Avoid or Short These Single-Digit Stocks in 2013 - Alcoa (NYSE:AA), Apple (NASDAQ:AAPL)

A common misconception among investors is that a stock's price tag indicates its true value. For example, common logic often says that Apple

AAPL

is expensive because it trades for over $586 a share. That logic ignores the fact that Apple trades at just 10 times next year's earnings, which is in fact inexpensive relative to many technology names. On the other hand, some investors may view Pandora

as cheap simply because it trades below $9 a share. That view comes despite the fact that the shares trade for almost 125 times next year's estimated earnings. What the tales of Apple and Pandora should tell investors is stocks can be cheap even with high price tags and pricey despite low price tags. The latter scenario underscores the wisdom of not being lured into a stock simply because of the superficial metric that is market price. With that in mind, investors would do well to avoid or short the following single-digit names next year.

LDK Solar LDK

A stock that trades for less than $2 that has surged more than 27 percent in the past week can be seductive, but keep in mind this is a solar stock that fell more than 10 percent on Monday. China-based LDK on Monday slashed its full-year revenue forecast to $950 million-$1 billion from $1-$1.5 billion. The company also said it expects fourth-quarter revenue of $230-$290 million, which is well below the consensus estimate of $$552.35 million. Forget $2, the shares closed barely above $1 on Monday and the average price target is just $1.16, implying little upside from current levels. LDK could easily trade for 50 cents or less before its sees $1.80 again.

Century Aluminum CENX

Practically every aluminum stock has been taken to the woodshed this year due to falling prices of the commodity. In turn, lower prices result in slack revenue and profits for aluminum producers and that theme has permeated this space. Here is a significant rub with Century Aluminum it is a small-cap stock that trades at almost 41 times 2013's estimated earnings. On the other hand, investors can pay just a few pennies more and get Dow component Alcoa

at just 12.4 times next year's earnings.

Caesars Entertainment CZRLVS and Wynn Resports WYNN in issuing special payouts. Problem is Caesars really should not do that because its balance sheet is less than fortress-like and that is delicately stating things. And it is the balance sheet that explains why this is a single-digit stock that is not a good value. Caesars has $20 billion in junk-rated debt and has to pay $1.5 billion a year in interest on that debt. Paying $1.5 billion in interest annually means that until Caesars can boost its credit rating, an unlikely scenario in the near- to medium-term, the company is devoting almost double its current market cap to interest expenses. That is not an attractive proposition for investors. Nor is the fact that earlier this year Fitch Ratings said Caesars could find its way to bankruptcy court in the future.

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