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.
This week, we'll look at three 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 to catch them!
Here are three low-priced stocks enjoying high CAPS support.
CAPS Rating (out of 5)
Return on Capital
|TriQuint Semiconductor (Nasdaq: TQNT )
|Novatel Wireless (Nasdaq: NVTL )
|Amarin (Nasdaq: AMRN )
NM = not meaningful.
Score is by how many percentage points that pick is beating the S&P 500.
These three companies may be low-priced, but that isn't necessarily enough to suggest that 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 in to the shallow end of the stock pool.
Hiding in plain sight
It looks like the concerns analysts had that OmniVision Technologies (Nasdaq: OVTI ) would lose business to Sony for the Apple (Nasdaq: AAPL ) iPhone 4S camera were pretty much on the mark, after ChipWorks pried open the new phone and found a Sony logo inside. Of course, OmniVision backers note that there can be more than one supplier for the camera sensor, so future teardowns will reveal how (or whether) Apple split the spot.
No such drama for TriQuint Semiconductor, however, as it came out the big winner in the iPhone teardown contest. After being noticeably absent from the Verizon (NYSE: VZ ) version of the phone earlier this year, two chips from the communications specialist were found in the latest version, along with ones from Skyworks (Nasdaq: SWKS ) and Avago Technologies. Shares of TriQuint powered up more than 25% over the past week as a result.
Its inclusion is the reason CAPS member eksummers620 backs the chipmaker, but let us know in the comments section below or on the TriQuint Semiconductor CAPS page whether you think all the good news has now been priced in, and add it to your Watchlist to be notified of the latest developments.
Mi, what big potential you have
Where TriQuint might have a lot of the good news from the iPhone teardown now priced in, surely Novetel Wireless has had all the possible bad news baked into its stock price. Shares are down nearly 70% from a year ago as losses drag on and no timetable for profitability is in sight.
I still maintain that the market is misreading the potential for Novatel, even in the face of tough competition from Sierra Wireless and Asian rivals. Earlier this year, Verizon picked up its 4G MiFi LTE hotspot; Novatel had previously introduced mobile intelligent MiFi hotspots with the carrier, which says to me this will be a much bigger market than currently exists.
At its current price level, Novatel could be ripe for a takeover by someone, but the CAPS community thinks it can do well enough as a standalone company: 93% of the more than 300 members rating the wireless specialist think it can beat the broad market averages.
Put Novatel Wireless on your Watchlist, and let us know in the comments section below whether you think the market is disconnected from reality here.
Amarin wants more. Not just content to seek out FDA approval for its fish-oil treatment to treat high triglyceride levels without a corresponding rise in LDL-cholesterol, the biotech wants to expand AMR-101 to also be used as a treatment for the reduction of cardiovascular events like heart attacks and strokes. While that's going to require new testing, the regulatory agency has approved its new trial design, and Amarin will begin enrolling patients in the trials. With an application submitted for its triglyceride therapy, it becomes something of a waiting game for the FDA to give it the thumbs-up or the thumbs-down.
Yet with the general positive outlook analysts have for AMR-101, it's something of a surprise to see its stock so depressed, cut in half from the highs it hit in the summer. Of course, Amarin has more than tripled since last year, so that might be telling us investors are waiting for more good news -- or the deadline to get nearer at hand -- before committing more money. The lack of a buyout hurt the stock, but with the drug expected to do better than GlaxoSmithKline's Lovaza, even if the stock trades higher than it did a year ago, it could mean the market is giving you an early entry pass to a high-growth stock.
CAPS member StockDocStan sees a lot of good things in Amarin at these levels.
I cannot resist the potential, so I am parking my money in a good basket of small cap biotech picks. This is the sector to be in for the next 5 years in a big, big way. Only picking the stocks in this sector with the brightest potential.
Add the biotech to the Fool's free portfolio tracker and tell us on the Amarin CAPS page whether you think investors will realize soon there's something fishy between its current valuation and the opportunity its therapies possess.