Is Now The Perfect Time To Buy Small-Caps Blinkx Plc And Sirius Minerals PLC?

Should you add Blinkx Plc (LON: BLNX) and Sirius Minerals PLC (LON: SXX) to your portfolio?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

While all small-caps tend to be more volatile than their larger peers, at the present time Blinkx (LSE: BLNX) and Sirius Minerals (LSE: SXX) are enduring extremely important periods in their development. As such, it is likely that the volatility seen in their share prices will continue, with Blinkx down 61% in the last year and Sirius Minerals seeing its share price rise by 30% in the same time period. The question, though, is whether now is the perfect time to take the plunge and buy them? Or, is there likely to be a better opportunity ahead?

Blinkx

As mentioned, Blinkx and Sirius Minerals are undergoing critical periods at the present time, with Blinkx transitioning its business model towards mobile and automated marketing and also reorganising its marketing efforts. This is a sensible strategy, with Blinkx seemingly following industry trends and, as such, it was good news for investors that Blinkx stated last month that it is confident of meeting full-year expectations. This, of course, is likely to mean a bottom line loss but, with such a huge transformational programme currently ongoing, which includes numerous acquisitions, it is not a major surprise that there are short term disappointments along the way.

The question, though, is whether Blinkx can return to profitability over the medium term. Its forecasts suggest so, since it is expected to break even in the current year and post a profit of £1.9m (pretax) next year. The chances of this happening seem to be relatively strong, since Blinkx has the financial resources to further increase its offering through acquisitions and, with it trading on a price to book (P/B) ratio of just 0.8, it seems to be worth taking a risk at the present time, with the potential reward being significant if it can continue to meet previous guidance.

Sirius Minerals

While Blinkx is transitioning, Sirius Minerals is trying to get started. Its future is, on the one hand, very bright, with crop trials indicating that polyhalite is highly effective at increasing potato yields. As such, if Sirius can obtain the necessary licenses/permissions and sufficient financing, it appears to be on to a winning product.

However, the reality is that anyone investing in Sirius at the present time could be taking little more than a gamble. That’s because there is no way of accurately predicting whether the licenses/permissions will be granted, and the same is true of the company’s financing requirements. Without both of these Sirius will not be able to open its proposed potash mine in York and, as a result, it will not become a viable business.

Clearly, there is scope for it to become a highly successful enterprise. However, the present time does not appear to provide for the most opportune moment to invest, since the risk/reward ratio still seems to be relatively unfavourable even though shares in Sirius have risen by 30% in the last year.

Certainly, there is additional risk in investing in small caps but, while Blinkx still has a hill to climb in order to deliver strong profitability, for Sirius the task ahead is dependent upon a small number of key decisions for which there is no way of predicting the outcome. As such, it is one to watch, rather than buy, at the present time.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »