Making Cents in Penny Stocks

The occasional shower of pennies from heaven might do our bank accounts some good. Alas, Fools can't say the same for penny stocks. They're often subject to manipulation and deceit, making it harder for investors to separate the few good offerings from the multitude best ignored.

Still, many investors enjoy dabbling at the low end of the stock-price spectrum. At Motley Fool CAPS, a "penny stock" is any stock trading under $10, and you'll find some of the best CAPS All-Stars regularly seeking out winning investments there. We identify them with a penny icon.

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

Here are three low-priced stocks enjoying All-Star support: 

*Price when the outperform call was made.

Your two cents' worth
The Texas prairies are attracting the eye of wind-power developers from all over the globe. And it's not just wind farms themselves creating opportunities, but also the parts for them. China's A-Power Energy Generation Systems supplies hundreds of turbines to SPG for a farm in West Texas, and France-based Alstom will be building a plant there to manufacture wind-turbine nacelles. Think of Texas as the Silicon Valley of wind power.

Alstom, though, is looking to be a vertically integrated supplier, such as General Electric or Siemens, in also providing turbines and towers. Its plans to develop a supply chain for other components should provide even greater opportunities for growth.

And CAPS member tytymhorau reminds us not to forget the wind power projects that A-Power has in place in the Middle Kingdom.

A micro-cap providing power generation/distribution in China, also an alternative energy play (wind and solar). Wind turbine production expanding to the U.S. Currently grossly oversold, market miffed over share dilution from a private placement at 14.37 in January. Is using capital raised to fund expansions that should prove extremely profitable a little further down the road.

A short circuit
Hecla Mining's shares have risen by more than 60% over the past year. But you're right to wonder why it remains so undervalued when you consider the financial strength it's been exhibiting -- a 46% increase in revenues, profits that tripled, and first-quarter production costs that came in at an astounding negative $3.03 per ounce of silver after by-product credits, with production reaffirmed at 10 million to 11 million ounces of silver.

Hecla trades at almost 4 times sales, which isn't exactly bargain-basement material, but when you compare it with Silver Wheaton (NYSE: SLW) at 22 times revenue, or Silver Standard Resources at 37 times, you see the potential. Only Coeur D'Alene Mines (NYSE: CDE) is comparably priced, but its cash costs are much higher.

It's that sort of displacement in value compared to opportunity that's attracting investors such as CAPS member leftybra, who writes:

Hecla has solid production of Lead, Zinc, Silver & Gold. Probably leads nation on Silver costs of production. (actually negative) I have followed and owned this stock for years.

An array of opportunities
It's understandable why analysts say "show me" when it comes to Keryx Biopharmaceuticals, considering the market has decided to price in a lot of good news already. But by bits and pieces, the drug developer is slowly chipping away at skeptics who wonder how well its perifosine drug will ultimately perform. The data so far is heartening. The colorectal-cancer treatment increased survival rates in a phase 2 trial from 11 months to 18 months when it was added to Roche's Xeloda, compared with the results from Xeloda alone.

AEterna Zentaris (Nasdaq: AEZS) is counting on its strategic partnership with Keryx for perifosine to generate a substantial portion of its future revenues, so there's more than one oar in the water pulling for this boat.

CAPS member baniven admits to a bit of speculation when it comes to investing here, but c25chris says that two drugs in late-stage development have shown him enough to make him believe Keryx will outperform the market.

Penny for your thoughts
Should we fill up the change jar with these penny stocks, or ignore 'em like a discarded coin on the street? It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Consult our free CAPS investor-intelligence community, where your two cents count as much as anyone else's.