Making Cents in Penny Stocks

The occasional shower of pennies from heaven might do our bank accounts some good. Alas, Fools can't say the same for penny stocks. They're often subject to manipulation and deceit, making it harder for investors to separate the few good offerings from the multitude best ignored.

Still, many investors enjoy dabbling at the low end of the stock-price spectrum. At Motley Fool CAPS, a "penny stock" is any stock trading under $10, and you'll find some of the best CAPS All-Stars regularly seeking out winning investments there. We identify them with a penny icon.

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 are three low-priced stocks enjoying All-Star support: 

^Price when the outperform call was made.

Your two cents' worth
I love going to the racetrack, but more often than not I end up backing the wrong horse. That's the same feeling I get from Alvarion, a provider of wireless broadband systems. Its WiMAX technology has the pedigree with backing from Intel (Nasdaq: INTC) and Motorola (NYSE: MOT), it took the early lead out of the gate, and most handicappers probably are at least familiar with the service. But there's a dark horse stalking WiMAX, and it's moving to the outside as they come down the homestretch.

Long-term evolution, or LTE, is a competing technology for WiMAX, and while the latter has made big gains internationally, here in the States, Verizon (NYSE: VZ) and AT&T are jockeying to build out the LTE service on existing carrier networks.

The race looks neck-and-neck at the moment, and it may still come down to a photo finish, but LTE paced itself and WiMAX seems to be tiring. CAPS member llgrout puts money on seeing Alvarion leg this one out.

High risk pick with earning estimates continuing to go down, but I think at current price the value is too good to pass up, and it will not go much below 2. It should rebound slightly, but not expected to do any great and wonderful things. In other words, it needs to be watched very closely.

Head over to the Alvarion CAPS page, and let us know whether this wireless broadband systems provider is a horse of a different color.

A short circuit
Japanese pharmaceutical Eisai thinks there are fat profits to be made in anti-obesity therapies, and its partnership with Arena Pharmaceuticals to market lorcaserin as soon as it gets FDA approval means it wants to have as large an opportunity as possible. With VIVUS and Orexigen Therapeutics (Nasdaq: OREX) also looking to cash in big-time with their competing treatments, Qnexa and Contrave, respectively, Arena and Eisai will need as much room as possible to capitalize on this.

Of course, it's not a sure thing the FDA will grant approval, though earlier this year Arena was sounding quite upbeat, saying that either with or without a partner it was taking lorcaserin to market.

CAPS member webknight thinks as quick as lorcaserin's patients will shed the pounds, Arena will tack on value: "Once it clears the hurdle for approval then it will start taking off just as quick as the customers are losing their weight."

On the other hand, AvgJoe22 thinks investors are getting a two-fer in VIVUS as it has more than just a fat chance of making it big: "With potential blockbuster drugs addressing obesity and (erectile dysfunction), VVUS has huge upside potential with limited downside relative to competitors in these markets."

Penny for your thoughts
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.