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 the CAPS community has singled out as those with the best chances of success by bestowing four- and five-star ratings on them. We just might want to turn our umbrellas upside-down!

Here are three low-priced stocks enjoying high CAPS support:

Source: Motley Fool CAPS.

The above three companies may be low priced, but that isn't necessarily enough to suggest they'll have an easier time recording big gains. Low-priced stocks are often low-priced for a reason. We have to check and see what their catalysts for growth might be before diving into the shallow end of the stock pool.

Your two cents' worth
While the government accounted for 23% of Iridium Communications revenues, or $78.7 million in 2010, the commercial segment is seen as its growth driver for the future. Its satellite communications services are indispensable for certain industries such as shipping, which uses it for ship-to-shore communications, and aerospace, which uses it for weather tracking and emergency tracking.

There's a very small field of players delivering such services, but Iridium differs from Inmarsat, Globalstar (Nasdaq: GSAT), and ORBCOMM in that Iridium claims that its low-earth orbit network is the only one to offer 100% global coverage.

Iridium is a long way away from the Motorola Solutions (NYSE: MSI) company of the 1990s that infamously crashed and burned in bankruptcy. Though it is still closely related to its one-time parent -- through contracts, technology licensing, and intellectual property -- Iridium today may be ready to fly much higher than it did before without falling back to earth like a modern-day Icarus. Sales have grown sharply, and losses have given way to profits.

CAPS member MYPIX sees a whole host of areas where Iridium can be leading the market in a very short amount of time:

There just isn't enough room on the spectrum to fit everyone who needs to talk. When they revamp this whole system, SAT COMM is going to replace the towers, at least in some parts. Many communities (especially those thought to be upper class) already have a problem with companies putting up towers in their area. SAT COMM would be great if they could get the technology together. No dropped calls, no areas without service. IRDM is currently working on an Internet service via satellite.

Add Iridium to the Fool's free portfolio tracker to see if its stock price will soar into the stratosphere.

A tasty opportunity
Despite having completed (and exceeded) its refranchise initiative, smoothie maker Jamba remains a company in a state of flux. Farming out company-owned stores to franchisees will likely hurt its top line numbers, but the move to an asset-light model means it will be a more nimble competitor to Starbucks and Hansen Natural. It should be able to expand margins and increase its brand awareness even further.

It might also make it an attractive acquisition candidate. CAPS member sylvestorthecat made it one of his top picks with the thought that Starbucks, PepsiCo (NYSE: PEP), or even Nestle would find it a tasty morsel, particularly since the latter two are collaborating on having their branded products on its shelves:

NESTLE USA is the big home run with the energy drinks that will crush all estimates as seen already with the rave reviews and orders selling out at amazon .com and now are in all JAMBA stores plus will be sold across the US in local grocery stores. With NESTLE doing all the marketing at no cost to Jamba Juice how can they go wrong having the biggest food company in the world promoting your product!!!

With 94% of the 836 CAPS members rating Jamba believing it will outperform the broad market averages, it's apparent they believe the drink maker will be a smooth operator. Drink in the opinions on the Jamba CAPS page, or add your own thoughts to the discussion.

A good bet
Maybe the market thinks Melco Crown Entertainment is going to crap out from new competition after the opening of the new Galaxy Macau casino on the growing Cotai Strip in China's gambling oasis. Instead, it could be a tide that lifts all boats.

Gaming revenues continue to soar despite the phenomenal growth the island experienced last year, and Wynn Resorts (Nasdaq: WYNN) expects Galaxy Entertainment's new gambling house to make even those numbers seem small when this year is complete. Melco's shares are 145% higher than they were a year ago on the strength of Macau's revival, and with the prospects for greater growth ahead, the slight amount they've given back recently will likely seem a distant memory, too.

With almost 1,350 CAPS members weighing in, 96% see Melco beating Wall Street's expectations. Follow along by adding the stock to your watchlist.

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? Consult our free CAPS investor-intelligence community, where your two cents count as much as anyone else's.