In the UK, we usually find penny shares on London’s AIM stock exchange. They’re highly speculative investments with huge volatility. That makes them risky and they’re often illiquid, which means it’s difficult to get a fair price when trying to sell a shareholding. Of course, some excellent companies started out as penny shares, so it’s not all bad. The trick is to look for high-quality potential and a shareholder-focused management team. Here are four I’ve been considering.
Argo Blockchain
I covered the reasons for and against investing in this blockchain stock, Argo Blockchain last month. The £916m company mines for Bitcoin. As such, its shares rise and fall in line with the volatility of the number one cryptocurrency. However, its share price is down 16% since its all-time high in February. I’ll be avoiding this for now, because I think the cost in running its miners and staying competitive is prohibitive to its long-term growth potential.
Supply@ME Capital
Fintech penny share Supply@ME Capital helps its customers monetise their inventory. Its business model looks credible, its target market could be massive, and shareholder interest is high. But it raised a red flag in February when its shares were suspended at the company’s request. They’ve since been reinstated and investor interest has resumed. The £163m company posted a large £2.1m loss for the six months ended June 30, up from £113k in 2019. But most of that was incurred through its reverse merger with Abal Group, the formerly AIM-listed cash shell company that took Supply@ME public. I see the company has growth potential, but until I better understand its outlook, I’m not tempted to invest.
HSS Hire
Construction company HSS Hire rents out tools and equipment to the industry. Its share price plummeted during 2020 but has been gradually climbing year-to-date. The pandemic hit the company hard. So, it now plans on closing 134 branches to concentrate on its online growth potential. However, the company has high debt and getting back on track is dependent on sales. If it can grow sustainably, then its share price could rocket, but it’s another speculative investment. I’m tempted by this one because it’s a recognised brand and construction is a sector that tends to thrive when recovering from an economic crisis. Nevertheless, it’s still risky.
Eurasia Mining
Mining stocks are volatile at the best of times and penny shares in the mining industry are riskier than ever. This company saw its share price rise astronomically in 2020. Eurasia Mining has been publicly listed since 1996. And with its shares trading around 30p, it’s returned to levels unseen in 20 years. It remains a highly volatile investment, but mining stocks are hot now because many precious metals are necessary in the development of modern tech, such as batteries for electric vehicles.
Eurasia mines for a mixture of palladium, platinum, rhodium, iridium, and gold. It suspended its shares in February 2020 but resumed trading in July, while simultaneously listing the company for sale. So far it hasn’t found a buyer as Covid-19 and travel restrictions are hindering the process. And whether it will find one willing to pay more than its current £800m market value remains to be seen. Investing in penny shares makes me nervous because they’re so speculative. But I feel bullish on the mining sector and Eurasia Mining shares tempt me.