If it rained pennies from heaven, as Bing Crosby sang, a few storms would sure do our bank accounts some good. But as Fools, we know that penny stocks are dangerous to our financial situations. The world of penny stocks is full of shysters peddling manipulation and deceit, and it's often hard for investors to separate the few good companies residing there from the multitude best ignored.

Many people like investing in penny stocks because they believe such stocks have a better chance of increasing many times in value. But a $20 stock can double, triple, or quadruple in value just as easily as a cheap one can. A cheap stock may be cheap for a very good reason, and ample evidence suggests that high-priced stocks have better chances of going up than cheap ones do.

Still, many investors dabble at the low end of the stock-price continuum. At Motley Fool CAPS, we note the investors who, more than half the time, rate stocks trading in the single digits, and we give them a saucy name -- "Pennies." Believe it or not, you'll find some of the best CAPS All-Star investors among them.

Pinching pennies
This week, we'll look at some low-priced investments these All-Stars have praised or panned. If the best investors who regularly scan this end of the market have singled out these companies, we might want to turn our umbrellas upside-down -- or run for cover!

All-Stars say these low-priced stocks will outperform the market:

Company

Price

CAPS Rating
(out of 5)

Player

CAPS
Rating

Fronteer Development Group
(AMEX:FRG)

$8.05

**

Biodok

83.38

Northgate Minerals (AMEX:NXG)

$2.79

****

LasVegas122112

82.79

Silicon Image (NASDAQ:SIMG)

$5.37

*****

manifestus

83.11

† Amount when the player made the outperform or underperform call.

And here are three they think will underperform:

Company

Price

CAPS
Rating

Player

CAPS
Rating

Neptune Tech (NASDAQ:NEPT)

$5.05

*

JuliusRex

81.96

Repligen (NASDAQ:RGEN)

$4.90

****

skyrocket29

88.05

China Techfaith Wireless (NASDAQ:CNTF)

$7.45

**

dinasourneil

99.69

† Amount when the player made the outperform or underperform call.

As we delve into the low-priced "pennies," it's interesting to note that one chosen to outperform has a low two-star rating, while one seen as underperforming the market has a high four-star rating. Let's look closer at these two seeming anomalies.

More than 200 investors have rated Fronteer, and most think it will outperform. The reasoning for that judgment is best summed up by CAPS All-Star LookingBeyond99, who sees scarcity in uranium as a factor for growth.

Gold and uranium ... I like this [stock's] upside more so because of its uranium deposits. I know the whole sector as a whole seems to be hated by the [F]ool community because if you look at it from a value perspective it makes no sense. However I do not think [it's] that simple. I think it also comes down to a belief that uranium is scarce now (it won't be once mines start going into full production [in] 5-10 years) and that for my generation (under 30) I believe uranium will be the way to go. I just can't jump on the ethanol bandwagon [as] it makes no sense to me.

While there are no top-rated bear pitches for Repligen, the bulls think the company's patent dispute settlement with ImClone (NASDAQ:IMCL) over Erbitux will shape the debate with Bristol-Myers Squibb. That's the thinking behind even unrated players like mdriver78, who notes the court hearing will be in 2008.

ImClone settled on patent dispute which may carry over to settlement with Bristol-Myers Squibb suit that is pending. The [c]ompany [had] [$20] [m]illion in cash [and short term investments] before the ImClone settlement, possibility of a revenue stream on royalties from ImClone, and the [c]ompany is profitable once the legal fees fall off the expenses side of the ledger. Potential for reward is significant into the future making the rewards outweigh the risks.

Make some change
There you have it -- some CAPS investors' reasons why these penny stocks may or may not be a good investment. What do you think? Should we fill up a pickle jar with them, or ignore 'em like a coin on the street?

Consult our free Motley Fool CAPS investor intelligence community, where your opinion makes just as much cents -- er, sense -- as any investor's. Sign up today, and count the difference that investors helping investors beat the market can make for you.

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.