Market Overview

Top Stocks Under $5 For 2014

Top Stocks Under $5 For 2014

With many traders ignoring equities below five dollars, there is serious upside for those willing to take on additional risk.

A low stock price alone does not indicate a buy as many companies see thier shares head to zero as they go out of business. 

The companies on this list list have strong indications for growth -- including insider and institutional buying, revenue growth, and expanding industries.

Not only do lower market capitailzations increase upside, but it is a lot easier for a five dollar stock to double in price than a $500.

Companies are also eager to have their shares above the five dollar level and may employ tactics to get there (ie. buy backs) because many funds will not invest in securities below five dollars.

A previous version of this article contained four stocks, but has been updated to include additional companies.

  • Mandalay Digital

    Mandalay Digital (NASDAQ: MNDL) creates solutions for mobile platforms. These include tools to complete the billing process, drive loyalty and predictive analytics for merchants to suggest products.

    Shares crashed in August, kicking off a series of non open market acquisitions from several directors. In addition, institutions started aggressively building positions and now own just over a fourth of the company.

    Taking a look at the financial statements, revenue has grown a tremendous 766 percent over the past year to nearly seven million dollars for the most recent quarter. However the company has become increasingly less profitable -- losing $3.78 million a year ago and $6.22 million for the same quarter this year. A key reason for the increase in loss is an additional two million spent on product development.

    The two factors that will drive the 2014 share price are continued revenue growth and an increase in dependence on mobile technologies. Shares are currently trading at $2.65.

  • Revolution Lighting Technologies

    Revolution Lighting Technologies (NASDAQ: RVLT) produces LED products for commercial customers, typically in the hospitality, education, and healthcare industries.

    The LED industry is expected to almost double by 2015, giving Revolution the opportunity to capture considerable market share. A key reason why the company stands to over take its competitors is its expansive dealer network, providing reach to an expansive group of customers. Because its products are more energy-efficient than many of its competitors, education is a key competitive advantage.

    Several directors and officers added shares in 2013 with buys and non open market acquisitions. Institutions and mutual funds, who own nearly 58 percent of the float, added 23.32 and 39.9 percent, respectively.

    Revolution’s position to capture a significant portion of the growing LED market is a reason for significant upside in share price. After bouncing off $5.50 in July, shares are now trading at $3.28.

  • (NASDAQ: SPRT) IPO’ed in the middle of 2000 with a market cap around two billion. Shares subsequently plummeted in 2001 during the tech bubble collapse. builds SaaS tools for small business to grow revenue and increase the customer experience. The company also offers premise services such as computer installation and maintenance.

    Year over year revenue is up 28.5 percent, driven primarily by the service business. Despite the impressive earnings growth, when looking at financial statements, increase in income stands out. Earnings jumped from 298 thousand to 3.03 million in a just a year, as the cost of goods sold rose far less revenue. SG&A expenses also saw far less of a climb. This earnings report shocked Wall Street as it doubled the estimate.

    Institutions who own more than 80 percent of the float are continuing to add shares this quarter after consistent additions last quarter.

    Continued demand for software solutions and investor interest in cloud-based companies are catalysts likely to push higher during 2014. Shares are currently trading at $3.68.

  • Vringo

    Vringo (NASDAQ: VRNG) is a patent litigation company currently defending patents related to search.

    The company has several sources of income available for 2014. First, the company won its case against Google (NASDAQ: GOOG) in November of 2012.

    As the legal process drags on, investors are waiting for Judge Raymond Jackson of the Eastern District Court of Virginia to award Vringo its payment. They key figure to watch is not only the lump sum but also a percent of royalties for the Google’s future North American revenue.

    Second, the company is engaged with Chinese telecommunications company, ZTE, in several European countries. In December 2013 its Indian division was forced to hand over additional information and Vringo won an injunction in Germany. These successes makes a global licensing deal likely.

    In a 2013 settlement with Microsoft (NASDAQ: MSFT), which is in part dependant the outcome of the Google trial, Vringo received six patents. Investors are still uncertain as to what the patents are, but it shows the company has several growth opportunities after litigation with Google and ZTE.

    Shares of Vringo have been incredibly volatile, often fluctuating around the three dollar level. Shares are currently trading at $2.93.

  • Imation

    This company is bumping up against the five dollar level after rising more than eight percent in the past five trading sessions. Shares of Imation (NYSE: IMN) slid down over the past several years as the company’s optical and tape media businesses have fallen out of favor. However, the outlook for Imation is bright as the company transitions into data storage and security.

    The demand for data security is ever rising as hackers (and governments) eat away at personal and corporate privacy. Just two weeks ago 40 million credit and debit cards were compromised by a security breach at Target.

    In a poll by HBGarry, 78.1 percent of investors said they are unlikely to invest in a company that has fallen victim to cyber warfare. In addition, Gartner research expects data security to be an 86 billion dollar industry by 2016, roughly 39 percent growth.

    Shares of Imation are especially likely to appreciate with the industry growth because investors are largely unaware of the company’s transition. Since the company announced its new strategy in 2011, it has spent 167 million on six acquisitions for data storage and security companies.

    Lake Street Capital Markets predicts the company will turn profitable in the second half of 2014 and rated the company a buy with an eight dollar price target.

    Shares closed Tuesday at $4.98 on a 3.97 percent gain.

  • Gold Fields Limited

    Gold Fields (NYSE: GFI) is one of the biggest but riskiest members of the list. The company is a gold and copper miner operating primarily in Africa. As gold took a thirty percent tumble in 2013, shares of Gold Fields fell more than 70 percent as the entire industry was hit hard.

    A key reason to be bullish on Gold Fields is that the company is working down its cost per ounce. According to Hebba Investing, the all in cost to mine an ounce of gold in the third quarter of 2013 was $1,449.21, versus $1,526.72 in the first quarter. Despite the reduction, Gold Fields is still one of the highest cost producers in the industry.

    If the company can continue to work down its cost of production, implications are very bullish. Because the company’s shares fell further than peers, an average cost of production will likely result in a sharp rebound.

    Investors should also note the company reported 495 million in cash for the third quarter of 2013 with net income of one million. This gives a sense of security as gold miners struggle with the depressed value of the commodity. Shares were last trading at $3.20.

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UPDATE: Imperial Capital Maintains on Brink's Company, Raises PT