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The occasional shower of pennies from heaven 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 two 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!
CAPS Rating (out of 5)
Return on Capital
|Antares Pharma (NYSE: AIS )||$2.20||****||29%||NA||(18.1%)|
|Exide Technologies (Nasdaq: XIDE )||$3.24||****||(69%)||10%||7.2%|
Source: S&P Capital IQ, Yahoo! Finance; NA = not available
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 to see what their catalysts for growth might be before diving into the shallow end of the stock pool.
Hiding in plain sight
Following the devastating news last month that BioSante Pharmaceutical's was halting testing on LibiGel because the topical cream did no better than a placebo in raising the libido of women, Antares Pharma was crushed since it provided the gel used to develop the treatment. Apparently, the thinking was that it would suffer a big loss of sales.
But that would have been faulty logic, since Antares derives most of its revenues from selling reusable needle-free injector devices to Teva Pharmaceuticals and Ferring. Third-quarter sales jumped more than 25% on the strength of its product sales, which comprises 56% of total revenue. Additionally, development revenue more than doubled, much of which came from a new agreement with Watson Pharmaceuticals (NYSE: WPI ) . The revenue it does realize from BioSante in licensing is thus negligible and was down significantly year-over-year anyway.
That's probably why Pfizer (NYSE: PFE ) had no problem signing on to license one of its drug-delivery technologies. I had picked Antares to outperform the broad market averages on CAPS early last year, and the BioSante news did nothing to shake my confidence in its ability to bounce back. The stock may not have yet recovered all that it lost in the meltdown, but I'm confident it will go on to do so.
With all the media focus on the rechargeable-battery market for hybrid and all-electric cars, it's easy to understand why lowly lead-acid battery makers like Exide Technologies and EnerSys have gotten lost in the shuffle. Both have fallen sharply from their 52-week highs, though Exide has suffered more, losing more than three-quarters of its value.
That low valuation has analysts rethinking its prospects, and several have suggested that Exide shares are now attractive since the market is essentially assigning no value to its battery-recycling business and discounts its smelting operations.
With Fisker issuing a recall on several hundred Karmas for repairs and GM recalling every single Volt it sold, an already weak market for electric cars is likely to get weaker still, meaning the grand plan lithium-ion battery makers like A123 Systems (Nasdaq: AONE ) have for selling tens of thousands of batteries are not about to be realized.
A recovering traditional auto industry, though, will push Exide higher and I've marked it to beat the Street on CAPS. Join me on the Exide Technologies CAPS page and tell me if I'm wrong about electric car battery makers, then and the lead-acid power house to your Watchlist to see if it gets a charge out of new growth.
Make some change
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