3 Stocks Under $12 Set to Double

I love a bargain, whether it be in a store, online or in the stock market. I
particularly like low-priced stocks because they allow me to take a substantial
position in companies whose stories I really like. Many times these are just
undiscovered gems, or businesses nobody really understands, or they have a stink
on them from some previous event but are engaged in a turnaround. Tenet
Healthcare That last situation describes Tenet Healthcare (NYSE: THC ). Tenet
owns 49 acute-care hospitals around the country, along with interests in an HMO
and a management services subsidiary (in other words, insurance services). Its a
nicely rounded health care play and, as we know, people always are going to get
sick. Tenet Healthcare is not going gangbusters, but it is doing a nice solid
job of turning its business around. Free cash flow has been steadily improving
over the years, it slowly has been paying off debt, and THC stock has attracted
interest across several respected mutual funds including some of my favorites,
such as T. Rowe Price Mid-Cap Value Fund, and Fidelity Leveraged Company Stock
Fund. THC shares trade at only $5.26, which is about a 14 P/E, equivalent to its
long-term growth rate. I think this stock can double much faster than in the
several years its growth rate might suggest, given how well its turnaround is
faring. I think earnings estimates will improve dramatically and set the stage
for a big jump in the stock price. E-Trade E-Trade (NASDAQ: ETFC ) is a classic
play in the cant shake the stink category. The company was in real trouble when
the financial crisis hit, as it was exposed to some really bad subprime holdings
in its portfolio. E-Trade held $3 billion in derivatives tied to these
mortgages, known as collateralized debt obligations and asset-backed securities.
E-Trade has roared back this year and just reported earnings that beat estimates
by 33%. ETFC is trading at a 17 P/E at $11.41 (it actually was below $10 to
start the week). Theres always been speculation that the company would be sold,
and Citadel Advisors a hedge fund and the companys largest shareholder at 9.9%
wants management to do exactly that. The companys brokerage business alone is a
prime asset. I see a distinct possibility of a double here, not only because of
the buyout, but because of the companys consistently improving underlying
financial position and increasing earnings. Demand Media I always bristle when I
see Demand Media (NYSE: DMD ) offering freelancers the chance to write evergreen
content articles for their many websites, because the pay is absolutely
atrocious. However, supply of freelance writers exceeds demand, and so Demand
Media can demand a low rate of pay and writers take it. Thats led to a very
efficient cost structure for a company that has figured out how to generate
traffic to its popular information-driven websites. I was shocked to discover
Demand Media is expected to go from break-even in 2010 to a 23-cent-per-share
profit this year, and 38 cents next year. While there is no real barrier to
entry in this arena, its websites slowly are becoming go-to names, and their SEO
capabilities are driving that traffic nicely. DMD has $103 million in cash and
no debt. It is a speculative play, but at $6.38, there is not a lot of downside
in the near term, and potentially a double going forward. The company was up
7.2% on Thursday, almost twice that of the overall market, which was in full
bull mode. Investors interested in finding other doubles under $12 need to keep
an eye on fast-growing, smaller companies. The trick, however, is to be careful
of stocks that havent been discovered at all. I happen to love DGSE Companies
(NASDAQ: DGSE ) and Cash Store Financial Services (NASDAQ: CSFS ), both of which
I believe are easy doubles, but the stocks are very illiquid, the spreads can be
large, and it isnt easy to open or close positions as a result. So be sure you
know what you are getting into before you dive in. As of this writing, Lawrence
Meyers was long EFTC, DGSE and CSFS.