One growth stock I purchased for my holdings recently and I am excited about in the longer term is Seeing Machines (LSE:SEE). Here’s why.
AI tech
Seeing Machines is a tech stock with operations primarily based in Australia. It specialises in designing, creating, and selling technology related to artificial intelligence (AI) that will reduce and prevent transport-related accidents. Its technology can be applied in the automotive, rail, aviation, and off-road sectors currently. It counts some major businesses as its customers already, including General Motors and Emirates Airlines.
So what’s the current state of play with Seeing Machine shares? Well, as I write, the shares are trading for 6p. At this time last year, the shares were trading for 10p, which is a 40% drop over a 12-month period. It is not uncommon to see penny stocks fluctuate up and down this much.
The Seeing Machines share price has dropped more so since the turn of the year due to the stock market correction. The correction is linked to macroeconomic headwinds and geopolitical issues.
A growth stock with risks
The biggest risk I must consider as a shareholder of Seeing Machines is that of competition. As with most penny stocks, there is a high likelihood that a larger, more established business in the sector could out-muscle and outmanoeuvre a smaller firm like Seeing Machines. AI-based technology is a growing market and many firms are vying for market share and dominance, some of which are bigger and better known with more financial clout.
Generally speaking, macroeconomic headwinds such as soaring inflation, the rising cost of raw materials and the global supply chain crisis are real threats to the progress of a growth stock like Seeing Machines.
Why I bought the shares
I always look at performance when deciding to buy shares for my holdings, although I do understand that past performance is not a guarantee of the future. Looking back, I can see Seeing Machines has increased revenue for the past four years in a row. It has consistently recorded a profit in each of these fiscal years too, even in the face of tough trading caused by the pandemic in the past 18 months.
Coming up to date, Seeing Machine released a half-year report at the end of March for the six months ended 31 December 2021. It reported revenue was up nearly 20% compared to the same period last year. Furthermore, it managed to conserve more cash and boosted its coffers by nearly 50%. Cash on a balance sheet is a big positive for me in any growth stock. This cash can steady the ship in uncertain times as well as fund growth initiatives.
At current levels, Seeing Machine shares are dirt-cheap, in my opinion. I paid 6p per share and purchased a total of 15 shares at a total cost of just over £1. I don’t see much risk here and if I lost all my money, it wouldn’t concern me too much.
My investing mantra has always been to buy and hold for the long term. I believe Seeing Machines could develop and grow into an AI leader and provide me excellent returns. I rate it as an exciting growth stock and will keep a keen eye on developments.