Plenty of brand name stocks are under $10

But the dangers are not to be underestimated, says Kent Croft, manager of the Croft Value fund. Croft made a big bet on battered Citigroup C in the early 1990s, which proved to be one of the fund's best-ever investments. But with banks hitting investors with unexpected write-downs of their asset values, the perils this time are larger, he says. "You're in a crisis situation right now. Financials now are in some ways unanalyzable," he says. "Because of that added difficulty, things can go down further."

The also-rans

Another major grouping of battered stocks includes firms going toe-to-toe with dominant competitors. Sprint Nextel has to deal with wireless industry giants AT&T ATT and Verizon VZ. Motorola faces Research in Motion RIMM and Nokia NOK Office Depot is taking on office-supply giant Staples SPLS. And Advanced Micro Devices AMD must contend with Intel INTC.

Corporate also-rans get a free pass during bull markets when investors are willing to give them up to 75% of the valuation of the industry leaders, Marcin says. But when the economy slows, investors gravitate to the industry leaders and punish those losing market share.

The special situations

Then there are companies like health care facility operator Tenet Healthcare THC and utility Dynegy DYN that have company-specific management or business challenges. And there are companies facing industry-specific challenges, such as Ford, which is trying to retool operations away from large SUVs amid soaring gas prices. Shares of Novell NOVL, a computer networking software maker, continue to fall as the company attempts to migrate customers to newer products.

And that's the big risk: A cheap stock can get even cheaper as the business deteriorates. A stock may "look statistically appealing, and investors (are) seduced by it," says Matthew Kaufler of Clover Capital. And that's the danger, he says, of buying a stock "because of a price decline and nothing beyond that."

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