Penny stocks can make you rich. Need proof? Every one of these multibaggers was once a penny stock:
Company |
Recent Price |
CAPS Stars (Out of 5) |
5-Year Return |
---|---|---|---|
Smith Micro Software |
$10.76 |
***** |
332.1% |
Quidel |
$14.82 |
***** |
292.1% |
ClickSoftware Technologies |
$6.74 |
***** |
262.4% |
Illumina |
$32.25 |
**** |
1,179.8% |
Life Partners Holdings |
$17.21 |
** |
696.8% |
Sources: Motley Fool CAPS, Yahoo! Finance.
The promise of outrageous returns has periodically made even the world's best stock-pickers penny stock investors. Peter Lynch has enjoyed the stock market's super-cheap seats in the past, and still does on occasion. The Royce Low-Priced Stock fund has beaten the market for a decade by betting on stocks trading near or below $10 a share, including Exelixis
Even the All-Stars in our 135,000-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? Well, the warning the SEC issued about them provides one excellent reason to steer clear. 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 seek only four- and five-star stocks with a market cap between $250 million and $2 billion? Surely our CAPS screener would return some winners, right?
This week when I ran that screen, 48 stocks made the cut -- not including our last topper, China Nepstar Chain Drugstore.
My favorite penny stock this week is Exide Technologies
Metric |
|
---|---|
CAPS stars (5 max) |
***** |
Total ratings |
298 |
Percent Bulls |
97% |
Percent Bears |
3% |
Bullish pitches |
44 out of 44 |
Data current as of July 17, 2009.
Like earlier penny pick Alvarion
There's just one wrinkle: Exide's primary business is lead-acid batteries. Management has only recently begun to align the business towards greater production of electrics, which differ from their more mature lead-acid cousins.
"The latest news is mostly that their new offerings will excel in the hybrid market, not the EV [electric vehicle] market," wrote CAPS investor Scoobrs earlier this month. "However, I believe that Exide will grow to expand their addressable market with EV offerings. I'm betting on a car battery company to know which way the wind's blowing and follow it."
Agreed, but that's also just one Fool's take. I'm more interested to know what you think. Would you buy Exide Technologies at today's prices? Let us know by signing up for CAPS today. It's 100% free to participate.
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