Making Cents in Penny Stocks

The occasional shower of pennies from heaven might do our bank accounts some good, but we Fools can't say the same for penny stocks. Because the world of penny stocks is often full of manipulation and deceit, investors have a hard time separating its few good offerings from the multitude best ignored.

Still, many investors dabble at the low end of the stock-price spectrum. At Motley Fool CAPS, we award the "Pennies" title to investors who rate stocks trading in the single digits more than half the time. Believe it or not, you'll find some of the best CAPS All-Stars among those members.

Pinching pennies
This week, we'll look at some of the low-priced investments these All-Stars have praised. If the best investors regularly scanning this end of the market have singled out these companies, we might want to turn our umbrellas upside-down -- or run for cover!

Here's the latest list of low-priced stocks with All-Star support:

*Price when the outperform call was made.

Your two cents' worth
Tengasco is an oil and gas company that is involved not just in exploration and production, but also in pipeline operations. Like many in the industry, Tengasco has benefited from higher energy prices, but it also is increasing its production. Five of the six wells it has drilled since the beginning of 2008 have begun producing -- the sixth was dry -- but more importantly for investors, all have been financed from internal cash flow. CAPS member TheSmartMoney believes Tengasco is a bullish play on oil.

This little company is running hard. … The company had a record month in July for new oil production and could top that by 18% in September if not August. As long as oil holds in the $105 per barrel range revenue will keep moving at a blistering pace. The CEO is from [Halliburton]. / TGC's P/E is well below the industry average and its growth is well above the industry average. TGC is a good way to go long on oil.

Management at chip maker Zoran is cautious about the immediate future and doesn't see DVD player sales making the same contributions to results, but that may not stop the company from moving forward strongly. After all, Motley Fool Stock Advisor recommendation Dolby Labs (NYSE:DLB) also faced a DVD market that was said to be past its prime, yet Dolby has been able to surprise analysts consistently with remarkably robust sales. There are still plenty of drivers for growth at Zoran; its chips are also found in TV set-top boxes. CAPS member toddum finds the conversion to digital signals next year to be one of those drivers: "With the upcoming "digital television" revolution, their chips will increase in demand as U.S. homeowners rush to buy either new TVs or digital converter boxes for their new sets. This company should be poised for a good year."

In making his pitch for AirTran Holdings, CAPS member MoSteele suggests that the high price of oil has knocked this company down, but that the fundamentals remain sound.

This little Florida based air transport company was penalized [by] higher crude prices. For this one the same [commentary] applies then the one I made for Republic Airways (NASDAQ:RJET). The crude price is by far overdone.

Look for a nice setback in the future. This company announced also record [revenues] and passenger numbers for the second quarter. This company has way to go.

Make some change
What do you think? Should we fill up the change jar with these penny stocks, or ignore 'em like a discarded coin on the street? It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Consult our free CAPS investor-intelligence community, where your two cents count as much as anyone else's.