I always look for new stocks that can improve my portfolio and boost my returns. I’ve realized so far that one way to go about this is to review established businesses that are found on the FTSE index. Another method I use involves looking for penny stocks that have a potential for growth and give me excellent returns later on.
Before you can do that, the first thing you need to do is understand what penny stocks are. Hi, my is Antoaneta. Today, I’ll discuss this type of stock and hopefully, by the end of the blog, you’ll know how to use it to your advantage. You can also check out our other investing blogs on my platform. Let’s begin.
Penny stocks, also called penny shares, trade with a share price that’s less than £1 and have a market cap that’s less than £100m. Based on these figures, it’s easy to spot that these businesses have low value because of the higher risks they present. But despite that, these companies can present a higher reward potential.
Investors consider penny stock investments as speculative when compared to purchasing stocks from firms that are more established. Penny stocks have a huge potential for growth and some haven’t developed any product or service or generated any income yet. You can check the FTSE Alternative Investment Market Index for penny stocks.
Are Penny Stocks Risky Investments?
You may find the next big stock among penny stocks. On the other hand, you’ll have to face a lot of risks, too. Before you invest in penny stocks, there are some things that you need to consider.
Do Your Research
Research is key when it comes to investing. It’s one of the things that you really need to do. Even the most popular investors conduct their due diligence so you should do that too. Beware of information that is not credible. You need to know how to weigh if the information you read is true or not. If you’re unable to find reliable and legitimate information about the penny stocks that you’re researching, it’s better to stay away from it, especially if you’re not comfortable investing in it.
Check the Liquidity
A lot of penny stocks lack liquidity. It may be due to two reasons. The first one is that the company has little cash to invest in research and development, product launches, and other activities that may help the business make a profit. Another problem is that low liquidity provides chances for the stock price to be manipulated. This takes place when somebody purchases a large amount of stock, and then hypes it up before he sells it once other investors start to focus on it.
Having a good understanding of penny stocks as well as the risks involved when investing in them will help you choose one from the FTSE AIM.
One of the penny stocks that I find interesting is BATM Advanced Communications. It is a technology company that operates two major divisions, biomedical and Network & Cybersecurity. BATM’s main office is in Israel but it has offices in different parts of the world including Asia, North America, and Europe.
The company’s biomedical department has joined other pharma companies in producing products that aim to address the COVID-19 pandemic. It’s presenting excellent progress in developing diagnostic tests as well as multi-pathogen tests. The business has a lot of opportunities to make the most out of its performance in these emerging markets, which makes the penny stock very interesting.
As of the moment, BATM’s shares are trading for 91p per share, marking an increase of more than 100% from its pre-pandemic levels. The company has a positive outlook and has increased its full-year expectation.
The company’s past performance is excellent, too. Its net income, operating income, and revenue have risen year over year in the past four years. It has good liquidity and balance sheets, thanks to its increasing cash flow.
In terms of the risks, the biggest one it’s facing involves its current standing in the market and its competitors in the industry. The company that is easily beaten by more established organizations. You’ll find a lot of pharma firms that have released their own set of COVID-19 related products and even cybersecurity firms are joining the race. This massive competition could pose problems for BATM’s financial health and investment viability.
But as a penny stock, BATM looks promising because of its stable financials and excellent performance history. If you are looking for penny stocks to buy, you need to do your research first. It will give you a true edge especially when it comes to making informed investing decisions.
Thank you for sticking with me until the end. Don’t forget to check other investing blogs such as “Investing Advice from the Greatest Investors“. If you enjoyed this blog, don’t forget to share and leave a comment.
Recommended for further reading:
- MONEY Master the Game – Tony Robbins
- The Five Rules Successful Stock Investing
- Business Secrets from the Bible – Daniel Lapin
- Intelligent Investor: The Definitive Book on Value Investing – A Book of Practical Counsel
- Rich Dad’s Guide to Investing: What the Rich Invest in, That the Poor and the Middle Class Do Not!