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Beware of Stocks Under $10

A story today from BW colleague Karyn McCormack makes an interesting observation: There are a lot of brand name stocks trading below $10 these days. If your share price is under $10, that makes you a second-class stock in many investors’ eyes. It seems like an arbitrary distinction, but stocks under $10 are assumed to be risky and lower quality. Hedge funds and investing methodologies often have a blanket rule, forbidding the buying of any stocks priced that cheap.

However, a list of stocks in the under $10 bargain bin now include Ford (F), Motorola (MOT), Sprint Nextel (S), Washington Mutual (WM) and several airlines. General Motors (GM) could be joining them soon. The article is worth a read here, and a slideshow of the stocks is here.

UPDATE: After falling 15.1% on Wednesday, GM shares closed at $9.98. That’s the automaker’s lowest share value since Sept. 13, 1954!

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