- Penny stocks have a trade value of less than £1 and a market cap of less than £100 million.
- But investors are often buoyed by their high risk-reward ratio and tend to explore them during inflationary conditions.
With the Bank of England (BoE) raising the interest rates UK interest rates by 0.5% to 4% on Thursday, investors are often left in a quandary about which stocks to invest in. This is the 10th time in a row that the central bank has increased rates as it tackles record high inflation.
With the interest rate currently at 3.5%, it was anticipated that the interest rates might touch 4% - the highest since 2008. So, amid this economic turbulence that has plagued the UK economy, many investors look to minimise their risks during the volatile period, while ones with a higher risk appetite opt for penny stocks with look for higher returns.
Penny stocks have a trade value of less than £1 and a market cap of less than £100 million. But investors are often buoyed by their high risk-reward ratio and tend to explore them during inflationary conditions.
While penny stocks are largely considered as ones offering better returns than large-cap firms, they are extremely volatile and risky. Especially during inflation, the risks associated with penny stocks tend to increase. Therefore, it is crucial for investors to carefully analyse a company before putting their hard-earned money into it.
Kalkine Media explores some of the penny stocks that investors can keep a keen eye on.
Prospex Energy Plc (LON: PXEN)
The United Kingdom-based oil and gas investment company primarily has its presence in Europe. The Prospex Energy Plc on 2 February enjoyed a one-year return of 231.47% and 7.88% on a YTD basis. The AIM constituent boasted a market cap of £43.50 million and an EPS of 0.02.
Angus Energy Plc (LON: ANGS)
With a market cap of £43.76 million, the UK-based independent onshore oil and gas development firm has given a return of 22.11%to investors in the past one year. Its year-to-date or YTD return currently stands at -19.35%. The firm is listed on the FTSE AIM All-share index.
Tavistock Investments Plc (LON: TAVI)
Tavistock Investments Plc is yet another FTSE AIM All-Share stock which on 2 February was having a market cap of £45.82 million. The financial services provider, which focuses on offering investment services to private investors, has given its investors returns of 107.50% and 22.27% on a one-year and one YTD basis. The TAVI stock had an EPS of 0.05.
Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.