Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



The Next Million-Dollar Penny Stock

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Penny stocks can make you rich.

Need proof? Every one of these multibaggers was once a penny stock:


Recent Price

CAPS Stars

(5 max)

Five-Year Return

Terra Industries (NYSE: TRA  )




Cleveland-Cliffs (NYSE: CLF  )




ViroPharma (Nasdaq: VPHM  )




PetroQuest (NYSE: PQ  )




AspenBio Pharma (Nasdaq: APPY  )




Sources: Motley Fool CAPS, Yahoo! Finance.

The promise of outrageous returns is why some of the world's best stock pickers are, at times, penny stock investors. Peter Lynch has and still does enjoy the stock market's super-cheap seats. The Royce Low-Priced Stock fund crushes the market by betting on stocks trading near or below $10 a share, such as Dendreon (Nasdaq: DNDN  ) .

Even the All-Stars in our 120,000-member Motley Fool CAPS community take to penny stocks. More than a few have been richly rewarded.

Pennies from heaven
So why not invest in penny stocks? I suppose because the SEC has warned us about them. But what if we take the agency's definition literally, and limit our choices to stocks trading between $1.50 and $5 a share? And what if we further limit our choices to four- and five-star stocks whose market cap doesn't exceed $2 billion, but is at least $250 million? Surely our new CAPS screener would return some winners, right?

This week, 54 stocks made the cut -- including our last topper, Exelixis. Let's move onto American Oriental Bioengineering (NYSE: AOB  ) , which has a strong following in our CAPS community:


American Oriental Bioengineering

CAPS stars (5 max)


Total ratings


Bullish ratings


Percent Bulls


Bearish ratings


Percent Bears


Bullish pitches


Bearish pitches


Data current as of Oct. 30, 2008.

Shares of this Chinese maker of plant-based pharmaceuticals are down more than 30% since Fool Bill Mann recommended it to Motley Fool Hidden Gems subscribers. From his original write-up:

I believe that fortunes will be made by patient investors in this market. And [American Oriental] has all the hallmarks of being the right company with the right leadership. And right now, it's cheap.

And it still is. American Oriental Bioengineering traded for roughly 1.5 times tangible book value and eight times trailing earnings as of yesterday's close. You'd think that growth had stalled completely. But it hasn't. Revenue and normalized net income are up 55% and 47%, respectively, over the past year. Management's return on invested capital remains comfortably in the double digits. Sounds to me like a business worth buying.

CAPS All-Star jinchoice agrees. Quoting from our Fool's September pitch for American Oriental:

Having lived in Korea, I'm familiar with the way Asians view their traditional medicine. With their increased wealth, the Chinese will ever be more health conscious, and they will start spending their money on traditional medicines that benefit their overall health even when there is no ailment. AOB is the biggest player in a very fragmented market. They will grow through acquisitions, and in time, I hope that their brand will be recognized in China. The Chinese will associate brand names with safety, and that should give AOB a great edge in the market.

Agreed, but I'm interested in what you think. Would you buy shares of American Oriental Bioengineering at today's prices? Let us know by signing up for CAPS today. It's 100% free to participate.

See you back here next week with another penny stock from heaven. Fool on!

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. American Oriental Bioengineering is a Hidden Gems pick. Exelixis is a Rule Breakers pick. The Motley Fool owns shares of both American Oriental and Exelixis. Its disclosure policy was once small and cuddly.

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 766496, ~/Articles/ArticleHandler.aspx, 10/24/2016 3:25:38 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
AOBID $0.00 Down +0.00 +0.00%
American Oriental… CAPS Rating: **
APPY $2.76 Down -0.01 -0.36%
AspenBio Pharma CAPS Rating: **
CLF $6.01 Down -0.08 -1.31%
Cliffs Natural Res… CAPS Rating: ***
DNDNQ $0.00 Down +0.00 +0.00%
Dendreon Corp CAPS Rating: *
PQ $4.27 Up +0.13 +3.14%
PetroQuest Energy CAPS Rating: *
TRA.DL $45.76 Down +0.00 +0.00%
Terra Industries,… CAPS Rating: ****
VPHM.DL $0.00 Down +0.00 +0.00%
ViroPharma CAPS Rating: ***