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Highlights:
- In the current market situation, several investors are looking at penny stocks to generate good returns.
- While penny stocks do offer good returns, they are riskier because of highly speculative valuations.
The Bank of England (BoE) has warned Britain’s economy could slip into recession towards the end of the year. With inflation at a 40-year high, such a crisis could be the biggest financial crisis since 2008-2009. The BoE has said it may reach over 11%, but several other experts have claimed it may be significantly higher.
Due to the economic situation, equity markets are now volatile, prompting investors to be cautious with their investments. A few investors with a bigger risk appetite are looking at low-cost shares, which may demonstrate good growth in the future. These cheap stocks, popularly called penny stocks, generally trade under £1 and hold a market cap of less than £100 million.
While penny stocks typically offer higher returns compared to mid and large-sized stocks, it is also important to know that they come with a higher risk component. It is because small companies that offer penny stocks usually have highly speculative valuations, thereby comprising more risk.
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Image source: © Tasha24567 | Megapixl.com
Despite the risk factor associated with them, penny stocks can still provide significant gains to investors. However, it is crucial to properly evaluate the companies and their growth prospects before investing in penny stocks.
Kalkine Media® explores five penny stocks with excellent 12-month returns that investors can evaluate.
Harvest Minerals Ltd (LON: HMI)
The Australia-headquartered firm is in the business of producing natural fertilisers. With a market cap of £21.38 million, the stock was trading at GBX 11.45, up 1.33% at 8:14 am (GMT +1). HMI stock has offered its shareholders a return of 279.51% over the past 12 months, while on YTD bases, the share prices have 163.07%.
Prospex Oil & Gas plc (LON:PXEN)
The oil & gas investment business boasts a market cap of £14.94 million. Over the past year, its share price has spiked by 104.14%, while the YTD return is 78.31%. As of 8:25 am GMT+1 on 25 August, the share price of Prospex Oil & Gas was GBX 5.94, up 0.68%.
Hurricane Energy Plc (LON: HUR)
The UK-based oil and gas exploration firm holds a market cap of £147.40 million, and its shares were trading at GBX 7.44, up 0.58%. It has given a return of 254.61% to investors in the past 12 months, and the year-to-date return stands at 107.63%.
Borders and Southern Petroleum plc (LON:BOR)
Borders and Southern Petroleum is an oil and gas exploration firm, and its shares were trading at GBX 3.74, up 1.01%, at 8:00 am GMT+1 on 25 August. The AIM-listed company holds a market cap of £21.78 million and has provided investors with a mammoth return of 302.97% over the past 12 months. The year-to-date return currently stands at 483.78%.
Tavistock Investments plc (LON: TAVI)
The UK-based financial services company offers investment-related services. Shares of the AIM-listed company were trading 1.58% higher at GBX 8.89 as of 8:49 am GMT+1 on Thursday.
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.
