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.

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 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 -- or run for cover!

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

Company

Price^

CAPS Rating (5 max)

CAPS Member

Member Rating

Zix (Nasdaq: ZIXI  )

$2.00

****

Rox6525

99.28

General Growth Properties (NYSE: GGP  )

$4.30

*

7dogs

95.49

International Coal (NYSE: ICO  )

$3.57

*****

scampbel131

99.17

Radian Group (NYSE: RDN  )

$5.05

**

TheBearFacts

91.91

Novavax (Nasdaq: NVAX  )

$2.46

**

aracer

88.29

^Price when the outperform call was made.

Your two cents
Considering the decline that Novavax has suffered, you might be excused if you steer clear of the vaccine maker. But the beaten-down biotech is developing a new type of bird flu vaccine. Since 2005 it has invested more than $100 million in developing multiple vaccines, and is committed to spending an additional $150 million over the next three years. Top-rated CAPS All-Star zzlangerhans thinks the market is feverish for beating it down so:

Novavax has been beaten to a pulp in the current market turmoil, but they're probably as strong as they've ever been with solid data for their H5N1 pandemic flu vaccine, and a phase II trial in process for their H9N2 seasonal flu vaccine. Novavax's quiet ascendance as a premier flu biotech along with a long quiescence in bird flu hysteria have created the conditions for a perfect storm should we see another outbreak (not that anyone wants that).

It's easy to see why investors remain positive about the prospects for Zix's e-prescribing service following the announcement last week of a new three-year contract with Aetna (NYSE: AET  ) . While the technology firm currently derives three-quarters of its revenue from email encryption services, electronic prescription services continue to offer new growth opportunities.  

Competition comes from Allscripts-Misys (Nasdaq: MDRX  ) . Here's input from CAPS member stockblog:

Zix Corp (ZIXI) and Allscripts provide e-prescribing technologies, which have pending legislation in the House and Senate to provide financial incentives to promote the adoption of the technology.

CAPS member Valleycat sees International Coal profiting from a surge in demand:

Coal energy isn't going anywhere for many, many years. But this company is going somewhere -- straight up! Keep an eye on their metallurgical coal production -- that's where the real money is.

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 will bolster our bottom line.

International Coal Group is a Motley Fool Hidden Gems Pay Dirt recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool's disclosure policy always wins the coin toss.


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