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Beware of Stocks Under $10

Posted by: Ben Steverman on July 2, 2008

A story today from BW colleague Karyn McCormack makes an interesting observation: There are a lot of brand name stocks trading below $10 these days. If your share price is under $10, that makes you a second-class stock in many investors’ eyes. It seems like an arbitrary distinction, but stocks under $10 are assumed to be risky and lower quality. Hedge funds and investing methodologies often have a blanket rule, forbidding the buying of any stocks priced that cheap.

However, a list of stocks in the under $10 bargain bin now include Ford (F), Motorola (MOT), Sprint Nextel (S), Washington Mutual (WM) and several airlines. General Motors (GM) could be joining them soon. The article is worth a read here, and a slideshow of the stocks is here.

UPDATE: After falling 15.1% on Wednesday, GM shares closed at $9.98. That’s the automaker’s lowest share value since Sept. 13, 1954!

Reader Comments


July 6, 2008 12:38 PM

You can have part of your portfolio under the $10.00 mark. Just be carefull and do the HOMEWORK.

Anthony Frausto

July 7, 2008 12:41 PM

The stupidity of this company's management can be illustrated by what they have done with a legendary brand with a real history of innovation: Saab. Instead of letting the sweds in Trollhatten do what they have done so well for decades, they tried to enter the low end of the lux car market with a Subaru-based 9-2X that completely panned. This demonstrated just how badly they knew their Saab customer base. Next up they took Saab into the SUV market with a rather decently modified Trailblazer with a massive v8 that eats gas like no tomorrow (very un-Saab-like indeed and bad bad timing!).

During these mis-adventures Saab has had to delay key updates to models like the highly respected 9-5 sedan/wagon line. But despite the Sweds' best intentions and brilliant engineering (witness the line of new bio-fuel turbo engines, turbo diesels and solar power research) GM high-command continues to blunder away with 9-3 and 9-5 models by replacing more costly but superior tech such as audio and climate control systems with uber ugly and inferior stock GM part bin items.

If I was the Swedish government I would build a consortium of high tech companies and the government and buy back both Volvo and Saab and save them from the idiots in Detroit before it's too late. Then just do what Volvo and Saab almost did decades ago: Merge them, gain economies of scale and get back to world class engineering and design.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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