4 astounding winners under $5

Speculators who took a chance on these low-dollar names last year did very, very well.

By Jim Cramer Jan 14, 2013 9:47AM

logoArrow Up Nicholas Monu iStock Exclusive Getty ImagesYou aren't supposed to make money buying low-dollar stocks. Yet in the past year, you've made a killing if you did so. That's right, if you bought a series of highly visible below-$5 stocks, you made fortunes, and I regard the moves as verification of my theory that everyone should have a speculation play in his or her portfolio, because it can keep you in the game by making the process intriguing and because you can make huge profits if the story pans out.

 

Specifically, check out these gains. If you bought Sprint Nextel (S) in May of last year at $2.30, you have now much more than doubled your money. If you had purchased Clearwire (CLWR) at $0.91 as recently as July 26, 2012, you caught a triple after Sprint bid for the company. Those who had the guts to buy Supervalu (SVU) -- I know I didn't -- at $1.80 back in October 2012 are verging on a double after the investment made by Cerberus that was announced this morning. And finally, if you had taken a chance with Nokia (NOK) back in July at $1.69, you have more than doubled your capital after the company announced its sharply better-than-expected earnings last Thursday.

 

Frankly, even I, a huge supporter of speculation, am astounded at these gains. Just astounded. How could you not be? In every case, these companies were thought to be on the ropes. Yet it turns out they all had more value than we realized, although the value was obscured, typically, by weak balance sheets.

 

Sprint, Clearwire and Supervalu had been burdened with huge amounts of debt, so much that their solvency was in question when we hit those amazingly low prices. But Softbank took a look at Sprint after it had successfully re-energized its business under super CEO Dan Hesse and liked it enough to buy a huge amount of the company.

 

Clearwire, as tattered as its balance sheet was, turned out to have extremely valuable spectrum, so valuable that even though Sprint decided to buy the rest of it with the money Softbank gave it. Charlie Ergen, a maverick businessman and chairman of Dish Network (DISH), has been drawn into the bidding for the company, perhaps to get some of that spectrum that is in such short supply and is so needed for additional cell-phone service.

Supervalu is, in the end, one of the largest supermarkets in the country, with some of the best brand names in the business, brands such as Acme, Albertson's, Cub, Jewel Osco, Lucky and Shaw's Star Market. These are all terrific places to shop and are often loved in their communities. The problem was the balance sheet, and with rates low, a private-equity outfit like Cerberus can leverage its balance sheet to fix the real problem, which is too much debt.


Nokia? Turns out that big expense cuts coupled with a hot, cheap smartphone were enough to get the company to report sharply better-than-expected numbers.

 

Now, you could have two different takeaways here. One is that you might say, "Terrific, Jim, you lost a fortune before you were able to get a fraction of your money back." I bridle at that, because fortunately, I disliked all of these on the way down.

 

Second, though, is that you could correctly argue that I stayed too negative, not liking Supervalu and Clearwire at their lows, thinking the bond holders would end up with their companies. But I did manage to nail Sprint and did say it was way too late to sell Nokia.

 

I know some of you are probably thinking right now that you should be buying other down-and-outers, like RadioShack (RSH), Best Buy (BBY) or Hewlett-Packard (HPQ). My take is that as with Nokia, there's no reason now to hate Radio Shack. Too low. Best Buy? Still falling. And Hewlett-Packard, I would rather be a buyer than a seller at this point.

 

The moral of the story: Speculate. It can work. And from Sprint, Clearwire, Supervalu and Nokia, I can tell you that it works much bigger than even I could ever dream.

 

Cramer

 


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.   

 

 

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36Comments
Jan 14, 2013 12:18PM
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Love the way cramer implies he "called" nokia --- when in fact he said stay away when it as well under $2 ......

It must be a great gig to look back at last year and then post a headline that implies that you made these great calls ......

