Stock bargains: 5 blue chips under $10

By The Motley Fool

You know it's bad when even blue-chip companies are populating my monthly pool of attractive stocks trading at single-digit prices.

The pool, which deepens with every downtick, now includes a number of companies with market capitalizations of at least $1 billion.

There are risks aplenty in scouring the single-digit minefield, but there are also rewards for those who choose correctly.

The 120,000-strong MSN CAPS community is organized to help investors choose correctly. CAPS participants have rated more than 5,400 stocks, awarding five-star ratings to the companies that most command confidence.

Each stock's CAPS page is a good place to start your research; you can find a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made. Turn to member blogs for insight and opinion. And the CAPS stock screener tool lets you find companies that satisfy your investment criteria.

• More than 100 'blue chip' stocks selling for less than $10 a share

Let's take a closer look at a handful of big-cap stocks trading at less than $10 a share.

Billion-dollar companies on sale?

Company	Sector	Market cap	Forward price-to-earnings ratio	Year-to-date change
Citigroup	Financial services	$35 billion	-3.7	-78%
Time Warner	Entertainment and media	$29 billion	7.9	-51%
News Corp.	Entertainment and media	$17.5 billion	6	-69%
Starbucks	Coffee and related products	$5.9 billion	10.5	-60%
JetBlue	Regional airline	$1.2 billion	-108	-26%

I'm not a fan of the banking sector, and Citigroup (C, news, msgs) is a stock I recommended selling six weeks ago. Today, however, an investor could pick up two shares for what a single share cost in early October.

I feel the worst of the massive write-offs and dividend-slashing is over at Citigroup. It may not be the strongest banking company, but it has what it takes to be a survivor.

As sector consolidation claims the weaker players, Citi is in a much better place than the market is giving it credit for.

• Company Focus: Is Citigroup already too big?

Citigroup's management received a vote of confidence today when a major shareholder, Saudi Prince Alwaleed bin Talal, said he plans to raise his stake in the company to 5%. The prince, whose stake had been less than 4%, said he's buying shares because Citi is undervalued and because he supports management moves to cope with the credit crisis.

Was it a mistake for AOL and Time Warner to get together at the peak of the dot-com bubble? Of course. But now, with Time Warner (TWX, news, msgs) trading at a fraction of what either company was commanding before the megamerger, it may be time to send in the value hounds.

Time Warner is not a broken company. It reported respectable quarterly earnings this month, posting a better-than-expected profit from continuing operations. The company is looking to earn from $1.04 to $1.07 a share this year, valuing the stock at less than eight times the period's projected earnings.

While AOL is a fading asset that Time Warner should have sold off years ago, the company still has dependable cable assets, a stagnant but reliable print publishing arm and a movie studio that cranks out hits every so often.

Time Warner is looking to generate $5.5 billion in free cash flow this year. It doesn't have to be a well-oiled machine to give today's buyers healthy turnaround gains.

Another media giant that has fallen on hard times is Rupert Murdoch's conglomerate. Can you believe that News Corp. (NWS, news, msgs), which made the dot-com buy of the decade when it snapped up leading social networking site MySpace, now trades in the single digits?

Clearly, it has been hit hard by its exposure to print and broadcasting advertising. But its online video site Hulu, owned jointly with NBC Universal, is projected to pull even with rival YouTube in terms of ad revenue by next year.

Bottom of the cup?

Starbucks (SBUX, news, msgs) is another stock that has been halved in value within the past two months.

Is Starbucks a mess? Of course it is. Its latest quarter was a disaster, and things will likely get worse in the near term. An 8% plunge in same-store sales may very well widen as the economy continues to shed jobs and those lucky enough to have a morning commute sidestep pricey latte pick-me-ups.

Still, the company has a killer brand. And it is widening its product offerings in a way that won't alienate regulars. I've dissed the stock over the years, but enough is enough. Starbucks is finally cheap.

JetBlue (JBLU, news, msgs) may not have that enviable streak of profitability, but I love the product (the four times I've flown with the carrier).

With fuel prices plummeting and the legacy carriers scaling back, it's a good time to be JetBlue. Like the carrier's low fares, the stock offers a compelling value.

Even Southwest Airlines (LUV, news, msgs) has been buffeted by airline industry turbulence, and its shares have also fallen into single-digit territory, giving investors another option for picking up a former highflier when its shares are grounded.

Turnarounds never happen overnight. These stocks aren't trading in the single digits by accident. But if I'm right about the catalysts, they may not be trading in the single digits much longer.

This article was reported and written by Rick Aristotle Munarriz for The Motley Fool. At the time of publication, he owned none of the stocks mentioned.