For most sophisticated investors the price, at which a stock trades, has little to no effect on their investment decisions. However, a large number of small investors – despite knowing that the price of a stock doesn’t represent the quality or the size of the underlying business – allocate a large amount of their capital to low-priced stocks. That’s because such stocks are more affordable for them to buy when compared to a stock like Alphabet Inc (NASDAQ:GOOG) which trades at $725 or even a Chipotle Mexican Grill, Inc. (NYSE:CMG) which trades at $458. Considering the affinity that small investors have towards low-priced stocks, we at Insider Monkey come up with a list of such stocks – all priced under $10- based on their popularity among hedge funds covered by us at the end of every quarter. In this post, we are going to reveal and discuss the five low-priced stocks that hedge funds tracked by us loved heading into the second quarter.
We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).
#5 Regions Financial Corp (NYSE:RF)
– Investors with Long Positions (as of March 31): 41
– Aggregate value of investors’ holding (as of March 31): $803 million
Let’s start with Regions Financial Corp (NYSE:RF), which is almost on the verge of breaking above the $10 mark. During the first quarter, the number of investors covered by us with long positions in the stock climbed up by five, but the aggregate value of their holdings in it slid by $146.1 million. Funds that initiated a stake in Regions Financial Corp (NYSE:RF) during that period included Fred Cummings‘ Elizabeth Park Capital Management, which bought nearly 1.74 million shares of the company. Led by the better than expected quarter numbers the company reported in April, shares of Regions Financial Corp have appreciated by 22% so far in the second quarter and are trading flat year-to-date. Since the stock of the bank holding company is currently trading at a discount to its book value and at a trailing multiple of only 12.44, most analysts feel that it can see further upside this year.