions for wireless broadband applications, is starting to trend within range of triggering a big breakout trade.
Looking at the chart for Sequans Communications, you'll see that this stock bounced higher last week right above its 50-day moving average of $1.71 a share with above-average volume and is still continuing to push higher. This spike to the upside is quickly pushing shares of SQNS within range of triggering a big breakout trade above some key overhead resistance levels.
Sequans Communications traded up on Thursday, hitting $1.89. The stock had a trading volume of 100,962 shares. Sequans Communications has a one year low of $1.42 and a one year high of $3.40. The stock’s 50-day moving average is $1.71 and its 200-day moving average is $2.23. The company’s market cap is $111.8 million.
Sequans Communications posted its quarterly earnings results on Thursday, 24th July. The company reported ($0.14) EPS for the quarter, meeting the Thomson Reuters consensus estimate of ($0.14). The company had revenue of $5.10 million for the quarter, compared to the consensus estimate of $5.53 million. The company’s quarterly revenue was up 13.3% on a year-over-year basis. Sequans Communications updated its Q3 guidance to ($0.12)-(0.14) EPS.
Several analysts have recently commented on the stock. Analysts at Lake Street Capital initiated coverage on shares of Sequans Communications in a research note on Thursday, May 15th. They set a “buy” rating and a $2.50 price target on the stock. Analysts at Natixis cut their price target on shares of Sequans Communications from $2.20 to $1.80 in a research note on Monday, April 28th. One investment analyst has rated the stock with a hold rating and three have issued a buy rating to the company. The stock currently has a consensus rating of “Buy” and an average price target of $3.00.
STOCK TRADE: Buy SQNS at market price (approx. $1.89), good for the day. Place a protective stop-loss at $1.50 and a pre-determined sell at $3.00.
Scorpio Bulkers Inc (NYSE:SALT)
Scorpio Bulkers Inc (NYSE: SALT), a development stage company, focuses on owning and operating drybulk carriers, is quickly pushing shares within range of triggering a near-term breakout trade.
Scorpio Bulkers opened at 7.69 on Thursday. Scorpio Bulkers has a 52-week low of $7.59 and a 52-week high of $10.73. The stock’s 50-day moving average is $8.72 and its 200-day moving average is $9.20. The company’s market cap is $1.078 billion.
Thursday's Range: $ 8.00 - $8.21
52-Week Range: $7.56-$10.73
Thursday's Volume: 207,868
Three-Month Average Volume: 468,667
Scorpio Bulkers last posted its quarterly earnings results on Wednesday, July 30th. The company reported ($0.11) earnings per share for the quarter, missing the analysts’ consensus estimate of ($0.09) by $0.02. The company had revenue of $13.18 million for the quarter, compared to the consensus estimate of $13.13 million. Analysts expect that Scorpio Bulkers will post $-0.34 EPS for the current fiscal year.
Stifel Nicolaus reiterated their buy rating on shares of Scorpio Bulkers in a research report released on Thursday, 31st July. Stifel Nicolaus currently has a $12.00 price objective on the stock, down from their previous price objective of $13.00.
Stifel Nicolaus has also modified their ratings on a number of other stocks in the few days. The firm upgraded shares of Gildan Activewear Inc from a hold rating to a buy rating. The firm now has a $72.00 price target on that stock. Also, Stifel Nicolaus upgraded shares of Diana Shipping from a hold rating to a buy rating. Stifel Nicolaus now has a $12.00 price target on that stock.
Several other analysts have also recently commented on the stock. Analysts at Evercore Partners cut their price target on shares of Scorpio Bulkers from $13.00 to $11.00 in a research note on Wednesday, July 23rd. Analysts at MLV & Co initiated coverage on shares of Scorpio Bulkers in a research note on Wednesday, May 28th. They set a buy rating and a $11.00 price target on the stock. Six analysts have rated the stock with a buy rating. The stock currently has an average rating of Buy and a consensus price target of $13.00.
STOCK TRADE: Buy SALT at market price (approx. $8.13), good for the day. Place a protective stop-loss at $7.00 and a pre-determined sell at $12.80.
AEterna Zentaris Inc. (USA) (NASDAQ:AEZS)
AEterna Zentaris Inc. (USA) (NASDAQ: AEZS), a specialty biopharmaceutical company focused on developing and commercializing novel treatments in oncology and endocrinology, had a sharp spike higher last week which pushed shares of AEZS into breakout territory, since the stock took out some more near-term overhead resistance at $1.23. This move is starting to push shares of AEZS within range of triggering another big breakout trade.
From a technical perspective, AEZS ripped sharply higher here right above its 50-day moving average of $1.17 and back above its 200-day moving average of $1.22 with strong upside volume flows.
There is now new bullish momentum on the daily chart of AEterna Zentaris. Thanks to the strength from late last week, shares are back above all the key moving average lines, and the short-term lines are moving (or have already moved) above the long-term moving average lines. In fact, it looks like AEZS pushed up and off a couple of those lines to rekindle the uptrend a couple of weeks ago. The volume has been plentiful with this second wind too... one of the key ingredients to any developing rally.
Thursday's Range: $1.27 - $1.33
52-Week Range: $0.99-$1.75
Thursday's Volume: 683,488
Three-Month Average Volume: 711,462
On 7 AUG Aeterna Zentaris Inc. reported financial and operating results as at and for the second quarter ended June 30, 2014. Research and development costs, net of refundable tax credits and grants, for the three-month period ended June 30, 2014 were $5.5 million compared to $5.3 million for the same period in 2013.
The focal point of late has been Macrilen - an endocrine therapy designed to treat adult growth hormone deficiency. The FDA has the new drug application in its hands right now, and is expected to make a ruling in November; if it's approved AEterna Zentaris Inc. will hold the world's first orally administered AGHD treatment.
It's in this timeframe we can see the stock has snapped a multi-year losing streak. With no real burdens or barriers left to get in its way, the sky's the limit.
Aside from making sure the market remains well aware of Macrilen's upcoming decision date with the FDA, it's also already lined up a sales partner. At the same time, it's started to participate in investor conferences like it never has before. Well aware of the value of good publicity, look for the corporation to do what it can to make sure the technical breakout also feels like a fundamental one.
STOCK TRADE: Buy AEZS at market price (approx. $1.28), good for the day. Place a protective stop-loss at $0.90 and a pre-determined sell at $1.80.