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The Next Million-Dollar Penny Stock

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


Recent Price

CAPS Stars (out of 5)

5-Year Return

Almost Family (Nasdaq: AFAM  )




Illumina (Nasdaq: ILMN  )




True Religion (Nasdaq: TRLG  )




Seabridge Gold (NYSE: SA  )




PowerSecure International




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 KKR Financial.

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, 59 stocks made the cut -- including our last topper, Allis-Chalmers Energy.

My favorite penny stock this week is FelCor Lodging Trust (NYSE: FCH  ) , a real estate investment trust that operates hotel properties on behalf of top brands. The details:


FelCor Lodging Trust

CAPS stars (out of 5)


Total ratings


Percent bulls


Percent bears


Bullish pitches

9 out of 10

Data current as of Oct. 15.

I'll be honest: This is a scary bet. FelCor recently took on $636 million in new debt, which pays creditors 10% annually till maturity in 2014. That's not quite as usurious as the terms Sirius XM (Nasdaq: SIRI  ) accepted in a February deal with Liberty Media, but not cheap, either.

I still like the stock for three reasons:

  • The company manages properties for well-known hotel brands, including Hilton and Marriot International (NYSE: MAR  ) .
  • The stock trades for little more than the tangible value of the assets it holds.
  • Insiders were buying shares in June, and in years past, they've bought other stakes at prices far higher than what we're seeing today. The last open-market sale of FelCor shares was in May 2007, at north of $25 per share. Currently, the stock trades for about $4.41 per share.

So I'm a buyer here, and I've rated the stock "outperform" in CAPS as a result. Do you agree? Would you buy FelCor Lodging Trust at today's prices? Let us know by signing up for CAPS today. It's 100% free to participate. Alternately, feel free to leave comments in the space below.

Each month, our Motley Fool Hidden Gems service spotlights promising micro-cap opportunities in a segment called Tiny Gems. Try this market-beating service risk-free for 30 days to find out what our penny-stock sleuths are following now. Almost Family is a Hidden Gems pick. Illumina is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy was small and cuddly. Once.

Read/Post Comments (19) | Recommend This Article (14)

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.

  • Report this Comment On October 16, 2009, at 4:30 PM, topsecret09 wrote: How about REAL pennies from heaven......... TS

  • Report this Comment On October 16, 2009, at 4:37 PM, cantbefoolish wrote:

    Tim, a big chunk of that Liberty interest has been relieved by a recent bond. Stop misleading your readers about SIRI.

  • Report this Comment On October 16, 2009, at 4:46 PM, dedmunds wrote:

    Everybody must go to and Seeking Alpha for true unbios information on SIRI. Only real places for up to date information, not old news!!!

  • Report this Comment On October 16, 2009, at 6:57 PM, cycle63 wrote:

    Doom, you must have some serious shorts out there to be this upset with those people who are optimistic about Sirius.

  • Report this Comment On October 16, 2009, at 7:25 PM, SIRIDoom wrote:

    Wrong, I do not short SIRI. I am waiting on the rev-split so I can day trade long again. I make money.

    But, I get very tired of reading the propaganda from the same old people paid to advertise and abuse the system with multi loginIDs.

    Same paid advertisers pro-siri misleading people for more than 2 years. Now they even advertise pro-siri web sites that censor all bad news on siri. You can hardly get any true information on siri.

    I do not ask anyone to believe my opinion. I respect the opinion of others. I certainly do not call people a lire for posting an opinion.

    But, these paid advertisers are here to start fights with anyone they can not get censored. They have NO respect for anyone and they get paid for misleading people.

  • Report this Comment On October 16, 2009, at 7:31 PM, SIRIDoom wrote:

    About shorting, here is an opinion from bigviny. He explains some shorting over the last 3 days. Not sure I belive it. But I found it very interesting... Enjoy...


    People make up to $1000 dollars a day on day trading, just short changing fractions of pennys on siri. If you look at the trade volume of siri it's not small. 15million just today, when it was heavily shorted trade volume was as high as 20 to 25million.

    Big players that have a good percentage of the trade volume probably go in and out of trading siri within the day. One person that is collecting on fractions of pennys, can go on a buy sell frenzy and walk out with a few penny's to the dollar at the end of the day, this is why flash trading should be deemed illegal. Look at the way the stock moves through out the day. It's a wave of buy and sell, and there are a few with large sums of volume doing this trend.

    Instead of waiting a whole day to trade on the penny. One or a few people with large trading volume can go in and out of shorting and buying the stock and get 3 times what the average buyer or seller is walking out with.


