Two Stocks for $10

When you ask people why they don’t invest, many will tell you it’s because it’s too expensive. That usually doesn’t mean they think the commissions are too high or the management fees too rich, but that they think they have to sink too much money into an investment account to make it worthwhile. That’s not entirely true, though.

Yes, you should own more than one or two stocks; ideally, you’d want at least a handful. And yes, most of the safer blue chip stocks will cost you at least $25 a share, if not closer to $100 or more. Then there is the issue of commissions, which can eat into your investment capital if you’re starting from a low base.

But then, this is the internet era and there are brokers out there today who operate almost entirely online, keeping costs down and commissions low. I know of at least two brokers who actually offer commission-free trading, with some caveats of course. And while most stocks that are extremely cheap are extremely cheap for a reason, there are some diamonds in the rough out there. The trick is being able to find them.

While Roadrunner Stocks isn’t an investment service that focuses on low-priced stocks, Chief Investment Analyst Jim Fink has refined a system that has a solid track record of finding those diamonds that just need a little polishing. And many of those diamonds can be had for less than $25 a share.

Shares of NMI Holdings are fetching $25 at the moment though, and they aren’t even getting $10. Right now they’re at just less than $8, despite that fact that the company is in the sweet spot of the real estate market.

A private mortgage insurer, as opposed to one with ties to the government, NMI makes mortgage lenders whole in the event that borrowers stop making payments and default on the loan. That sounds like, and frankly is, a risky business. NMI takes a unique approach to managing that risk though, especially since it can’t fall back onto taxpayer money if it gets into trouble.

While most private mortgage insurers depend upon the lender actually making the mortgage to do their due diligence, NMI actually goes through its own underwriting process on each mortgage it insures. As a result, it doesn’t place a lot of onerous requirements on borrowers, pay offs on defaulted loans quickly and actually charges a lower premium than most.

Despite having seemingly perfected the mortgage insurance business model, the company isn’t profitable at the moment, but it’s still young. It just went public in 2013 and the real estate market turnaround is just beginning to reach a critical mass, with sales of both new and existing homes approaching pre-recession levels. As the market continues to improve, NMI will see its profits grow along with it. Over the course of 2014 alone, its new insurance written grew from $158 million to $1.69 billion.

In fact, Jim reckons it is one of the best value plays in his portfolios today.

Brocade Communications Systems is another high value, low cost stock that Jim has in his portfolios. In fact, it’s up by more than 80% since he began recommending it a little over a year ago.

A somewhat obscure maker of networking equipment that is generally overshadowed by its behemoth competitors, it has developed a switching technology that operates as speeds those competitors are just beginning to match. In 2011, Brocade (NSDQ: BRCD) introduced a 16 gigabyte per second fiber channel switch, which is used in designing storage area networks (SAN) that connect lots of computers to lots of different storage devices and share data. The 16 gigabyte switch is important because as networks grow, you need switches capable of handling more data to allow it to continue flowing smoothly.

On top of that, it has been introducing new and even better products at a brisk pace, while partnering with major tech companies to meet growing storage needs in the age of big data.

Given its high level of innovation, annual revenues have been growing by better than 14% over the past decade and earnings per share jumped by nearly 18% between 2013 and 2014. It has attracted more and more positive analyst attention given its success, with earnings forecasts growing pretty consistently quarter-over-quarter. Despite that, you can still pick up shares for just a hair more than 10%.

Those are just two examples of stocks with solid prospects that you don’t have to break the bank to buy, and there are several more in his portfolios. And if you’ve got an eye for small cap stocks that offer compelling values and the potential to break higher, Roadrunner Stocks is just the ticket for you.