Every investor wants to latch on to a low-priced stock and watch it zoom… while you are holding it, of course. Today, we are going to break out the trusty screener and look for stocks under $10 that meet some of William O’Neil’s (founder of the Investors’ Business Daily) CAN SLIM criteria. 1 O’Neil wrote about his strategy in the popular How to Make Money in Stocks: A Winning System In Good Times or Bad.
- C = Current Quarterly Earnings growth of at least 25%.
- A = Annual Earnings Growth of at least 25% for the last three years.
- N = New Product, Service, Management, or Price High.
- S = Supply and Demand, i.e. heavy volume on up days.
- L = Leader or Laggard. We’ll measure this using Relative Strength.
- I = Institutional Sponsorship. How much do money managers own?
- M = Market Direction. This one is almost a gimmie as stocks have been in bull mode.
As mentioned up top, our universe will be limited to companies trading for less than $10. The screener says there are more than 3,500 companies under a ten spot.
Our number dwindles significantly using the C criteria of 25% year over year earnings growth. Now, we are working with a list of a hair under 900.
And the list gets reduced to a more workable number of 28 companies with revenue growth of at least 25% for the last three years.
We are going to skip S and L for now and move straight to Institutional Ownership. We’ll get back to the two technical views next. We will set the minimum ownership requirement to 30% of the shares outstanding. This leaves room for more institutions to buy in, which could generate buying pressure and drive prices higher.
The list of companies that qualify is down to 10.
Champions Oncology, Inc. (CSBR)
Neos Therapeutics, Inc. (NEOS)
RedHill Biopharma Ltd. (RDHL)
Harrow Health, Inc. (HROW)
HTG Molecular Diagnostics, Inc. (HTGM)
Evolent Health, Inc. (EVH)
Finjan Holdings, Inc. (FNJN)
Lilis Energy, Inc. (LLEX)
Antero Midstream Corporation (AM)
Scorpio Bulkers Inc. (SALT)
Now, we are going to double back to the companies’ stock charts to see which meet the Up Volume and rising Relative Strength requirements. Only two catch our attention.
NEOS has been in a downtrend for most of the last three-months. However, the most recent downturn stopped at a higher low than the previous low. The price is butting heads with the 50-day moving average and a 50 relative strength reading. If NEOS can get to the better side of $1.37 and finish print a close there, it could find its way to $1.70ish.
HROW looks solid on the weekly chart. The green volume bars (up days) are considerably taller than the red (down days) bars. Shares have sold off from a recent high, but still trade with a relative strength rating above 50. Harrow Health could attract buyers around support at $7.
Along with strong growth numbers, HROW appears to be a good value play. The company trades at just 6.3 times earnings-per share, although earnings aren’t expected to increase year-over-year. Longer-term, analysts project a five-year growth rate of 15% a year. 2 At its current P/E of 6.3, the drug maker trades a 58% discount to its expected growth rate. It also trades at a 35% discount to the street’s one-year price target of $11.38. 3
Both stocks are thinly traded and are suitable for high-risk, high-reward investors as low volume stocks can be highly volatile. The duo could be ready to move higher in the intermediate term based on their stock charts; however, Harrow Health has the superior fundamentals story in our opinion.