The Next Million-Dollar Penny Stock

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Penny stocks can make you rich. Need proof? Every one of these multibaggers was once a penny stock:

Company	Recent Price	CAPS Rating (out of 5)	5-Year Return
American Oriental Bioengineering (NYSE: AOB)	$5.43	*****	271.9%
Nuance Communications (Nasdaq: NUAN)	$14.70	****	261.2%
American Dairy (NYSE: ADY)	$30.24	***	740%
Iconix Brand Group (Nasdaq: ICON)	$17.38	***	414.2%
Savient Pharmaceuticals (Nasdaq: SVNT)	$16.02	**	618.4%

Sources: Motley Fool CAPS, Yahoo! Finance.

The promise of outrageous returns has periodically made even the world's best stock pickers penny stock investors. Peter Lynch has enjoyed the stock market's super-cheap seats in the past, and still does on occasion. The Royce Low-Priced Stock fund has beaten the market for a decade by betting on stocks trading near or below $10 a share, including Ivanhoe Mines (NYSE: IVN).

Even the All-Stars in our 140,000-plus 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? Well, the warning the SEC issued about them provides one excellent reason to steer clear. 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 seek only four- and five-star stocks with a market cap between $250 million and $2 billion? Surely our CAPS screener would return some winners, right?

This week when I ran that screen, 49 stocks made the cut -- including our last topper, Limelight Networks.

My favorite penny stock this week is ION Geophysical (NYSE: IO), chief competitor of Motley Fool Hidden Gems pick Dawson Geophysical. The details:

Metric	ION Geophysical
CAPS stars (out of 5)	*****
Total ratings	670
Percent bulls	97.1%
Percent bears	2.9%
Bullish pitches	99 out of 100

Data current as of Sept. 20.

Each company specializes in seismic equipment that's useful for oil and other types of resource exploration. "I see a safer and more cost effective way to find minerals, oil, natural gas, and to map terrain for solar farms and wind power farms," wrote CAPS All-Star getrichdietrying earlier this month.

This member is not the only one who thinks this way. Fellow All-Star Teacherman1 and up-and-coming Fool A6EIntruder both see big potential in ION Geophysical, as do dozens of others. Only three of the last 99 Fools to rate ION say it will underperform the market, and none of those is ranked among the top 20% of investors in CAPS.

Do you agree? Would you buy ION Geophysical at today's prices? Let us know by signing up for CAPS today. It's 100% free to participate.

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