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Tickers in this Article: ITI, LQDT, CAW, GPX, PG, XOM, ADP
If you do an internet search for the phrase "Stocks under $10", countless sites offer to help you find the next home run micro-cap. It's awfully enticing to buy a company's stock at $5.50 and watch it shoot to the moon, providing an early retirement gift. But, investing in stocks, whether they're trading at $10 or $100 requires patience and commitment.

That's the rub when investing in small stocks; there's plenty of potential reward but also a heavy dose of risk. So lets get to it, here are four stocks all trading under $10 that could add a wallop to your portfolio without keeping you up at night. (For tips to keep in mind when buying low-priced stocks, check out The Lowdown On Penny Stocks and How To Evaluate A Micro-Cap Company.)

Iteris Inc. (AMEX:ITI)
Iteris is a leader in traffic management solutions - that's real traffic, not internet traffic. It provides both public and private entities with video image processing and computer software that controls vehicle flow. Iteris has been in business since 1993, and fiscal 2008 is shaping up to be its best year ever. Highlights for the third quarter ended December 31, 2007 include a sales of $15.4 million (an increase of 6%) operating income up 50% to $1.1 million and a gross margin increase of 310 basis points. Most impressive is the year-to-date earnings per share (EPS), up 200% to 12 cents from 4 cents in the same nine month period in 2006. Full-year earnings are due May 29. The two analysts that cover the stock on MSN Money have an average estimate of 16 cents per share. I believe it could be a penny or two higher given the operating margin expansion in recent quarters. Over the past 10 years its stock has been as high as $29 in February 2000 and as low as 60 cents in July 2003. Keep in mind there are still risks at these trading levels but the potential reward is significant.

Liquidity Services (Nasdaq:LQDT)
Liquidity Services does exactly what its name suggests; it provides buyers and sellers of surplus assets a convenient online auction marketplace to transact business. Companies like The Stanley Works (NYSE:SWK) use the online auction sites to remarket and sell discontinued merchandise. Joseph Scarpantonio, manager for inventory liquidations, believes that doing this improves the reverse logistics process by speeding up and increasing the return on outdated merchandise from retailers. Helping clients get rid of their excess inventory is a growing business. In the second quarter ended March 31, 2008, it grew sales by 28%, adjusted EBITDA by 21% to $5.7 million and adjusted EPS by 20% or 2 cents. Company guidance for 2008 calls for adjusted EPS of 51-53 cents. With a price-to-sales ratio close to 1, a trailing price-to-earnings ratio of 24 (when the industry P/E is 30), zero debt and a business model that does well in good times and bad, you can hold it with little stress. (Find out more on ratios in Use Price-To-Sales Ratios To Value Stocks.)

CCA Industries (AMEX:CAW)
Think of CCA as an extremely small version of Procter & Gamble (NYSE:PG). CAA's product lines include dietary supplements, skin care, oral care, nail care and many others. In business since 1983, 40% of its yearly revenue comes via Wal-Mart, its biggest customer by a country mile. Having the retail behemoth as a significant partner is both a blessing and a curse. For the year ended November 30, 2007 it made 79 cents per share, just one cent less than in 2006, on $3 million less in revenue. For the first quarter ending February 29, 2008, net income is down 8% to $344, 000. Management is moving away from media advertising, choosing instead to use co-operative advertising with its retail partners. The move is saving CCA money in the short-term, and possibly making it more in the longer term. In late 2006, Dubilier & Co. offered $12 per share for its common stock. The deal didn't happen due to a lack of financing but Claymore Advisers LLC still saw enough value to add almost 8,000 shares to its portfolio as seen in public filings on May 9, 2008. This along with an 11 cent dividend makes it an attractive stock at current prices.

GP Strategies (NYSE:GPX)
Through its General Physics subsidiary, GP Strategies provides Fortune 1,000 companies with workplace optimization training. Clients include Exxon Mobil (NYSE:XOM), BMW and Wyeth (NYSE:WYE). Revenue in 2007 was $248.4 million, up $69.6 million from the previous year. Nearly all the growth ($65.5 million) came from buying Sandy Corp. from Automatic Data Processing (NYSE:ADP) in January for $11.7 million. So far, it looks like a brilliant acquisition. Q1 2008 sales were up 25% with positive contributions from the three business segments; most notably a 38% increase from Sandy. EPS was up 42% to 17 cents from 12 cents. With both price-to-sales and PEG ratios below 1, it provides the perfect mix of value and growth. Given the corporate training industry commercial market was $56 billion in 2006 and 58.5 billion in 2007, GPX has a lot to offer investors in the future.

Buy Low, But Smart
Investing in low-priced stocks might carry more risk but there is also potential for major gains. The money you might make or lose will not be based on how many stocks you own, rather how much money you have invested. These four stocks are just some examples of lower-prices options, with decent fundamentals. They could become the story of when you took the chance, got in really low, and padded your pocket.

Before buying any stock you should always do your own research. To get started, check out Due Diligence In 10 Easy Steps.

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