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Penny shares have greater profit potential, right? And there’s less to lose? Hmmm. Those are both mistaken thoughts.
The maximum we can lose from a penny share is 100%, exactly the same as with any stock. And I’d say there’s probably a greater chance of a wipeout, as something has usually gone wrong to send them to such low levels.
I’ll briefly mention one as a caution. I won’t name the company, but five years ago its shares were priced at around 1p. Not much to lose? They’ve crashed more than 95% since then.
The value of an investment depends on a company’s performance, not just the share price. Here are two that I like.
Venture capital
When you think of investing in venture capital, what comes to mind? Visions of millionaire investors ploughing serious cash into private equity firms?
With Triple Point Venture VCT (LSE: TPV), we can have a go with even modest sums.
I’d never heard of it until I read my colleague Jon Smith’s article, “This penny stock invests in start-ups. Here’s why I think it could surge“. But we Foolish investors learn from each other, right?
Investing in venture capital can be a risky business. The things they put our money into might not be easy for us to investigate and understand ourselves. We have to hope the managers are on the ball.
Trust a trust?
If trusting our cash to folks in the City without being able to properly understand what they’re doing with it sounds out of touch with the Foolish approach… well, yes, that’s a good point.
Still, the trust has put money into forestry management using artificial intelligence (AI). And some has gone to a company working on cost-effective electric vehicle (EV) schemes for businesses.
Those are high-profile right now. And it might not need much for one of them to take off and give the Triple Point share price a boost.
Things can go wrong with start-ups, of course. But I might put a small amount of my 2025 investment cash into this penny stock.
Down to earth
I’ve followed Topp’s Tiles (LSE: TPT) for a long time.
I’ve bought its products, and I like them. A lot of others do too. And over the long term, it’s built up a strong following.
The problem is, the business has been hit by multiple external crises. The most recent is the fallout from the pandemic, which immediately stopped us doing anything more than essential shopping.
Inflation, high interest rates, expensive mortgages, depressed building sector… they’ve all taken their toll.
Upbeat outlook
But at FY time in November, the company told us it’s “continuing to take market share in a difficult trading environment.” And though the market is “c. 20% down on pre-Covid levels,” Topps saw revenue 14.9% ahead of 2019.
That difficult trading environment is still a big threat, and stubborn inflation could hold the share price back in 2025. But the City expects earnings growth in the next few years, and predicts a 9% dividend yield.
That might finally move me to buy some.