Penny stocks can make you rich.

Need proof? Every one of these multibaggers was, at one time, a penny stock:


Recent Price

CAPS Stars (out of 5)

5-Year Return





Savient Pharmaceuticals (NASDAQ:SVNT)




Tesoro (NYSE:TSO)




Reliant Energy (NYSE:RRI)




ON Semiconductor (NASDAQ:ONNN)




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 enjoyed, 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 for less than $10 a share. Even the All-Stars in our 110,000-strong Motley Fool CAPS community take to penny stocks, and more than a few of them 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?

Well, this week, 36 stocks made the cut -- including our last topper, CDC (NASDAQ:CHINA). Let's move on to Oilsands Quest (AMEX:BQI), which, with oil still around $120 a barrel, has captured the imagination of several in our CAPS community:


Oilsands Quest

CAPS stars (out of 5)


Total ratings


Bullish ratings


Percent bulls


Bearish ratings


Percent bears


Bullish pitches


Bearish pitches


Data current as of July 29, 2008.

I blame CAPS All-Star DemonDoug for the enthusiasm. As he saw it in October, the company's proposal to extract vast amounts of usable crude from Canada's oil sands could result in huge returns. He still appears to believe that.

"The outlook for this company is extremely positive, if their production numbers can be achieved," our Fool wrote last week. "I've long felt that any oil company that is increasing output, especially over the next 5-10 years, is going to be a big, big winner ([because of] increasing global energy demands, falling dollar, and peak oil)."

Agreed. Consider, too, that institutions own only 43% of the outstanding shares. If Oilsands Quest can produce what it says it can produce, the big money will buy in bulk and deliver the multibagger from today's prices that CAPS investors are hoping for.

But that's my take. What's yours? Would you buy Oilsands Quest 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!

Every month, the 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.

Fool contributor Tim Beyers, who is ranked 18,628 out of more than 110,000 participants in CAPS, is a regular contributor to and is a member of the market-beating Rule Breakers team. Tim didn't own shares in any of the companies mentioned in this article at the time of publication. The Motley Fool's disclosure policy was small and cuddly. Once.