Ah, penny stocks. Quite possibly the world's most dangerous investments. Yet also so enticing.

And for good reason. Some of the world's best stock pickers are, at times, penny stock investors. Peter Lynch, for example, has and still does enjoy the stock market's super-cheap seats. The Royce Low-Priced Stock fund crushes the market by betting on stocks trading for less than $10 a share. Even the All-Stars in our 105,000-plus-strong Motley Fool CAPS investor-intelligence database dabble in penny stocks. More than a few have been richly rewarded.

Finally, there's our Motley Fool Hidden Gems small-cap service. Within it, you'll find a segment called Tiny Gems that spotlights rising micro-cap stars. International Assets Holding (NASDAQ:IAAC) made the list in April 2005, and it's risen more than 250% since.

Other former penny stocks that became multibaggers:

Company

Recent Price

CAPS Stars (5 Max)

Five-Year Return

McDermott International (NYSE:MDR)

$65.06

*****

2,998%

Steel Dynamics (NASDAQ:STLD)

$38.09

*****

1,047%

Urban Outfitters (NASDAQ:URBN)

$31.91

**

692%

GameStop (NYSE:GME)

$47.56

****

740%

Myriad Genetics (NASDAQ:MYGN)

$48.03

***

184%

Sources: Motley Fool CAPS, Yahoo! Finance.

Pennies from heaven
So why not invest in penny stocks? I suppose because the SEC has warned us about them. But what if we take the agency's definition literally, and limit our choices to stocks trading between $1.50 and $5 a share? And what if we further limit our choices to four- and five-star stocks whose market cap doesn't exceed $2 billion, but is at least $250 million? Surely our new CAPS screener would return some winners, right?

This week, 25 made the cut. My favorite is Northgate Minerals (AMEX:NXG), a copper and gold miner that made my list of top growth stocks last summer and which, today, is widely favored by some of my favorite Fools.

Let's begin with TheGarcipian, whose pitch from a year ago emphasized excellent cash management:

[Northgate] has managed its company resources extremely well: in lock-step since 2002 (and perhaps earlier), it has increased cash reserves ... steadily reduced debt ... increased its other non-debt liabilities ... (which is a good thing, demonstrating their ability to hold off a creditor with delayed payment plans), and increased overall shareholder equity ... Their revenue has steadily increased from $110M in 2002 to $411M in 2006, a quadrupling in as many years. Excellent.

Others, like Foolish colleague Christopher Barker, known in these digital parts as TMFSinchiruna, are betting on outsized growth. Here's an excerpt from his CAPS pitch in April:

The company is forecasting over 400,000 ounces of unhedged gold production in 2008 and is targeting growth through further acquisition opportunities in stable mining jurisdictions around the world.

And this growth can be had on the cheap. Northgate trades for 15 times trailing earnings, well below the industry average of 39.

Color me intrigued. But that's me; I like cheap growers. What's your take? Would you buy Northgate Minerals at today's prices? Let us know by signing up for CAPS today. It's 100% free to participate.

See you back here next week with another penny stock from heaven. Fool on!