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5 Top Stocks Under $10
for 2013

Top 5 Picks For Next Five Months
Now that the incredible performance of January 2013 is behind us, where do we go from
here? Are there specific sectors that appear to more promising than others? What small
cap stocks are primed for outperformance for the next 5 months?
We believe that technology will continue to rule the day with economically sensitive
stocks to follow, along with select retail stocks. On the technology side, security
software and some hardware appear to be the most attractively priced relative to
prospects, while energy, green tech and popular retail names are other choice industry
segments.
Echo Automotive Inc. (OTCBB ECAU - $2.03) is on the cutting edge of green
technology utilizing a novel approach and marketing strategy.
The Company develops technologies and products designed for the cost-effective
conversion of existing vehicles into highly fuel-efficient hybrids and plug-in hybrids. The
key to Echos strategy is the bolt-on nature of its solution that introduces little or, in
some cases, no additional points of failure, making it very low risk compared to
competing solutions.
The Companys EchoDrive system is a solution initially tailored for the fleet vehicle
market. Management believes that the current market seeks a solution to high fuel
prices but is not capable of producing an electric vehicle that has a favorable price point
to warrant large scale purchase. By using its flagship platform technology, ECAU bridges
the gap between all-fuel to all-electric motors by converting fleet vehicles into cost-
effective, fuel-efficient plug-in hybrids, while providing a 50% reduction in fuel costs.
EchoDrive is bolted onto new and existing vehicles cost-effectively to reduce a vehicles
fuel consumption. The EchoDrive components include an electric motor, system
controller and modular battery-packs that enable the right-sizing of the battery to help

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shorten the return on investment and align to the customers needs and budget.
With EchoDrive installed, these vehicles are then plugged in using any available power
source from a standard 110 voltage outlet to any industry standard rapid charger via the
integrated J-Plug, thereby increasing energy efficiency with grid power.
During operation of the vehicle, EchoDrive applies the stored energy via the electric
motor to assist the power train when the internal combustion engine is most inefficient,
significantly reducing the workload of the engine and the use of fossil fuels. Like hybrid
vehicles, EchoDrive recaptures energy for its battery packs when the vehicles utilize
their brakes. Additionally, EchoDrives unique engineering allows for uninterrupted
driving in the unlikely event of most system or component failures,
making EchoDrive an attractive alternative for critical fleet operations.
The Company will formally introduce the technology at the National Truck and
Equipment Association tradeshow held in Indianapolis, Indiana March 6-8, 2013.
Investors should note that the management team at ECAU is first-rate, with members at
the C-level boasting resumes with senior management experience in the automotive
sector, start-ups, and funding companies.
The stock is under major accumulation and we believe it will pick up steam as we get
closer to the tradeshow date and as deployment news occurs. Our near term target for
this news-driven stock is $4.00.

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Figure I. Technical Chart for ECAU
Source: BarChart.com
A lot has been written of late regarding a potential rise in natural gas prices. We are
leaning toward that camp as well, and what better way to play the trend than a company
that services the industry.
Heckmann Corporation (NYSE HEK - $3.96) operates as a services-based
company focused on total water and wastewater solutions for shale or unconventional
oil and gas exploration and production. The Company offers water delivery and
disposal, trucking, fluids handling, treatment, temporary and permanent pipeline
facilities, and water infrastructure services for oil and gas exploration and production
companies. It operates multi-modal water disposal, treatment, trucking, and pipeline
transportation operations in select shale areas in the U.S.
HEK also transports fresh water for production, and provides services for site
preparation, water pit excavations, and remediation. It serves customers seeking fresh
water acquisition, temporary water transmission and storage, transportation, treatment
or disposal of fresh water, and complex water flows, such as flowback and produced

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brine water in connection with shale oil and gas hydraulic fracturing drilling
operations. It also owns and operates a fleet of approximately 600 trucks for water
transportation and approximately 1,100 frac tanks.
Institutional ownership is nearly 30% and we believe that as natural gas moves higher,
so does the stock. Plus, considering that the founder of the Company is nearly 70 years
old, we would not be surprised to see a sale of the company in its future, especially as it
gains a critical mass of business. That critical mass could occur this year as revenue is
projected to explode this year by over 100%, with EPS of $0.20, versus a loss last year.
As sales growth is recorded we believe the stock will bust through its $5.49 year high
without much difficulty.

