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AIM penny stocks with potential

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View of a gold mine from above
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One of the obvious places to look for penny stocks is the AIM market. This is home to some UK business success stories, such as ASOS. It also houses companies that are less likely to ever be profitable investments — it’s a mixed bag. But there are gems in there and these penny stocks are two of them, in my opinion. 

An AIM penny stock

EKF Diagnostics (LSE: EKF), with a share price of 66p, is one such AIM-listed penny share, that I think has potential for significant share price growth. The market cap is currently around £300m.

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EKF is a medical device manufacturer. It’s not a flash in the pan company, having been listed in London since 2010 and founded in Germany in 1990. It’s also been involved in working with other companies in the fight against Covid-19. For example, it distributes the Kantaro COVID-SeroKlir antibody kits.

I like its strong financial performance. Final results have shown revenue and gross profit up 45% and 58%, respectively. Even more excitingly, regarding future potential, it recently entered into a multi-million dollar contract with Amazon

However, I am wary of the chair’s large 29% holding, which he has begun to sell. There are also rumours he may continue to sell off his holding, which could put downward pressure on EKF’s shares. There’s also a risk that the increases in revenue from Covid-19-related activities could tail off in future. I’ll keep an eye on it and may add to my own portfolio. 

Gold as an inflation hedge

As worries about inflation rise once again, I’m reminded of the theory that gold is a good hedge (a way to counter falling share prices). Whether or not that’s true, and independent of inflation fears, I like penny share Greatland Gold (LSE: GGP). It has a share price of 22p at the time of writing.

That means the shares have become significantly cheaper since hitting a one-year high of 37.5p in December 2020. Despite the recent poorer share price performance, the shares have more than doubled over the last 12 months.

For me it’s not clear why the share price has struggled as much as it has this year. I think perhaps the shares just rose very quickly in 2020, leading to some investors banking profits. I think that, combined with the price of gold doing very well in 2020 but not so well this year,  largely explains the share price fall.

For me that creates an opportunity. Operationally, Greatland Gold has made a lot of progress with its Havieron Joint Venture. This exploration, being done with Newcrest Mining, is a very significant mine, with potential further drilling and resource updates through this year. Positive announcements on this front have the potential to boost the share price, in my opinion.

Mining exploration is always a risky business and a run of bad news and drill results could see the share price fall. The company has issued new shares and could continue to do so if it remains loss-making and burns through over £2.5m a year.

Overall though I think Greatland Gold is an AIM-listed penny stock with the potential to grow its share price. Even better, its shares are now much cheaper than six months ago. That’s why I’m tempted to add to my own portfolio. 

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Andy Ross owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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