Up-and-coming stocks costing $12 or less

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Jennifer Schonberger

Look at a list of any day’s top performers and you’ll see that low-priced stocks almost always dominate. Of course, the lists of the biggest losers are also often filled with low-priced stocks.

These stocks are risky because the underlying companies are either small or troubled. Still, the hunt for the next big thing tantalizes.

In that spirit, we’ve identified three stocks that have the potential to shine over the next few years. (Note: share prices shown are as of April 10, 2012.)

Kodiak Oil & Gas – Symbol KOG; recent price, $9.04

Investors are going gaga over shale. Huge new discoveries and improvements in technology for extracting oil and natural gas from rock formations are putting the U.S. back on the road to energy independence.

Denver-based Kodiak has a strong foothold in the Bakken oil-shale formation, a 200,000-square-mile swath of land that contains the largest known reserve of light sweet crude oil in North America.

Kodiak produced the equivalent of 17,000 barrels of oil per day last year, analysts estimate, and they project that production will hit 30,000 barrels per day by the end of 2012. Analysts forecast that sales will leap 360 percent this year, to $637 million, with earnings nearly quadrupling.

Points International – PCOM; $10.52

Just about every major consumer business tries to lure customers with some sort of rewards program. Points International helps companies administer their loyalty programs. It counts among its clients various airlines, Amtrak, Best Buy and Starbucks.

The Toronto company also operates Points.com, the only website at which consumers can register their rewards programs, redeem and buy points, and trade points with other people.

Points’ profits are growing briskly. Analysts estimate that earnings will more than double in 2012.

Velti – VELT; $11.34

When Bose, the consumer-electronics company, wanted to promote a new headphone model, it turned to Velti, which placed ads on a smartphone song-recognition app.

Users who clicked on the ad were taken to a mobile website. On the ad’s first day, 70 percent of users who visited the site clicked the “buy now” button.

Such is the appeal of Velti, an Irish company that also manages mobile ad campaigns for such companies as Intel and Johnson & Johnson.

Velti, which went public in January 2011 at $15 per share, coasted to nearly $20 before crashing to its current price over concerns about the company’s exposure to weak European economies and a disappointing earnings report.

But the mobile-ad market is exploding: Sales were estimated at $13 billion in 2011 and are expected to hit $29 billion by 2014. Velti is well positioned to benefit from that growth. Analysts see earnings soaring 89 percent in 2012.

Jennifer Schonberger is a staff writer at Kiplinger’s Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit www.Kiplinger.com.
© 2012 Kiplinger’s Personal Finance