Figure I. Technical Chart for HEK
Source: BarChart.com



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The semiconductor arena has not been short on gainers, and this appears to be a trend
that will continue. One small cap stock with a higher sticker price that tends to follow
the semis is Orbotech Ltd. (NASDAQ ORBK - $9.18). Time and time again, I
have seen semis rise, and ORBK move higher just a few weeks later. It is up 10% since
the start of the year and based on seasonality in its primary businesses, we think that
management will guide estimates higher and that the stock will outperform even the
semis following 4Q12 results, to be announced next month.
Long a favorite of mine, and a major institutional small cap value holding, Orbotech Ltd.
has been at the cutting edge of the electronics industry supply chain, as an innovator of
enabling technologies used in the manufacture of the worlds most sophisticated
consumer and industrial products, for over 30 years. The Company is a leading provider
of yield-enhancing and production solutions, primarily for manufacturers of printed
circuit boards (PCB), flat panel displays (including LCD) and other electronic
components; and today, virtually every electronic device is produced using Orbotech
technology. The stock is a major beneficiary of resurgence in the flat panel LCD space, as
evidenced by a recent winning bid for $40 million worth of business, earlier this month.
The Companys automated optical inspection equipment carries an enviable 60%
market share in PCBs and over 90% in LCDs. The big growth in the 2013 production of
smaller form factors and more sophisticated mobile phones, tablets, and other hand-
held devices should result in sales growth and huge EPS growth this year.
ORBK appears to have passed the bottoming phase technically and seems poised to
reach the $12 mark, aided in part by a $30 million stock buyback. The Company is
currently projected by the Street to earn $0.57 in 2013, after a big loss in 2012 and we
would not be surprised to see margin expansion as the year goes on. As that occurs,
look for buyers of the stock to migrate from small cap value to small cap growth, which
could drive ORBK toward our target price by mid-year, or sooner.

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Figure I. Technical Chart for ORBK
Source: BarChart.com
Everyone is familiar with RadioShack Corp. (NYSE RSH - $2.80), even if you are
not a fan of the electronics chain. While ECAU is clearly a high-risk, high-reward play,
RSH is a value play that is also under significant accumulation.
RSH is a leading national retailer of innovative mobile technology products and services,
as well as products related to personal and home technology and power supply needs.
While founded as a source of electronic parts and power supplies, the Companys
bailiwick in the 21
st
century is to provide consumers with a targeted assortment of
wireless phones and other electronic products and services from leading national
brands, exclusive private brands and major wireless carriers, all within a comfortable
and convenient shopping environment. The Company employs approximately 34,000
knowledgeable sales experts globally through its retail network of approximately 4,700
company-operated stores in the U.S. and Mexico, 1,500 wireless phone centers in the
U.S., and 1,100 dealer and other outlets worldwide.

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In the middle of January, the Company terminated its mobility sales agreement with
Target (NYSE TGT) which on the surface was likely a good move as it was not adding
materially to operating performance.
However, we take a different approach to this move. We believe that the $4.4 billion in
annual sales retailer may have made this move as a precursor to a sale of the company to
either another retailer or a firm that may have preferred the Target contract not be
renewed. The stock has run substantially higher on no news, and we believe that could
be telling for a stock that trades with a market cap of less than $450 million, or 10% of
its revenue.
In our view, RSH could turn out to be a strong M&A play, and believe the price could
approach the upper $3.00 to low $4.00 range. Even without such a transaction, the
value stock seems to be in the midst of a turnaround, so investors with a longer term
outlook may still eke out sizable gains.

Figure I. Technical Chart for RSH
Source: BarChart.com

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We would be remiss in highlighting technology stocks without profiling our software
security pick. Zix Corporation (NASDAQ ZIXI - $3.32) provides email
encryption solutions in software as a service model in the U.S.
Its encryption service delivers information in a secure manner and enables the use of
Internet-based email for sensitive information exchange primarily in the healthcare,
financial services, insurance, and government sectors. It offers email encryption service,
a secure messaging service that allows an enterprise to use policy-driven rules to
determine which emails should be sent securely to comply with regulations or company-
defined policies. The Company also provides a patented solution, which analyzes and
encrypts email communications. Its services allow users to send encrypted email to any
email user at any email address by using the ZixCorp Best Method of Delivery
protocol, which automatically determines the direct and appropriate means of delivery,
based on the sender and recipient communications environment and preferences.
There is a lot to like about ZIXI and we are surprised it has stayed under the radar
screen for so long. ZIXI boasts major financial and health care clients who require the
highest level of email encryption and security. The Companys ZixDirectory the
worlds largest community of email encryption users with tens of millions of members
and more than 100,000 new addresses per week, is a key selling point given the huge
critical mass.
ZIXI is a high margin software company generating a healthy 25% operating margin
through the sales and service revenue generated from its Tier 1 customers. The stock is
trading at a low valuation (16x 2013 EPS of $0.20) for a company in this space,
especially considering the deep Wall Street research coverage for such a sub-$50M in
revenue firm. Still, this low valuation relative to its growth rate and its industry peer
group will not remain the case for long. Already it is beginning to trade on much higher
volume, and with the current price just below its 52 week high, we believe the next stop
is $5.00.

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Figure I. Technical Chart for ZIXI
Source: BarChart.com