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Summary
- Penny stocks are widely believed to be highly volatile and risky.
- Penny stocks also offer potentially high returns to investors.
- Oilex LD and Kodal Minerals are two such stocks that can be kept an eye on in July.
It is widely believed that penny stocks are extremely volatile and risky. True, there are many stocks that come under £1 that are prone to price volatility. However, there’s little value in completely dismissing penny stocks as several offer potentially high returns to investors.
Shares trading below £1 on UK stock exchanges is termed penny stocks. If the price of the share is low, it is considered to be a speculative investment. The definition has, however, been widened to include stocks priced above the guideline prices. Their high volatility gives an opportunity to tap growth potential.
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These stocks generally function on the success or failure of a business. As they do not belong to broader exchanges, they have limited oversight, and investors end up with limited government protection.
If listed companies collapse, they have more chance to getting bailouts from the government than any of these companies.
But such companies do have enough growth potential simply because of risk-reward function. Here are two such stocks that are priced under £1 but have over 200 per cent year-to-date return and can be kept an eye for the month of July.
Oilex LD (LON:OEX)
The stock of this oil and gas company has a year-to-date return of 223.08 per cent and a one-year return of 116.29 per cent. The stock has a market capitalisation of £7.91 million. It was trading up 21.05 per cent at GBX 0.23 on 24 June 13:05 GMT+1.
The company recently acquired 55 per cent participating interest (PI) in Cambay Production Sharing Contract. The acquisition would give Oilex complete PI in Cambay PSC. Oilex has done an exhaustive technical study of Cambay’s assets and drilling plans. It will run a pilot project soon, and its results would provide sufficient data on whether horizontal wells can lead to a 3-to-5-fold estimated increase in well productivity.
Kodal Minerals (LON: KOD)
The stock of this mineral company has a year-to-date return of 315.74 per cent and a one-year return of 716.36 per cent. It has a market capitalisation of £69.73 million. The shares were trading up 0.34 per cent at GBX 0.44 on 24 June at 13:20 GMT+1.
The company recently announced that geochemical sampling that was conducted at the new gold exploration zone in Côte d'Ivoire had found high-quality surface samples. Infill sampling has found continuity of superior quality gold, and an aircore drilling rig has been retained to conduct testing of this area. Drilling was announced to begin 21 June onwards.
