Best penny stocks to buy in 2021

Harshil Patel considers the best penny stocks to add to his Stocks and Shares ISA in 2021.

| More on:

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.

I’m looking for the best penny stocks to buy in 2021. Penny stocks can often be much riskier than established FTSE 100 stocks. Share prices can be much more volatile and large swings are not uncommon.

Even the best penny stocks can be relatively illiquid, making it difficult to buy in larger quantities. This can be a barrier for institutional investors. It also often leaves penny stocks under-researched. However, for smaller private investors like me, it can present an opportunity to find undiscovered gems.

Best penny stocks to buy now

Pci-Pal (LSE:PCIP) provides companies with secure cloud payment solutions for business communications. It recently reported annual revenue growth of an incredible 60%. It’s experiencing positive trading momentum and is generating cash that is ahead of management expectations.

Management also sounds positive for the future. CEO James Barham remarked, “We are at a very exciting point in our growth story.

Also, I like that it has long-term contracts, which can provide more predictable earnings.

That said, it’s still currently loss-making, so I might have to be a patient investor. Also, cyber threats such as data breaches pose a significant risk to its business. In addition, sales are heavily dependent on the security of the company and its systems.

Overall, I think many of these risks can be mitigated and I’d buy these penny stocks as a small part of my Stocks and Shares ISA.

High risk, high reward

When looking for the best penny stocks, I’m looking for outsized reward potential. That’s because even the best penny stocks can carry greater risks compared with larger, more established companies.

One of the best penny stocks with considerable reward potential is Helium Global (LSE:HE1). It aims to explore and supply helium to several fast-growing industries. Although helium is most commonly known for its use in party balloons, this is just 8% of the market. It’s actually used in several globally growing markets. 20% of helium is used in MRI scanners, and other uses include data centres and rockets.

Pros and cons

So what’s great about this helium explorer? I like it because it has a pipeline of advanced targets and it’s ready to drill. It has some of the best locations in Tanzania and it has been active in the region for five years. I’m also impressed by its management’s track record. They seem to have plenty of experience with similar projects.

That said, exploration is risky and not guaranteed. Much can go wrong with drilling. Also, mining licences in the area are dependent on local authorities. Although Helium One has a good relationship with the authorities, there is still a risk of licences being reviewed. Its share price has risen considerably this year, and some short-term consolidation is possible.

Overall, I think the potential upside is significant and management are capable. So, I’d be happy to buy a small amount for the speculative part of my portfolio.

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.

Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

Up 75% in 5 years, I reckon this FTSE 250 still has lots to give!

Our writer explains why this FTSE 250 stock could still continue to provide growth and returns despite already being on…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

2 high-quality FTSE 250 stocks to consider buying

The FTSE 250 is home to some of the best investment opportunities out there. This Fool highlights two stocks for…

Read more »

Investing Articles

The Marks and Spencer share price dips! Is this my chance to buy?

Marks and Spencer was one of the hottest stocks on the market last year. With its share price falling in…

Read more »

Growth Shares

How low could the boohoo share price go?

Jon Smith explains why the enterprise value and the low risk of bankruptcy should help to prevent the boohoo share…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Down 23% in a year! Can the Diageo share price regain £30 in 2024?

This Fool UK writer is checking the charts to see if the Diageo share price can recover from the recent…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

I wouldn’t touch this FTSE 100 stalwart with a bargepole

Despite looking like a bargain on paper, this Fool is avoiding FTSE 100 constituent Vodafone at all costs. Here he…

Read more »

Investing Articles

I’m waiting for the Rolls-Royce share price to pull back before I buy

The Rolls-Royce share price has been the Footsie's best performer in the last year. But this Fool has no intention…

Read more »

Front view photo of a woman using digital tablet in London
Dividend Shares

2 dividend stocks to take me from £0 to £9.5k in second income

Jon Smith talks through some ideas with second income potential, including one stock that has a dividend yield above 10%…

Read more »