5 Cheap Stocks to Buy Now

Go Long on Cheap,
High Beta Stocks

If you owned or purchased cheap stocks at the beginning of the year, you have been rewarded handsomely for your risk taking. Many of the stocks that were summarily crushed during the credit crisis last fall bounced hard off lows reached in November and March.

In fact, some have doubled or tripled in a very short period of time. But that should come as no surprise to investors — historically, owning cheap stocks at the end of a recession can deliver big returns. That certainly has been the case so far this year, and the likelihood of more gains is quite promising. Ask any professional trader which approach is working best of late, and you will hear: "go long on cheap, high beta stocks and do so aggressively."

In my Top 5 Penny Stocks to Buy Now, I put together five cheap stocks that I thought would do well in 2009. "Well" is an understatement. Three of the five stocks have nearly doubled in value or more. TriQuint Semiconductor (TQNT) is up 151% since mid-December. Only one of the five picks is down in the period — with a mere loss of 10%.

Now, with much action in the space and so much potential money to be made by speculating on cheap stocks, I'm in the process of launching an exciting new service for investors called Penny Stock Winners that focuses entirely on these low-priced gems।

Cheap Stock 1:
Star Bulk Carriers (SBLK)

If you're interested in cheap stocks, take a look at the dry bulk shipping sector. The global recession has decimated shipping rates at a time when capacity is on the rise. The double whammy of falling demand and increased supply has resulted in stocks in the group falling hard.

Names including Star Bulk Carriers (SBLK) lost significant value in 2008. But sometimes the harder they fall, the harder they rise. Bulk shippers have been huge winners since last March with some stocks going up by three or four times their price at the bottom.

While we have yet to see a big improvement in the global economy, improvement could propel these stocks to another triple or more. SBLK priced shares for the public at the peak of the market at a $15 level.

Those levels can be reached again as a new economic cycle begins।

Cheap Stock 2:
StemCells, Inc. (STEM)

The overwhelming election of Democrats in all houses of government is expected to be quite positive for the stem cell space. Under the previous administration, efforts to fund research proved to be elusive. That is not the case today. Companies like StemCells, Inc. (STEM), who are racing to bring this exciting area of research to market, now have friends in Washington.

After the initial euphoria, stem cell stocks have settled back toward the lows reached prior to the election. In a market that has been cruel to any sort of speculation, investing in hope has been a tough sell. The market, though, is inefficient here. Those willing to speculate have the potential for huge gains.

Bringing a drug to market from stem cell research may not be profitable today, but things are stirring in the space. This week General Electric (GE) announced a deal with fellow stem cell player, Geron (GERN). Gentlemen, start your engines. GERN was up big on the news with STEM moving a modest 2% higher.

At $1.70 per share, STEM is incredibly cheap given the potential. Don't let fear in the market keep you away from risk-taking. Some, including myself, suggest that is exactly what you should be doing।

Cheap Stock 3:
Sirius XM Radio (SIRI)

If you can't beat them, join them.

Sirius (SIRI) is doing just that by teaming up with Apple (AAPL) to create an application for the iPhone that will stream Sirius XM content to subscribers. And so there goes one of the big arguments against SIRI. Critics claimed that the iPod would destroy the need for satellite radio. Wrong. With Apple and Sirius teaming up, the device is now a friend of Sirius.

It hasn't been an easy path for SIRI. Huge expenses associated with building its business saddled the company with debt that nearly brought about its demise. Shares of SIRI fell to a just a few pennies in anticipation of bankruptcy. Fortunately, improvement in the debt market and a white knight in the form of Liberty Media allowed SIRI to refinance maturing debt. A recent debt sale went better than expected.

Now, as a pure monopoly play, good times are just ahead। My question is: How can you not own this stock?

Cheap Stock 4:
Quicksilver (ZQK)

We're not even half way through summer, but retailers are already salivating for the all-important back-to-school shopping season. And that makes now the perfect time to place your bets on Quicksilver (ZQK).

This formerly edgy company has struggled with declining sales and huge losses that weighed heavily on the balance sheet. Recently, ZQK obtained debt financing but at a prohibitive cost even while eliminating near-term liquidity concerns. The company is clearly betting on a big fall sales season as it will need better than the $2.8 million in profits earned in the most recent period.

If the bet is a winner, investors will see the stock quickly rebound. Although the risk is high, so too could be the reward.

I'd buy ZQK in advance of the back-to-school rush।

Cheap Stock 5:
TriQuint Semiconductor (TQNT)

TriQuint Semiconductor (TQNT) was trading at just over $2 per share at the end of 2008. That was before the entire semiconductor sector exploded as investors speculated on the dawn of a new product replacement cycle.

Even better for TQNT has been the growth of the smartphone. TQNT is a supplier of component parts that have incredible revenue generating potential for the company, despite being commodity-based. That explains the big move in the stock to date, but more gains are coming.

In any other economic environment, TQNT is a $20 stock. Instead, the company trades for just over $5 per share. The company is a momentum play, and I look for it to post impressive revenue and profit growth as the smartphone spreads like wild fire.