Ask a Fool: Are There Any Stocks Under $10 Worth Buying?

By Matthew Frankel Markets Fool.com

Q: Are any stocks under $10 per share worth buying now?

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First of all, it's important to point out that for the most part, a stock's price is an arbitrary number. Think of it this way: If Company A has 1,000,000 outstanding shares of stock that trade for $5, and Company B has 100,000 shares that each trade for $50, both companies are worth the exact same amount of $5 million.

Having said that, there are some advantages to lower-priced stocks. For one thing, you may be able to invest more of your money. As I write this, one share of Amazon.com trades for $938. If you have $1,500 to invest, you can only afford to buy one share of Amazon, leaving $562 of your money sitting on the sidelines. Lower-priced stocks also allow you to buy more shares, which is important if you like to use options strategies, as options trade in multiples of 100.

One sub-$10 stock I like right now is Sirius XM (NASDAQ: SIRI), which was a recent addition to Berkshire Hathaway's portfolio. The company has a dominant position in the subscription-based radio industry, strong revenue growth in recent years, and it produces excellent free cash flow.

Staples (NASDAQ: SPLS) is another low-cost stock I have my eye on. There are certainly some challenges in the retail industry right now, but Staples is well-positioned to come out on top in the office superstore business. The company has a leading market share and a strong balance sheet, and is adapting well to the evolving retail environment. It also trades for an extremely low valuation of just 10.5 times forward earnings.

While many sub-$10 stocks are highly speculative, these two are market leaders that could deliver strong returns in the coming years.

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Matthew Frankel owns shares of BRK-B. The Motley Fool owns shares of and recommends AMZN and BRK-B. The Motley Fool has a disclosure policy.