Take a Flier on Low-Price Stocks


Take a Flier on Low-Price Stocks

Shares from these three companies are cheap after posting big declines last year, but they're making a comeback. Plus: Buy into bonds through exchange-traded funds.

Buy $20 in lottery tickets every week for a year, and the entertainment value ends with each drawing. But invest in 100 or 150 shares of a low-price stock, and you can savor the excitement for years. Plus, the odds of winning are astronomically better.

$1,000 IDEAS

Invest in a Stellar Fund

Buy Low-Price Stocks

Save for College

Defend Against Mother Nature

Find a New Career

Get a Tax Credit

Make Money Doing Good

Travel to Hawaii

Employ a Virtual Butler

Savor Wines of the World

Send Your Kids to Camp Cash

What Else $1,000 Can Do

We started our search with the Kiplinger.com stock screener and Value Line's database to look for companies whose shares are priced between $3 and $7 and which produce quality products, boast low ratios of share price to sales and book value, and -- this is important -- are posting gains this year after a sharp decline. If a fallen stock's price is creeping up, the market probably knows something.

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Design Within Reach (symbol DWRI, $5) has small stores in hip neighborhoods from Santa Monica, Cal., to Tribeca and many hot spots in between. The company sells high-design furniture, lighting and storage, much of the merchandise from Europe and Brazil. Although sales were up 30% from 2004 to 2005, to $158 million, the company lost $2.1 million last year. But DWR suffered financial-management and computer-system problems that are now being corrected. The problems were one reason the now-recovering shares fell 78%. If you don't like the stock, you'll swoon over the credenzas.

Phoenix Footwear Group (PXG, $5) owns high-end shoe brands, including H.S. Trask, which started in Bozeman, Mont., and is known for loafers made of American bison leather. In 2003 it added Royal Robbins, a travel-wear line sold in upscale outdoors stores. Sales were up more than 40% from 2004 to 2005, in this case to $109 million, and the company eked out a $1.2-million profit.


Hanger Orthopedic Group (HGR, $7) is named for James Hanger, a Civil War amputee who invented the modern prosthetic leg. In addition to fitting war-injury amputees, it supplies orthopedic walkers for weekend athletes recovering from broken bones. Hanger is a volatile stock known to fall on rumors of ever-lower Medicare reimbursements. But its revenues are growing, and last year the company posted a $12-million profit on $578 million in sales. Remember: You can't win if you don't play.

-- Jeffrey R. Kosnett

Buy into Bonds

Buying individual bonds or even bond funds can be a pricey proposition. But you can enjoy bond yields affordably through exchange-traded funds -- mutual funds that trade like stocks -- for much less than $1,000. The best of the bunch:

IShares Lehman Aggregate Bond fund (symbol AGG; $98 a share) tracks the entire bond market, making it a great one-stop, fixed-income investment. Almost 40% of the fund is in U.S. Treasury bonds and other bonds issued by government agencies, with the remainder in mainly high-quality corporate bonds. It yields 5.0% and charges just 0.20% annually for expenses.


To cushion your bond investments against inflation, consider iShares Lehman TIPS Bond fund (TIP; $99), which also costs only 0.20% annually. It invests exclusively in Treasury inflation-protected securities. TIPS increase in value as inflation rises. For instance, if the consumer price index climbs 1%, this fund will also increase in price by 1%. In exchange for the extra security, however, TIPS pay lower yields than other bonds. This ETF currently yields 2.1%.

-- Steven T. Goldberg