He is a 2 bit shyster crook and nothing more .........
Jan 14, 2013 10:10AM
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When Cramer says buy you need to sell and when he says sell you need to buy and here is why;

-when the stock hit $1.69 back in July he was telling people to sell and that Nokia was going bankrupt at the same time GS and MS bought hundreds of millions of Nokia stocks while they issued a sell rating on the stock!

-Cramer is part of the wall street elites that feed the masses "sheep" all the lies to advance their agenda

- my way of making money is simple; the more you read and research a stock the worst off you will be ....most of what you read is lies

- use your brain and do not follow the herd of sheep mentality.

- when cramer gets a CEO on his show he does that after he buys millions of dollars worth of stock of that company and he immediately sells and makes the money.

 

Jan 14, 2013 10:40AM
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""""In every case, these companies were thought to be on the ropes."""

 

They ARE on the ropes! 

 

you're just using hind sight to cherry pick lows against highs.  gee.  the percent gains sound so nice and enticing!  except THEY ARE ON THE ROPES!

Jan 14, 2013 12:53PM
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And for the record cramer only started leg humping sprint AFTER it had gone form $2 - $5 plus --- at around 5.50 in october he said SELL ....you can see it all in his previous columns here by clicking on his name ..... 

his "gain" from sprint would have been about 20 cents a share not the 100 % or so he implies here.

Do your homework and you will what a lying POS he really is.
Jan 14, 2013 11:20AM
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I wouldn't let the Japanese decision to inflate go unnoticed.  This is one more add in to the New World Order.  It almost seems the strong  currencies finally are seeing the New World Order taking over and it's sink or swim.  In other words inflate or die. At best we could describe this as a contagion.  The race to the bottom.  And always those least able to obsorb will suffer the most.  In a way I can begrudgingly say this is positive for the markets. We are as they say a one trick pony.  Either support this market or succumb to inflation.  Either way it stinks.  JMHO

Jan 14, 2013 12:17PM
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9.5 billion outflow from stocks week ending Jan. 2nd -- Should have qualified this as mutual funds.
Jan 14, 2013 1:24PM
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It has to be getting rather perilous for these market guys to sit and spin their wheels in this range we have been stuck in.  Law of the Street "no trades no income", so I guess Cramer threw in his two cents worth of con.  Oh yea so lets get em to go "BUY" some small caps and get this party started.  Must have gotten a few calls from his buds. Either this or that but these guys NEED money. Which way can this dog go.  Pull it higher or push it lower.  After last week we obviously have some very committed bulls. No interest income and dividends already priced in.  I just don't believe Americans have had the 30 year lifestyle party run scoured out of their Psyches yet.  All I will really bet on is this won't go on much longer. Although isn't this getting similar to the stagflation we saw in the 70's that lasted like 15 years.  JMHO
Jan 14, 2013 2:01PM
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I've thinking about being a "buy and hold' stock buyer......... Let's see the average is 22 seconds.
Jan 14, 2013 3:23PM
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Along with other leisure activities, We mostly go to Casinos to keep our minds sharp...

 

Taking what we consider, limits to lose;  And INTENT on winning...

 

We both won "big" about 10-15 days ago, but I lost "more then" enough 3-4 days ago.

Jan 14, 2013 1:10PM
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DLH.....And I thought I had read where, there was 10-15 Billion dollars of INFLOW into FUNDS.

Over the New Year Season ??

And believe it was some "sideline cash", coming back..Don't remember the Sources??

But, read it a couple of places..

Jan 14, 2013 2:38PM
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From where I chart;  Yes, we have much stagnation and stagflation....

But even from the Bush days we have had a long term UPTREND..

 

Although taking out the Debacle and falling on our azzes, we are in the upward trend still...

And many specific companies or equities are doing quite well, even increasing their paybacks..

Or bringing them back to pre-debacle levels....I think that is "a good sign".? 

 

Would I consider a correction? Sure, that is usually a sign of a healthy Market in this day and age.??

Jan 14, 2013 3:18PM
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Ahhhhhh, DLH; Maybe what we have is a DATE problem ??

 

Even according to Antman Merryheyday's, newest Article above; There has been a big INFLUX back into the Markets since "first" of year...

