Making Cents in Penny Stocks

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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:



CAPS Rating (out of 5)

CAPS Member

Member Rating

Hercules Offshore (Nasdaq: HERO  )





ReneSola (NYSE: SOL  )





Boots & Coots Int'l Well Control (NYSE: WEL  )





National City (NYSE: NCC  )





American Oriental Bioengineering (NYSE: AOB  )





*Price when the outperform call was made.

Your two cents’ worth
Forget the moral hazard the Treasury has endorsed with its banking-industry bailout -- the arbitrary and seemingly capricious way it's being implemented is causing more immediate concerns. The pending merger of PNC (NYSE: PNC  ) and National City is a picture of that in action.

While it's a sweet deal for PNC, the government virtually forced it to happen, after denying National City access to the fund. The government may now even allow PNC to operate outside the regulatory environment regarding the amount of deposits it is legally allowed to have in any one market.

Even with all the political involvement in the situation, CAPS member Theresewin finds there's always the possibility the deal doesn't get done. "I am not convinced the buyout by PNC will go through and think this has a little fight in it until it is decided......just kind of a hunch on my part."

JA Solar (Nasdaq: JASO  ) gave a dim outlook on the solar sector as pricing and demand both falter, which underscores the thinking on the part of some analysts that the industry is poised to fall further. ReneSola, for example, reported a strong third quarter this morning, but its guidance reins in expectations for the rest of the year. With solar stocks maintaining their demand expectations -- ReneSola, for example, preserves its full-year output guidance -- the industry is perhaps setting itself up for a nasty shock and decline.

Still, CAPS member crazyrugger finds the company to be worthy of a small investment at these prices, as long as you recognize the speculative nature of the bid:

In the short term this stock will not move much. The economy is just too slow and the return on purchasing these products are not realized quickly enough, for the squiz that is being placed on companies currently. However, at these prices people will regret not purchasing. [ReneSola] has a decent balance sheet, not great, but really pretty good for how old the company is. At 4.80 this will be a good speculative play.

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.

Hercules Offshore and American Oriental Bioengineering are Motley Fool Hidden Gems picks. The Fool owns shares of American Oriental Bioengineering. 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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Related Tickers

12/31/2008 4:04 PM
NCC.DL2 $1.81 Down +0.00 +0.00%
National City Corp CAPS Rating: *
SOL $0.94 Down -0.02 -1.65%
ReneSola CAPS Rating: *
AOBID $0.00 Down +0.00 +0.00%
American Oriental… CAPS Rating: **
HERO.DL $1.16 Down -0.02 -1.50%
Hercules Offshore CAPS Rating: **
JASO $5.88 Down -0.11 -1.84%
JA Solar Holdings CAPS Rating: **
PNC $95.10 Down -0.33 -0.35%
PNC Financial Serv… CAPS Rating: ****