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. Because the world of penny stocks is often full of manipulation and deceit, investors often have a hard time separating its few good offerings from the multitude best ignored.

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 give more than half of their ratings to stocks that trade in the single digits. Believe it or not, you'll find some of the best CAPS All-Stars among those members.

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.

Here's the latest list of low-priced stocks with All-Star support:

*Price when the outperform call was made.

Your two cents' worth
Investors seem torn over the potential benefits of Medarex's melanoma therapy ipilimumab. On one hand, you have CAPS member maphere, who last month was looking forward to seeing the biotech complete its phase 3 trials on the drug, which companies such as Cell Genesys (NASDAQ:CEGE) have been using in combination with their own drugs.

MEDX is close to getting approval for Ipilimumab which is an immunotherapy drug that causes the immune system to kick in and attack melanoma cancer. They have had some delays since Dec. of last year but they are poised to finish Phase 3 clinical trials showing [improved] overall survival. Doctors are very [positive] about this drug as well as patients who [overwhelmingly] discuss among themselves the benefits they have received.

On the other hand, CAPS All-Star zzlangerhans more recently said Medarex has placed too much importance on ipilimumab, even though the company has some other potentially exciting treatments on hand: "I've had a lot of success playing Medarex, obviously, and I want to keep adding to my lead. While I'm long-term negative on the company [because of its] insistence on clinging to the ineffective drug Ipilimumab, they do have a revenue-generating mAb [monoclonal antibody] production platform and no recent negative catalysts to justify the decline to four year lows."

Yet Medarex's ipilimumab partner, Bristol-Myers Squibb (NYSE:BMY), recently released some updated survival data, which showed that about half of the patients who suffered from advanced metastatic melanoma and had received treatments were still alive after one year. It's a hopeful development for the drug.

Still, it's the rest of the pipeline that had OOooMercuryooOO looking for outperformance from Medarex. As our CAPS member said in an August pitch: "Broad, strong pipeline -- three approvals nearing which will validate their mAb platform -- also they're sitting on a mountain of money and they are precisely what big pharma is looking for in an acquisition (except, perhaps, the complexity involved [because of] numerous licensing agreements)."

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? 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.