Stock up on bargains David PottsNovember 28, 2011 . Dollar smart...

Stock up on bargains David Potts
November 28, 2011
.
Dollar smart … just a few bucks can secure a decent stockholding in a company with solid prospects for share price growth.

With the market how it is, more stocks are going for less than $1, so it could pay to rummage through the bargain bin.

These specials aren't confined to speculative mining explorers, either.

The going sharemarket discount is 30 per cent below normal values.

Advertisement: Story continues below The trick is to separate shares that are on sale for less than $1 because they have a long way to grow from those that have passed their use-by date. New stocks suffer because analysts don't follow them and fund managers don't hold them.

Being unknown might be death in a bear market but it's almost a thrill in a bull one.

In an upswing they suddenly attract attention and are re-evaluated.

Ever heard of Allied Mining and Processing?

You have, you know. It was far and away the best-performing stock over the past 20 years, with a return of 5083 per cent a year, according to CommSec.

Still can't guess? It's the original name of Fortescue Metals Group.

While it was a spectacular success, the other reason small stocks are more likely to out-perform, if you pick the right one, is that they are riskier. ''Taking a bit more risk can enhance a portfolio return in the long term,'' the chief executive of research house and fund manager Lincoln, Elio D'Amato, says.

Then there are older stocks that have landed at Vinnies but are sprucing themselves up. A bear market like this isn't quick to forgive and is prone to mark them down too far.

So here are 10 stocks trading at a $1 or less analysts say are discounted too far, starting with the cheapest:

1. BSA

Price: 18.5 cents

BSA installs heating, ventilation, airconditioning and fire alarms in offices and factories. It also has a division, oddly named Triple M, that hires out technicians to telcos, broadcasters and utilities, plus it owns Mr Antenna and Mr Alarms.

''It's a nice steady business and pays a 10 per cent franked dividend,'' the chief investment officer of Clime Investment Management, John Abernethy, says.

Because the price is so low, the 2¢ a share dividend produces a yield of 15 per cent after taking the tax-free 30 per cent franking credit into account. It also paid an extra 1¢ special dividend in 2010-11.

The company has just extended its deal with Foxtel, installing and servicing satellite connections for another four years. It reported a net profit of $8.6 million in 2010-11, up 7 per cent.


Read more: http://www.theage.com.au/money/stock-up-on-bargains-20111126-1nzsd.html#ixzz1ewkFPr8M