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Ten terrible stocks to buy now

The world’s biggest stock exchange has started breeding penny stocks, says this U.S. microcap specialist, so why not try and hit the jackpot.

Crisis may breed opportunity, but there is a limit, isn’t there?

There are certain chances investors are just not willing to take in a wayward market like this, aren’t there?

Well let’s find out. A leading American expert on microcaps challenges investors to take on the biggest basket cases on the stock market.

Mr. Max Bowser looked at the New York Stock Exchange in this time of turmoil and observed “the dignified big board has become the breeding ground for penny stocks.”

So he set himself a project. Identify 10 NYSE stocks trading for 75¢ a share or less. The search for these once-proud bottom feeders is the headline story in latest edition of The Bowser Report.

Mr. Bowser arrived at a list of stocks he calls “The Terrible Ten” and invites his subscribers to buy every one of them and see what rewards they may reap.

Noble experiment

When this editor began his “noble experiment” there were 19 stocks on the NYSE trading under 75¢. He narrowed the list down to 10. One of them, by the way, is a Canadian company that was accustomed to good reviews earlier in this decade.

“As a one-time venture, we suggest that you buy all 10 — 200 shares,” he tells his readers. “Don’t guess which one will take off and then put all your funds in that one stock.”

He then recommends that they follow his “Selling Plan.” This means selling half of one’s holdings when the stock doubles in price and selling the rest only if the shares fall by 25 per cent or more.

We can skip to the last page and tell you that the “Terrible Ten” plan is off to a good start — four of the ten stocks have had brisk jumps in price in the short time since Mr. Bowser went to press. The other six continue to languish below the 75¢ line.

But let’s get on with the story and identify the Terrible Ten.

A higher reputation

In alphabetical order, here are the ten losers selected by Mr. Bowser, with their 52-week highs and their price at the closing bell on Friday.

Alesco Financial (NYSE-AFN), a real estate investment trust, has traded as high as $4.99 and now sits at 45¢.

Anthracite Capital (NYSE-AHR), yet another real estate investment trust, crested at $9.59 and closed Friday at 49¢.

The Canadian entry is Intertape Polymer (TSX/NYSE-ITP), the packaging and plastic specialist that once had a higher reputation among analysts and investors. Its 52-week high is $3.41 and its current price is 47¢ — 56¢ on the TSX.

Guaranty Financial (NYSE-GFG), a savings bank headquartered in Texas, has been as high as $12.77 and is now at 58¢.

Journal Communications (NYSE-JRN) is one of the early jumpers. Based in Milwaukee, this newspaper, radio, printing and direct mail firm has a 52-week high of $7.88 — and has had a spike up to $1.74.

LL&E Royalty Trust (NYSE- LRT) a petroleum royalty trust, has a modest high of $2.60 and closed Friday at 57¢.

Nautilus (NYSE-NLS), the well-known fitness equipment maker, is getting back into shape. Its 52-week high was $6.85. It has now pumped itself back up to $1.09.

Phoenix Companies (NYSE-PNX), a big insurance firm, has been the premium comeback story so far. Its 52-week high is $13.98 and it has recovered to the tune of $1.94 with a recent leap.

Another notable name, tech services firm Unisys Corp. (NYSE-UIS) has also started a rebound. Its 52-week high is $5.11, its current price $1.59.

Finally, coated paper specialist Verso Paper Corp. (NYSE-VRS) has been as high as $9.35 and now sits at 68¢.

Size is important

“For our one-time experiment, size is important,” says Mr. Bowser, “because if some of these outfits can get their acts together, institutions and deep-pocketed individuals will jump on them.”

And they get a lot of exposure just being on the NYSE.

There is a rather distinguished precedent for this bottom-of-the-barrel approach, the editor points out. In 1939, the world was in turmoil. World War II had broken out in Europe and the stock market was still a very uncertain place.

John Templeton bought every stock on the New York exchange selling for less than $1.00. He went so far as to borrow $10,000 to help buy the shares of no less than 104 companies — and 34 of those were bankrupt.

“As the then-young Tennessean anticipated, the U.S. economy rebounded strongly,” adds the editor. He held on for four years and quadrupled his purchase price.

When he passed away last year at age 95, Sir John Templeton had built a legendary reputation on that bold beginning.

But be careful how low you go, cautions the editor. One fellow called Bowser headquarters and asked if there was a newsletter that recommended stocks selling for 5¢ or less. If such stocks went up to $1.00 each, he could turn $100 into $2,000.

“We aren’t keen on this concept,” Mr. Bowser concludes. “At 5¢, a stock has sunk so low that we would not anticipate much future for it.”

Of course we can’t tell whether the editor’s call to his investors has helped propel four of his 10 bottom feeders up the charts. Still, there is at least circumstantial evidence that you can turn profits with terrible stocks.

But there is a limit to what you should attempt, says Mr. Bowser. Terrible stocks, yes, but stocks that are almost dead, no.