Harry Domash's Winning Investing

Cheap Stocks Not!

Judging from my mail, many of you are looking for beaten-down stocks trading in the under $5 per share range.


But don’t go there. Cheap stocks get that way because most market players see them as “done for.” And in my experience, they’re usually right.

In fact, I recently spent some time researching whether, on average; you’d make more money buying cheap stocks or expensive stocks. Guess what?

Research Says

All else equal, you’d score higher returns buying $10 stocks than $5 stocks, $20 stocks than $10 stocks, etc. In fact, that relationship goes all the way up to $200. That is, stocks priced at $200 per share average higher returns than those going for $100 per share.

Also, my research has found that stocks that have either been upgraded to “strong buy” or “buy,” and/or had their price targets raised by two or more analysts, tend to outperform the overall market.

Not Cheap & Analyst Upgrades

With all that in mind, here are four stocks; trading for $11 or more per share, that were also upgraded (buy/sell rating or price target) by at least two analysts within the past few days.

•  Atlas Air Worldwide (AAWW) operates a cargo airline, provides passenger charter services, and leases aircraft to commercial airlines. Recently traded around $28, roughly at breakeven for the year, but down from its February $34 peak. Recent analyst actions include ratings upgrades from “neutral” to positive” and from “peer perform” to “outperform” with target prices of $39 and $32, respectively. 

•  Intercontinental Exchange (ICE) operates global online financial marketplaces used to trade stock futures and other exotic securities. Recently traded at $88 per share, about 7% off of its February high, Year-to-date, it’s only down around 4%. Recent analyst actions include an upgrade to “buy” with at $106 price target from “hold” and a lift in price target to $102 from $93.  

•  Science Applications International (SAIC) is a technology consultant to U.S. government agencies on projects involving defense, intelligence and space issues. Recently traded at $82, down 14% from its February high and down 7% year-to-date, Recent analyst actions include an upgrade from “neutral” to “buy” with a $97 price target and another price target boost to $94 from $91.

•  Ares Capital (ARCC) is a Business Development Company (BDC). BDCs are a special type of corporation created by Congress to encourage lending to middle market sized businesses. BDCs can pay high dividends because they don’t pay federal income taxes as long as they distribute at least 90 percent of taxable income to shareholders. Ares currently pays a 14.3% dividend yield. Recently traded at around $11.50 per share, down 40% from its February high and down 39% year-to-date. Recent analyst actions include ratings upgrades from “neutral” to buy” and from “market perform” to “outperform” with target prices of $16 and $14, respectively. 

Those are my ideas. But do your own due diligence, the more you know about your stocks, the better your results.

published 4/28/20

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