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. The world of penny stocks is often full of manipulation and deceit, making it harder for investors to separate its few good offerings from the multitude best ignored. Though some investors think cheaper stocks have a greater chance to appreciate, those stocks may be cheap for a reason. Indeed, a $20 stock may have even better chances of gaining value than a $0.20 one.

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 players.

Pinching pennies
This week, we'll look at some of the low-priced investments these All-Stars have praised. If the best investors in CAPS who regularly scan 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:

Company

Price+

CAPS Rating

(5 max)

Player

Player Rating

SORL Auto Parts (NASDAQ:SORL)

$6.35

*****

tuffsledding

99.89

Human Genome Sciences (NASDAQ:HGSI)

$5.60

***

ltmm

99.83

Force Protection (NASDAQ:FRPT)

$3.46

***

Humle100

99.17

US Gold (AMEX:UXG)

$3.33

****

scampbel131

95.43

Himax Technology (NASDAQ:HIMX)

$4.95

*****

zygnoda

94.77

+Price when the outperform call was made.

As we delve into these "pennies," we find that most of the companies seem to be generally well-liked by the CAPS community -- all are rated three stars or better.

Thank you, Mr. Bernanke
There's no doubt that concerns about the market, the economy, and the world's financial institutions have seemingly grown more shaky over the past year, helping to boost gold's valuations. But there's nothing like a Fed chairman with a penchant for dropping dollars from a helicopter to really spur a gold spike. When Ben Bernanke chose to save the world markets by cutting interest rates by 125 basis points, gold prices jumped to the record level of $933 an ounce.

Inflation fears are rampant because Bernanke has indicated he's willing to cut rates even further (the latest cuts did little to shore up support), and though gold has pulled back from its highs on profit-taking, this could be only a pause before the next cuts.

Gold miner US Gold just might benefit from that. Because the yellow metal is an alternative to U.S. greenbacks, the devaluation from the Fed's opening the spigot could lead to many profiting handsomely. Yet while many gold companies exist to take advantage of the situation, investors would be better off sticking with those that showcase top-notch management teams. That's what sets U.S. Gold apart from its rivals, according to CAPS All-Star afoolsgold.

Look up the biography of Ian Telfer, CEO of [Goldcorp] (NYSE: GG  ) on dogpile.com and you'll find more bio's of bitter rival Rob McEwen of [US] Gold Corp ... [T]he difference between the two may reside in McEwen's unbridled passion to win, and combining charm and cunning demeanor to pursue his goals. The ultimate pitchman for the gold industry- expect McEwen to raise as much money as he needs to build his new company into a mid-level company in a short time. McEwen's explorations are properties straddled between Barrick and Newmont [Mining] (NYSE: NEM  ) operations. Watch him build [US] Gold Corp into a mid-tier player within two years.

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


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