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Making Cents in Penny Stocks

By Rich Duprey - Updated Apr 5, 2017 at 7:55PM

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While low-priced stocks can be cheap for a reason, they might also present some great, overlooked investment opportunities.

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:

Company

Price^

CAPS Rating (5 max)

CAPS Member

Member Rating

Advanced Micro Devices (NYSE:AMD)

$1.93

**

mrcort24

98.84

Royal Caribbean Cruises (NYSE:RCL)

$8.34

**

bargainstocks

97.24

CapitalSource (NYSE:CSE)

$4.09

*****

mainlymanna

96.36

Genworth Financial (NYSE:GNW)

$3.00

***

wreckhur

96.30

NVIDIA (NASDAQ:NVDA)

$7.46

*****

eazydoes

95.87

^ Price when the outperform call was made.

Your two cents' worth
Maybe it's a bit of "chicken or egg" theorizing, but Advanced Micro Devices reinventing itself couldn't have come at a better time than when much of the semiconductor industry is expecting a significant decline. It cut its workforce, shed its manufacturing business to become a fabless company, and sold its digital TV assets to Broadcom (NASDAQ:BRCM).

By focusing on chip design, AMD can also focus its energies on catching up to Intel (NASDAQ:INTC). CAPS member ardyes703 finds upcoming design announcements to be vitally important at a time when the chip maker finds itself a bit beaten up:

For being the No. 2 chipmaker in the world, they are awfully cheap in the $2 range, yes it could drop to $1 range, but the upside potential for the fresh chips set to come out April 2009 & June 2009 should be enough to bring values up.

Although today's cruise ships closely resemble small islands (in both size and amenities), the big honking ships built for Royal Caribbean Cruises may not have a chance to repay their owners in the immediate future if the economy continues to sink. While Carnival Cruise reported better-than-expected third-quarter results recently, guidance was weak and seemed to suggest icebergs ahead for the entire industry in the form of reduced consumer demand.

Yet CAPS member financeguy81 said his experience in trying to book a cruise with Royal Caribbean was difficult due to a lack of vacancies:

Last time I tried to book a vacation, I was hardpressed to find any last minute vacancies on [Royal Caribbean] or its partner, Celebrity. Foolish to use this a guage? Probably. But at the same time, I don't think it's a coincidence that their stock got hit hardest amid the fuel crisis in the summer months and has now all but leveled out and seen some positive movements.

Penny for your thoughts
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. 

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.

By posting on CAPS, you can help our Foolanthropy efforts to promote financial literacy. The Fool's "My 2 Cents" campaign will donate $0.02 for each message posted on any of our discussion boards, as well as for each CAPS pitch, during the month of December.

CapitalSource is a Motley Fool Income Investor selection. Intel is an Inside Value pick. NVIDIA is a Stock Advisor selection, while Royal Caribbean is a former one. The Fool owns shares of CapitalSource and Intel, as well as covered calls on Intel.

Fool contributor Rich Duprey owns shares of and options on Intel, but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool's disclosure policy always wins the coin toss.

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Stocks Mentioned

Royal Caribbean Cruises Ltd. Stock Quote
Royal Caribbean Cruises Ltd.
RCL
$41.72 (0.10%) $0.04
Intel Corporation Stock Quote
Intel Corporation
INTC
$35.59 (0.62%) $0.22
NVIDIA Corporation Stock Quote
NVIDIA Corporation
NVDA
$179.42 (-0.86%) $-1.55
Advanced Micro Devices, Inc. Stock Quote
Advanced Micro Devices, Inc.
AMD
$98.12 (-0.94%) $0.93
Genworth Financial, Inc. Stock Quote
Genworth Financial, Inc.
GNW
$4.38 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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