At any given time, without even looking, I'd gamble that most of the stocks on the yearly new-low list trade under $5 a share. Take a gander today, for example, and you'll find AspenBio Pharama (APPY) at 80 cents, Qualstar Corp. at $1.80 and diversified utility U.S. Geothermal (THM) at 35 cents. My two cents? Save your two cents for other investments.

Also See

• In Praise of Private Equity
• A Pure Play Inflation Bet
• The Top Foreign Stock Funds

There are few lower probability trades than penny stocks, especially of microcap companies trading at a multi-month lows. They are the classic sucker's wager. Scratching off lotto tickets might be a better bet.

In almost all cases, cheap stocks are cheap for a reason. They're the names the market, the collective analysis of literally thousands of people, have tossed out, and not because they're hidden treasure waiting to be found. Penny stocks have a better chance of going to zero then they have of becoming the next Chipotle (CMG), exactly why, as a rule, many institutional investors won't buy stocks under $5. It's a smart discipline: with thousands of different risks to assume, why take on the worst possible option?

In reality, penny stocks are attractive for exactly the wrong reasons, namely the irrational desire to buy a lot of shares of something, anything, even if it's a 70-cent stock like GeoMet (GMET), a microcap energy company in danger of being delisted from Nasdaq. You can buy 150 GeoMet shares for the price of one measly Chevron (CVX) . But there's no value in having a large quantity of an inherently bad investment.

We also foolishly gravitate towards the fantasy of a quick profit in penny stocks, the belief that a penny stock need only jump a dime or quarter for us to make a substantial percentage profit on our thousands of shares. It's a mirage that rarely works out. The comparatively low liquidity on penny stocks means oftentimes simply entering or exiting a position can cost upwards of 5% a turn, which makes achieving profit nearly impossible.

Moreover, real gains in markets tend to come not as a result of a one-day pop, but from trends that persist over time. Because most penny stocks very viability is in question -- many just disappear altogether longer-term bull trends tend to be an exception rather than the norm.

Stocks are like sushi: you don't want a "bargain" or sale off the discount rack. And while uncertainty is inherent in any market speculation, penny stocks like Giga-Tronics (GIGA) or Innovaro (INV) are nearly always bad bets; the odds are stacked decidedly against the investor's success, exactly why so many experienced investors avoid them altogether. Follow their lead to more promising names.

Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC