Making Cents in Penny Stocks

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

Still, many investors dabble at the low end of the stock-price spectrum. At Motley Fool CAPS, we award the "Pennies" title to investors who rate stocks trading in the single digits more than half the time. Believe it or not, you'll find some of the best CAPS All-Stars among those members.

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 -- or run for cover!

Here's the latest list of low-priced stocks with All-Star support:

Price when the outperform call was made.

Your two cents' worth
When an industry is in as much turmoil as the U.S. credit and financial markets, the stocks of leaders like Ambac Financial and MBIA (NYSE:MBI) are likely to be extremely volatile as they try to work their way out of their troubles. CAPS member Herecometheblind indicates he bought Ambac stock and watched it become a yo-yo, but fully expects it to recover.

I have watched this stock for the past several months and have been happily surprised. … While there is still some volatility here, I will be long on this stock. Over the next year I expect to see this stock in the mid twenties or higher. Great buy!

Despite big drops recently, oil prices are still at triple-digit levels. CAPS member bajaisaak believes Oilsands Quest is prudently managing its reserves for the long term, making it an attractive takeover candidate.

BQI owns an unthinkable amount of land, and have hit oil with every drill in the ground. They are developing the resource at a prudent pace. Some multinational energy firm looking to boost reserves and gain a foothold into the world's most politically secure energy source will come along and take them over. Buy it now before it's gone.

With high energy costs over the past year, the solar industry has sought to develop new technologies like thin film solar panels. Certainly, Ascent Solar Technologies, First Solar (NASDAQ:FSLR), and others want to see it become the preferred method of manufacture over polysilicon-based alternatives. Top-rated All-Star CAPS member mkeszler thinks Ascent has a favorable future.

High risk, high reward opportunity. Solar is a competitive industry with awesome growth potential. There will be spectacular gains, as well as dismal flops. This outfit may go either way, but risk-reward looks appealing. They have over $6/share in cash and book value of over $7, so they should be able to hang in there until profitability.

Make some change
What do you think? 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.