  • Report this Comment On October 17, 2009, at 12:28 AM, M21CB wrote:

    Siridoom go sit on one! Ur such a joke, can't say that I blame u though, if I lost all my money like ur dumba*s did then I guess I would be bitter to. What other reason would u be spending everyday of your life bashing one stock out of million for! Lmao! It's over buddy hang it up! But if u start being good I might loan u a few bucks when siri blows through the roof! But we all know that's not gonna happen becuz ur just a bitter a*shole who lost his money. Boohoo! Lmao sucka!

  • Report this Comment On October 17, 2009, at 8:36 AM, RAF22 wrote:

    SIRIDoom - You make consistently wrong and reckless accusations on these pages about certain posters with favorable opinions of SIRI being "paid advertisers" and "employees" of either the company or other well respected sites such as and Seeking Alpha. Your attempts to disparage these persons and sites through your continuing misrepresentations and distortions lack any factual basis - as usual - and, more and more, they continue to diminish your credibility with all other persons interested in valid commentary on Motley Fool. The executives of MOF would be well served by preserving the integrity of this site by keeping ridiculous allegations such as the ones you consistently repeat without any factual backup from appearing their site. Your own credibility is totally shot and MOF should not allow this to taint their own veracity.

  • Report this Comment On October 17, 2009, at 10:13 AM, M21CB wrote:

    Siridoom it's hard to understand where u "stand" This is your quote"Wrong, I do not short SIRI. I am waiting on the rev-split so I can day trade long again. I make money" But your name is Siridoom? What other reason would u be spending everyday of your life bashing one stock out of million for! Lmao! If you seriously don't believe in a stock why trade in it I don't get it?! You're a shorter! Siri has plenty of time to rally before Mel even thinks about a Rev-Split so stop your fear mongering because it's falling on deaf ears! "Long Siri" Lmao sucka!

  • Report this Comment On October 17, 2009, at 11:05 AM, dedmunds wrote:

    Sirius' (SIRI) Karmazin Says 'No Plans Right Now' for a Reverse Split



    LONG SIRI!!!

  • Report this Comment On October 17, 2009, at 7:35 PM, ozzfan1317 wrote:

    I'm not trying to defend anyone but the company isnt profitable and they have a lot of debt kind of hard not to be leary of putting your money in. Maybe they will prove me wrong we will see.

  • Report this Comment On October 17, 2009, at 7:35 PM, ozzfan1317 wrote:

    I'm not trying to defend anyone but the company isnt profitable and they have a lot of debt kind of hard not to be leary of putting your money in. Maybe they will prove me wrong we will see.

  • Report this Comment On October 18, 2009, at 10:12 PM, SIRIDoom wrote:

    Manipulation is a fact.

    Thousands of ways exist to manipulate stocks. But, none of them matter in a controlled market.

    1. The United States Government handed control of all financials to the FED and Goldman Sacks in the first "Bush" Bail Out.

    2. SIRI is controlled by Goldman Sachs by contract and loan with stock LEAN guarantee. Goldman Sachs uses that LEAN to barrow shares to short a hedge on the loan. That hedge has amassed billions in share traded in profit for Goldman Sachs.

    Believe what ever you need to believe. We as retail investors are like sheep being slaughtered. The Government has our balls. Goldman Sachs has everything else.

    For SIRI it is all an inside deal. Mel needs to reduce the stock issue and he will let Goldman Sachs keep SIRI trading under the dollar. After we get milked a few more times while they make it all look good, the rev-split will happen.

    It was all planned... No reason to argue… Just wait and see…

  • Report this Comment On October 23, 2009, at 12:41 AM, streetstylz wrote:

    The next million dollar penny stock will be NeoMedia Technologies -- NEOM.OB

    Recent news:

    Neustar and NeoMedia Speed Up Widespread Implementation of Mobile 2D Barcodes

    NeoMedia and Scanbuy Reach Settlement and License Agreement

    Good fortune!


  • Report this Comment On October 23, 2009, at 11:26 AM, Viyyaman wrote:

    There are 2 pennies I like. Right now NEOM has all the momentum. Within the next 60 days VYON will be a large content aggregator.

  • Report this Comment On October 23, 2009, at 11:28 AM, vero65 wrote:

    The next one will be NEOM (Neomedia Technologies) without a doubt. The wave on barcode use in mobile phones is just beginning and it is going to be HUGE. Barcodes will be everywhere and NEOM is just at the heart of it with Neustar. Just wait for the "click" is coming.

  • Report this Comment On October 23, 2009, at 11:44 AM, rickyaces wrote:

    OTCBB : NEOM will have revenue growth quarter by quarter over the next few years. Unless they get bought out by a big company. GLTA

  • Report this Comment On November 06, 2009, at 5:07 PM, peterod wrote:

    check out JOEZ if you like TRLG

  • Report this Comment On November 29, 2013, at 6:44 PM, 375066 wrote:

    anyone have any info on VYON (viyya technologies)?


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