Five Under-$10 Stocks to Buy Now

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#3 MGIC Investment Corp. (NYSE:MTG)

– Number of Hedge Fund Shareholders (as of June 30): 46
– Total Value of Hedge Funds’ Holdings (as of June 30): $616.07 million
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 30.40%

In terms of peer valuation, MGIC Investment Corp. (NYSE:MTG) is attractive. When American International Group Inc (NYSE:AIG) sold its mortgage insurance business on August 16, for example, it received a 9.5-times 2015 EPS multiple for the division. If the same multiple were applied to MGIC, the company’s stock would be around 30% higher. Many hedge funds have taken notice. 46 funds that we track were long MGIC Investment Corp. (NYSE:MTG) at the end of the second quarter, up nby nine funds from the end of the March quarter. If industry pricing improves or the sector consolidates further, look for MGIC’s valuation to potentially rise.

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#2 Office Depot Inc (NASDAQ:ODP)

– Number of Hedge Fund Shareholders (as of June 30): 47
– Total Value of Hedge Funds’ Holdings (as of June 30): $296.88 million
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 16.30%

Although its same-store sales are weak, it is hard not to own Office Depot Inc (NASDAQ:ODP) given the stock’s value. After a botched merger attempt, Office Depot’s management has promised to focus on unlocking synergies from its merger with OfficeMax, which is expected to amount to around $750 million in annual savings by the end of 2017. The company also expects to save an incremental $250 million in annual costs through various efforts, including shuttering an additional 300 stores over the next few years. If Office Depot’s management can deliver, its stock has substantial upside from its currently depressed levels. 47 funds owned shares of Office Depot Inc (NASDAQ:ODP) at the end of the second quarter, down by 11 funds quarter-over-quarter.

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#1 Rite Aid Corporation (NYSE:RAD)

– Number of Hedge Fund Shareholders (as of June 30): 50
– Total Value of Hedge Funds’ Holdings (as of June 30): $1.25 billion
– Hedge Funds’ Holdings as Percent of Float (as of June 30): 15.90%

With 50 hedge funds in our database long the stock at the end of June, Rite Aid Corporation (NYSE:RAD) is the top under-$10 stock among the smart money set. Unlike the bull case for other stocks, many funds who own Rite Aid are long for arbitrage reasons. In October of 2015, Walgreens Boots Alliance Inc (NASDAQ:WBA) agreed to buy Rite Aid for $9 in cash per share in a deal that was expected to close in the second half of 2016. Rite Aid’s substantial discount to the deal terms shows that some funds don’t think the FTC will give its blessing to the merger. If the deal goes through, Rite Aid has 18% upside.

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Disclosure: None







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