Five Stocks Under $10 to Buy Now

A few months into Donald Trump’s presidency, the bull market is alive and well. Expectations that the government will lower corporate taxes and allow companies to repatriate overseas profits have fueled optimism in the main indexes. In addition, expectations that the government will loosen regulations have ignited a spark in the financial sector.

While the main indexes have rallied, shares of some companies have been left behind for various reasons. In this article, we take a closer look at five companies whose shares are trading for under $10 and who are widely owned by elite funds, Southwestern Energy Company (NYSE:SWN), Xerox Corp (NYSE:XRX), Dynegy Inc. (NYSE:DYN), Rite Aid Corporation (NYSE:RAD), and Chesapeake Energy Corporation (NYSE:CHK).

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#5 Chesapeake Energy Corporation (NYSE:CHK)

– Number of Hedge Fund Holders (as of December 31): 41
– Total Value of Hedge Fund Holdings (as of December 31): $884.01 million
– Hedge Fund Holdings as Percent of Float (as of December 31): 14.20%

After rallying from last summer on the back of the natural gas/crude rally, Chesapeake Energy Corporation (NYSE:CHK) has given back much of its gains. Natural gas sentiment is soft, and there is a fear among some investors that U.S. shale is too competitive at $50 per barrel and higher. Whether OPEC will continue to countenance U.S. shale production gains (2018 might be a record production year), or whether the cartel extends its cuts for another six months is a big question. The price action of Chesapeake likely depends on that decision in the near to medium terms. 41 top funds had a bullish position in Chesapeake Energy Corporation (NYSE:CHK) as of the most recent 13-F reporting period, unchanged from that of the previous quarter.

#4 Rite Aid Corporation (NYSE:RAD)

– Number of Hedge Fund Holders (as of December 31): 42
– Total Value of Hedge Fund Holdings (as of December 31): $1.44 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 16.60%

Rite Aid Corporation (NYSE:RAD) recently pierced the $5 per share mark to trade close to $4 and three quarters. At the moment, there is still considerable uncertainty surrounding DOJ approval for the merger with Walgreens Boots Alliance Inc (NASDAQ:WBA), which amended the previous merger agreement earlier this year to a tiered reward system. Although 42 elite funds owned the stock at the end of December, the doubters don’t know if the combination can divest enough assets to please both the government and to make sense financially. Walgreens is purportedly considering selling some Rite Aid assets to Fred’s as a potential appeasement plan.

On the next page, we examine Dynegy Inc, Xerox, and Southwestern Energy.
#3 Dynegy Inc. (NYSE:DYN)

– Number of Hedge Fund Holders (as of December 31): 42
– Total Value of Hedge Fund Holdings (as of December 31): $486.75 million
– Hedge Fund Holdings as Percent of Float (as of December 31): 49.10%

Despite 42 elite funds accounting for almost half of the float on December 31, Micahel Laides of Goldman has a $10 price target and a ‘Neutral’ rating on Dynegy Inc. (NYSE:DYN), citing potential risk in terms of the company missing price and volume expectations. Shares of the company have been under pressure due to the company’s debt load and coal portfolio. The bullish thesis that President Trump might be good for utilities with considerable coal exposure hasn’t exactly played out yet.

#2 Xerox Corp (NYSE:XRX)

– Number of Hedge Fund Holders (as of December 31): 43
– Total Value of Hedge Fund Holdings (as of December 31): $1.65 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 18.60%

43 elite funds were long Xerox Corp (NYSE:XRX) at the end of the fourth quarter, up 11 funds from the previous quarter.  The change ranks Xerox second on our list of stocks that hedge funds are interested in and that trade for under $10 per share. The writers at Barron’s are also bullish on Xerox, saying that the stock could potentially double as the new CEO, Jeff Jacobson, focuses on faster-growing segments and as the company launches new products. Shares are up 27% year-to-date.

#1 Southwestern Energy Company (NYSE:SWN)

– Number of Hedge Fund Holders (as of December 31): 44
– Total Value of Hedge Fund Holdings (as of December 31): $647 million
– Hedge Fund Holdings as Percent of Float (as of December 31): 12.10%

Like Chesapeake, Southwestern Energy Company (NYSE:SWN) has been the victim of the natural gas bear market. If OPEC doesn’t decide to extend its cuts and crude falls, natural gas might correlate with oil, and Southwestern could suffer as a result. On the other hand, weather might be more friendly in the future and eventually the supply and demand picture will be more favorable. 44 top funds had a bullish position in Southwestern Energy Company (NYSE:SWN) at the end of the fourth quarter, up 7 funds from the previous quarter.

Disclosure:None