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
With polysilicon prices falling, Solarfun Power got an energy boost that made it one of the biggest percentage gainers in the market. But is it only a temporary bounceback that will quickly reverse itself again if oil prices continue to fall?

There's certainly some doubt about the nation's commitment to new energy initiatives. Ford (NYSE:F) announced it was calling back 1,000 employees to start up production of its F-150 pick-up truck even as it teeters on oblivion. If Ford's right and there's pent up demand for gas-guzzling trucks, low oil prices may bring an end to sustained demand for alternative energy sources that cost more -- even with the help of tax credits.

CAPS All-Star muirmm isn't so sure, and figured early last month that the main reason for the sell-off in the sector was uncertainty over passage of the ITCs. Now that they've been approved, he believes Solarfun and its peers may soon be surpassed by newer technology:

All the solar manufacturers have sold off because of uncertainty over whether renewable energy tax credits will be extended…. I intend to sell them soon after the tax credits are renewed, as that should cause a nice pop in the stock prices. After that, I believe solar stocks will be a bad bet. Nanosolar (not a public company) will soon flood the market with much cheaper solar cells. … Once they get rolling, they will be able to make an essentially infinite supply of panels at a tenth the current price. That will make life REALLY hard for all the other manufacturers.

Crocs has always been a company caught between those who viewed it as a lasting fashion statement and those who figured it was a fad. Now it seems that CAPS members are divided over whether it's cheap enough to get a buyout offer or if the decimated retail markets have impaired the iconic shoemaker for good. CAPS All-Star Masterofdabull takes the bear view that Crocs is cracked: "Too many knock offs, no new different products, bad economy."

Arguing for the other side is another All-Star, QUICKflip24, who figures that if teen retailer Pacific Sunwear (NASDAQ:PSUN) has been beaten down so far as to get a buyout offer, no matter how dubious it might be, Crocs should be next in line.

If PSUN can get a take out offer, then surely a brand like CROX can. Not expected to make money this year but not expected to lose much either. balance sheet is fine...just some extra inventory.

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.