3 stocks on the cheap
At less than $11, these picks could deliver big profits if their momentum continues.
By Nancy Zambell, InvestorPlace.com
Unless you’ve been living under a rock, by now you know that August was characterized by a spate of merger and buyout action across Wall Street -- particularly in the tech sector. That’s because corporations are sitting on a boatload of cash and equity prices are relatively depressed, making the time ripe for a takeover or acquisition.
So which targets are next? I have three stocks in mind that are very affordable. And even if they aren't big buyout targets, they have the strength to succeed and bring investors profits.
Activision Blizzard (ATVI) is the cream of the crop when it comes to video game stocks. Last year, four of the top 10 best-selling video games in the world belonged to ATVI, including Guitar Hero on Tour, the #1 title in dollars on the Nintendo DS, and its Guitar Hero III: Legends of Rock version was the first video game to ever pass $1 billion in sales from just a single title.
I expect the company to continue its torrid growth in 2010 — especially as folks find themselves spending less money on outside entertainment and more time at home in this recession. Activision has record sales and earnings, consistently beating analysts’ estimates, and $3 billion in cash with no debt. That gives Activision incredible room to grow.
Ballantyne Strong (BTN) is a leader in the transition to digital and 3-D, and the company also finds itself handsomely profiting as the transition takes hold across the industry. The company is expected to be integral to the digital transition for both Regal Entertainment (RGC) and Cinemark Holdings (CNK). Digital products have already grown to 39% of the company’s sales, up from 23% at the end of 2008. But digital is just in its infancy. The expansion of the industry will create breathtaking profitability opportunities for BTN.
It’s also worth noting that less than 30% of its shares are held by institutions, but the company has just received coverage from one Wall Street analyst, with anticipation of another on his heels, so attention is coming to the stock.
Education Realty Trust (EDR), created as a REIT in 2004, is one of the largest owners and operators of collegiate student housing in the United States. This makes it a stable but potentially lucrative investment, with 65 properties in 21 states.
First, due to SEC regulations for real estate investment trusts, EDR returns a hefty portion of its profits via dividends — a 2.9% yield as of this writing. Secondly, the numbers show a big upside for shares. According to the U.S. Labor Department, college enrollment hit an all-time high last year, with more than 70% of high school graduates opting for college rather than trying their luck in a recession-heavy economy.
But the big upside of Education Realty Trust is that the profits don’t rely on student loans like shady for-profit education stocks that have been in the news in recent months. The majority of the company’s revenues (86.9%) are derived from its student housing leasing. EDR’s preleasing is 3.1% ahead of last year at this time, and net rental rates are 1.9% ahead of last year. Those numbers point to future growth and make this stock a good buy.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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