Penny stocks can make you rich.

Need proof? Every one of these multi-baggers was, at one time, a penny stock:

Company

Recent Price

CAPS Stars
(5 stars max.)

Five-Year Return

Insteel Industries (NASDAQ:IIIN)

$10.43

***

2,718.9%

Dynamic Materials (NASDAQ:BOOM)

$16.25

*****

1,077.5%

Aspen BioPharma (NASDAQ:APPY)

$6.33

***

491.6%

Sun Hydraulics (NASDAQ:SNHY)

$16.26

*****

379.6%

RPC, Inc. (NYSE:RES)

$8.81

*****

179.7%

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 has beat the market for a decade by betting on stocks trading near or below $10 a share, including Callaway Golf (NYSE:ELY).

Even the All-Stars in our 125,000-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? 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 caps don't exceed $2 billion, but are at least $250 million? Surely our new CAPS screener would return some winners, right?

This week when I ran it (and you can, too), 62 stocks made the cut -- not including our last topper, Orthovita. Let's move on to JA Solar (NASDAQ:JASO), which has a substantial following in our CAPS community:

Metric

JA Solar

CAPS stars (5 max)

***

Total ratings

1,137

Bullish ratings

1,083

Percent bulls

95.2%

Bearish ratings

54

Percent bears

4.8%

Bullish pitches

141

Bearish pitches

10

Data current as of Jan. 14, 2009.

Solar stocks took a beating last year. JA Solar, in particular, fell more than 80%. Can 2009 bring a recovery? CAPS investors say "yes," even though prices have been falling since November.

"The cat in the room. Can you predict where a cat will go if placed in a room? If you open the door and place a bowl of catfood in the next room, you can be sure the cat will go to the next room and the bowl. Incentives are the bowl to market participants. Look at Germany. Solar is huge in Germany because of the incentives," wrote JohnTH in a pitch from last week. Continuing: “Obama is planning incentives for solar here in the USA. All solar companies will benefit from the incentives, including JASO."

Agreed, but that's my take. I'm more interested to know what you think. Would you buy JA Solar 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!

On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool’s own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

Sun Hydraulics and Dynamic Materials are Motley Fool Hidden Gems recommendations.

Fool contributor Tim Beyers also contributes to the market-beating Rule Breakers service. Tim didn't own shares in any of the stocks mentioned in this article at the time of publication. Check out his 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.