Penny stocks and bargains - Beginners investing

(Nick Slade) #1

I’m not much of a big spender when it comes to investing (not yet anyway) and am currently choosing to purchase just 1 or 2 shares for a few companies for less than £50 total so I can find my feet, get a feel for what happens and learn as much as I can.

Even though I usually only stand to make a couple of pennies, I still find it pretty rewarding and fun.

I thought it could be useful to have a thread dedicated to shares worth <£1, so that if any other beginners like me want to find their feet, they can do with a minimal budget with a low loss should it all fall apart.

The only ‘penny stock’ I’ve found so far is Debenhams which as most of us know, is basically unavailable from now onwards.

Company name:
Ticker:
Share price (at time of writing):
Company background:

Disclaimer: Often penny stocks come with a big risk of failure. Freetrade would not recommend investing in those companies because of this

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#2

Company name: Sirius Minerals
Ticker: SXX.l
Share price (at time of writing): 24p
Company background: currenlty undertaking europes largest mining work in the north of England for a type of fertiliser. They are currently trying to secure stage 2 funding to continue the project. Yesterday the share price was 20p and it shot up to 27p today at its peak. Could be one to watch as it has huge potential but risky at the same time.

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(Nick Slade) #3

This sounds interesting - I’ll take a read up on this one!

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(Chris) #4

Apologies for this and I’m going to very boring and put a warning out to any new investors here…

…the price and the cost of ay share is not the same thing and you should understand the difference before you invest. For example the price of a share can be 2p, £1 or £44 the cost of these shares (eg the value you get) is in no way correlated to the value you get back. Eg paying 2p for a share does not mean it is better value than a share that costs £44. The cost should be the price vs some valuation metric of a business, typically this is Earning - the PE ratio being the metric to consider. However, earnings is not the only one.

Because I don’t want to spoil the fun…

Company name: Lloyds Banking Group
Ticker: LLOY
Share price (at time of writing): 62.95p
Company background: A British retail & commercial bank that also owns Halifax. It is the largest mortgage lender in the UK and also the largest retail bank in the UK.

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(Nick Slade) #5

Very well put! I was careful to choose ‘Price’ instead of cost, as depending on the amount invested, the cost could vary. Completely agree that just b ecause they are cheap doesnt mean its a bargain and you should buy as many as possible.

The idea behind this was purely to allow someone like myself who only wants a couple of shares in a few companies to learn the ropes to do so without spending/loosing lots of money in the process

Funny enough, Lloyds is my old bank before moving to Monzo. I never thought much of them but I had a spare £2 in my portfolio to spend so bought a couple of shares. I’ve ended up making 10% on my initial investment so even though I still have to work for a living, I’m happy to get something at least!

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(Chris) #6

The idea behind this was purely to allow someone like myself who only wants a couple of shares in a few companies to learn the ropes to do so without spending/loosing lots of money in the process

I didn’t mean any offence. I’m sure you had no ill intentions at all and I totally get were you’re coming from with the thread. I just want to make sure any newb took note of the fact that you did use price.

The only others I know of are:

Company name: Patient Capital Trust
Ticker: WPCT
Share price (at time of writing): 82p
Company background: Neil Woodfood’s investment fund that invests in unlisted companies that are typically in the startup or early growth stage

Company name: AO (Appliances Online)
Ticker: AO
Share price (at time of writing): 97p
Company background: One of the UK’s largest appliances online retailers

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(Nick Slade) #7

No offence taken :slight_smile: I was greatful for the input. You put what I was trying to say into words which I was struggling to do!

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(Chris) #8

Well I’m glad I could help :slight_smile:

Interesting point you’ve raised though. Shares that have a price point of below 1.00 do allow anybody to get involved, buy a single share and dip their toe in the water - whilst limiting risk and liability. Hopefully this threads helps some people

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(Emma (#20 😎)) #9

Patient capital are 82p FYI

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(Chris) #10

Thank you! I’ve edited the OP now. Not sure how I got it that wrong :confused:

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(Emma (#20 😎)) #11

If it was that price I’d celebrate. I timed the market so I invested in them when it was at its highest :joy: :woman_facepalming:

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(Chris) #12

Well think on the positive side, any investment now is essentially a discount on your original :slight_smile:

It’s a shame though. I really like Woodford, I think he will turn it all around but he’s had a bad run of the last few years and the media is not helping him at all now.

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#14

Have a look at SYM on ‘stock requests’ - maybe what you’re looking for and it needs votes to get it on Freetrade!
All the best

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(Gordon) #15

Not exactly penny stocks, but have you considered ETF’s £7.30 ish per share for the £ISF FTSE100 then you’ll have a little bit of 100 stocks. ETF’s seem to do well over the long term.

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(Rob N) #16

When Freetrade add fractional shares this year, all shares will be penny stocks :+1:t3:

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(Nick Slade) #17

That’s an excellent point! Although I did read (can’t find it now but I’ll add it if I do later) that only US shares will be available to buy fractionally and that you will only be able to buy whole UK shares?

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(Rob N) #18

Yeah actually it’s firstly for US shares, which tend to have far higher prices (google, amazon, Apple etc) and the US regulations are further ahead in allowing that

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(David Kent) #19

For the lower entry amount it’ll be tough to see anything meaningful after you deal with any tax. It’s a fun time if you just want the excitement of seeing the money change and dealing with those emotions however this just encourages a shorter term view because of the buzz.

I’d strongly recommend going for a solid ETF and putting in a meaningful amount to you in each month, this could be £20-50 each month into this ETF and let that grow.

If you are deadset on experiencing some emotions you can look through the AIM or oil/gas stocks. Generally cheap per share and highly volatile with terrible liquidity. The poor liquidity means simply buying the share will trigger a jump up in price (so it’ll be even tougher to make any money on it as you generally sell for sell than the listed price too.)

Personally I brought into a firm called MetalTiger years ago off the back of some good news, me purchasing the stock increased the price by 8% and then to sell it would be a 22% decrease, simply because there was no liquidity in the market because it was a cheap penny stock.

If you want cheap just for the wild ride:
Company name: Sareum
Ticker: London Stock Exchange: SAR
Share price (at time of writing): 0.75p (fractions of a penny)
Company background: They have seen an increase this morning, and they are part of the Medicine and Biotech Research sector (wild place, crazy speculation on drugs that work and are super early stage.) With a market cap of less than £22m I’d stay away, this is a potential pump and dump stock. But if it’s risk you want and you are not worried about winning or losing (most likely losing with this stock) you’ll have fun with it :joy:

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(Chris) #20

I disagree a little with this. Anybody investing micro amounts is highly unlikely to have any tax implications. And even if they are, an ISA wrapper is a perfect solution :slight_smile:

However, your advice on ETF’s is very solid. Any amount in an index tracking ETF is likely to do well over the long term

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(David Kent) #21

And even if they are, an ISA wrapper is a perfect solution

That’s very true and something I should have added. There is also no stamp duty on AIM stocks I believe, due to the risks.

I’ve lost too much to AIM/penny/pink sheet stocks, I’m sorry for the knee jerk blanket claim!

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