There is merit to holding penny stocks of promising companies. A low-priced stock ensures that I do not have to set aside significant sums of money to be able to buy it. This is an especially attractive aspect to stock market purchases when I have just started saving.
How to choose penny stocks
But not all penny stocks are equal. Some stocks are so cheap because the company does not have strong prospects and its share price has just dwindled to penny stock territory. That is not the kind of stock that I want to hold in my portfolio, because it is clearly a losing game. Yet there are others that are penny stocks today, but could explode over time. Here I explore two stocks that I think could have such potential and in which I would gladly invest £1,000 today.
Staffline sees better prospects
The first stock is recruitment services provider Staffline (LSE: STAF). When I last wrote about it in September, its share price had shown an unbelievably positive trend over the past year. It had actually tripled! A couple of months later, it has seen a correction from those levels. It has, however, more than doubled in the past year and is around 62p right now.
Considering that labour market trends in the UK are largely positive right now, I think it might start strengthening again. In fact, I think it could lose its penny stock status and go back to pre-pandemic levels soon. There some stumbling blocks, though. It is not a profitable company and labour shortages could hold the sector back too. On the whole though, I think this is a good growth stock to buy today.
Marston’s is a pub stock to buy
Another penny stock I like is Marston’s (LSE: MARS). At a share price of 77p, the stock has actually lost some of the gains made right after the stock market rally that started last November. Its share price actually rose above 100p earlier this year, before dropping, probably on continued uncertainties in overall conditions.
However, I think in the coming months it could rise again. Its latest results showed that sales were higher than they had been pre-pandemic for the quarter ending 2 October. And importantly, social distancing is a thing of the past now as vaccinations strengthen and the intensity of Covid-19 cases diminishes.
My only problem with the stock is that it was loss-making even in the year before the pandemic. And now the company has posted two successive years of losses. Nevertheless, its latest six monthly numbers show that it has the capacity to turn around. I could wait a little while longer to see if it stays profitable now. But the more I observe it, the more convinced I get that it is a stock that could rise over time. It is a buy for me.