Maybe people have thought Obama and Congress have got their shidt together ??

The Debt ceiling is the next hurdle, ALONG with SPENDING cuts...!!!

I also think some of the "money flow" is from Foreign Investors too...

I am positive I have read something to that affect...

But maybe after the first of the year ??? 

Jan 14, 2013 2:30PM
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DLH......I'm just going to assume something like a HFT platform...??

 

Or for us "dunderheads" some of that software application of "trading" red and green signals ??

 

I wonder how they "beat the taxman"? Unless they do their trading in IRAs and Roth like us...?

I go to sleep at night with "limit orders", I sleep much better not caring..

And you can enjoy naps, fishing and casinos easier too..."Don't Worry-Be Happy."

Jan 14, 2013 1:05PM
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V_L...I might agree with a FEW of your points, BUT "SHEARING" off 10,000 of the DOW...??

 

That sounds LIKE 50-60s talk and a little insane....Guess you don't care much about retirees and/or people that have worked all their lives waiting to retire with a decent 401K...??

 

Have you ever considered World implications either ?...Puuleeeeeeeze !!

Jan 14, 2013 12:43PM
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AND........Nokia (NOK) and Wells Fargo (WFC) were "downgraded" this morning too.

 

Now isn't that precious ??

Jan 14, 2013 2:17PM
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As a mostly buy and hold type investor, with only about a 25-30% "churn" per year..Is that IRONIC.?

I believe you have to be a "Pro-Active Trader" to get ahead in the Game, and a little of a Perma Bull, about most investments...

For my "age group" I do take more chances then most..But "controlled risk and growth" can add as much to your Portfolios as staunch dividend plays....You have to be careful, and don't always expect winners....Just get on "right side" of percentages....IMO.

70% winners against 30% losers in equal amounts can be moneymakers..

And the profits can be used to accumulate "staidfast dividend", recessionary proof type equities, IF there is such an animal..??

I feel all young investors under 50 should apply themselves in such a manner; ONLY because they have time to recover in past downturns like we have had..But NOT get scared and RUN.

I think Warren and Charlie might have practised something along these lines, before they became "Value Blended" only?? But they can make deals that none of us can understand ?...DON'T really believe they got where they are today, by only buying high div-paying stocks..??

 

Without some Growth/risk in your investments, I really have trouble seeing where you stay much ahead of Inflation.? 

Although starting to feel "mortality" setting in I/we have started accumulating more of the safer Companies....And average over 5% with at least 20 of our positions. I think 5.3% to date. 

Jan 14, 2013 12:56PM
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Interesting on TV as we comment, OUR ESTEEMED Prsident, taking it Home to the "do little" Congress (the House) about the Debt Ceiling.....And Q&A about some gun control now...

For you that are watching (like Mirage) I don't think he is "using a teleprompter".?

 

Not really fond of the "ceiling" being raised..But for those counting, Bushie raised it about 15-20 times,

NO BIG SQUAWK....back then...?

 

But, I don't want to see any "downgrades" or any Markets correct heavely anywhere.

We can work our way out of this slowly..It takes time now..

Jan 14, 2013 10:32AM
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What's a better way, mohamed ??

 

Using a Dart Board...??

Jan 14, 2013 11:35AM
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Either way...NTU....Japan has been stumbling for 20 years...With the new Leadeship coming in, He put the Financial Sector on notice that something was going to change...

And they were sick of playing "second fiddle" to the World.

How it plays out down the line and to the common Japanese citizen, remains to be seen...??

 

But the same scenario may be coming to a Nation near you....Like US.

Invest accordingly, with proper research....The "lesser" of two evils.........??? 

Jan 14, 2013 10:58AM
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I'm kind of "surprised" SiriusXM (SIRI) didn't make this list...??  I believe it is sponge worthy ?

 

***edited***

And Research in Motion (RIMM) too...Unfortunately it was in the $5-10 range....Pushing $15 now.

A very nice climb from low $6s in the Fall last year..

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