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Penny stocks have higher profit potential, right? And is there less to lose? Hmm. Both are wrong thoughts.
The most we can lose on a penny stock is 100%, exactly the same as with any stock. And I'd say there's probably a higher chance of a removal, since something usually went wrong to send them to such low levels.
I will briefly mention one as a precaution. I won't name the company, but five years ago its shares were trading at around 1p. Isn't there much to lose? Since then they have plummeted more than 95%.
The value of an investment depends on the performance of a company, not just its share price. Here are two that I like.
venture capital
When you think about investing in venture capital, what comes to mind? Visions of millionaire investors investing big money in private equity companies?
With Triple point risk APV (LSE: TPV), we can try even with modest sums.
I had never heard of it until I read my colleague Jon Smith's article: “This penny stock is invested in startup companies. Here's why I think it could increase“. But we dumb investors learn from each other, right?
Investing in venture capital can be a risky business. It may not be easy for us to research and understand the things our money is invested in. We have to hope that the coaches are aware.
Trust a trust?
If trusting our cash to city folks without being able to properly understand what they're doing with it sounds out of touch with the dumb approach… well, yeah, that's a good point.
Still, the trust has invested money in forest management using artificial intelligence (ai). And some have ended up at a company working on profitable electric vehicle (EV) plans for businesses.
Those are high profile right now. And it may not take much for one of them to take off and give Triple Point's share price a boost.
Of course, things can go wrong with startups. But I could put a small amount of my 2025 cash investment into this penny stock.
With our feet on the ground
I have followed Tiles from above (LSE: TPT) for a long time.
I have purchased their products and I like them. Many others do it too. And in the long term, it has gained a large following.
The problem is that the business has been affected by multiple external crises. The most recent is the consequences of the pandemic, which immediately prevented us from doing anything other than essential purchases.
Inflation, high interest rates, expensive mortgages, a depressed construction sector…they have all taken their toll.
Optimistic outlook
But in November of the fiscal year, the company told us that it is “Continue to gain market share in a difficult business environment..” And although the market is “do. 20% less than pre-Covid levels,“Topps saw revenue 14.9% ahead of 2019.
That tough trading environment remains a big threat, and persistent inflation could dampen the share price in 2025. But City expects earnings growth in the coming years and predicts a 9% dividend yield.
That might finally prompt me to buy some.
