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Tuesday, November 10, 2009
Tim Beyers :: Townhall.com Columnist
The Next Million-Dollar Penny Stock
by Tim Beyers
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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

Titanium Metals (NYSE: TIE)

$9.19

*****

260.4%

ClickSoftware Technologies (Nasdaq: CKSW)

$5.61

*****

193.7%

Hologic (Nasdaq: HOLX)

$15.13

*****

203.2%

Allos Therapeutics (Nasdaq: ALTH)

$6.21

****

188.8%

Net Servicos de Comunicacao (Nasdaq: NETC)

$13.91

***

486.9%

Sources: Motley Fool CAPS, Yahoo! Finance. As of Nov. 6.

The promise of outrageous returns has periodically made even the world's best stock pickers penny stock investors. Peter Lynch has enjoyedthe 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 decadeby betting on stocks trading near or below $10 a share, including Ceradyne .

Even the All-Stars in our 140,000-plus Motley Fool CAPScommunity take to penny stocks. More than a few have been richly rewarded.

Pennies from heaven
So why notinvest 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 screenerwould return some winners, right?

This week when I ran that screen, 51 stocks made the cut -- including our last topper, Sonus Networks .

My favorite penny stock this week is USEC (NYSE: USU), which sells enriched uranium to commercial nuclear power suppliers. The details:

Metric Continued...
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About The Author

Tim Beyers is a freelance writer and PR and marketing consultant.

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