Penny stocks: 1 growth pick I would buy with £500

Jabran Khan explains that penny stocks can be good growth picks and details one in particular that has Covid-19-related products thriving currently.

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Penny stocks are often priced low for a reason and can sometimes be seen as a risky investment. Despite that assertion, some are primed for growth. I believe BATM Advanced Communications (LSE:BVC) is in that bracket. Here’s why I like it for my portfolio.

Pandemic benefit

BATM Advanced Communications is a tech firm operating via two divisions, Bio-Medical and Networking & Cyber Security. Headquartered in Israel, it has a global reach with offices and operations in North America, Europe, and Asia.

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When the pandemic first struck, many tech and pharma firms joined the race to develop Covid-19-related product designed to combat the spread. BATM’s biomedical division has made significant inroads and this has benefited BATM and its investment viability in my opinion.

As I write, shares are trading for 91p per share. Prior to the pandemic, BATM’s share price was trading for 43p per share. When details of it’s pandemic-related products emerged, the share price shot up. It surpassed the 100p mark for the first time in its history. It rose to 140p per share in July last year, just three months after being priced at 43p. Now below 100p, it can be viewed as a penny stock once more.

Products and performance

BATM has produced a whole portfolio of diagnostic tests. In addition to this, it is developing multi-pathogen diagnostics. These could be crucial in the winter months ahead as other respiratory viruses spread.

BATM also has a strong cyber security division and targets what it describes as “Tier 1” organisations and governments worldwide. It has had success too. BATM recently announced two new contract wins worth $10m and $4.1m respectively. Both contracts were with unnamed governments to bolster their defence departments. 

For me, penny stocks that are attracting trust from worldwide government defence departments are worth taking note of. BATM’s performance to date hasn’t been shabby either. I know past performance is not a guarantee of the future, but I use it as a personal gauge when investing.

Revenue, operating income, and net income have been increasing year-on-year for the past four years. Gross profit has increased for the past two years. In addition to this, its balance sheet has been propped up by healthy cash flow increasing year-on-year for the past four years too.

Penny stocks carry risk but potential huge reward

BATM’s size and competition concern me. BATM is not a small operation. However, it is a small fish in a large pond in both its divisions. There are plenty of big pharma firms with Covid-19-related products. There are also more established tech firms offering cyber security solutions. My concern is BATM could be beaten to new business by these larger, more established firms with longer track records.

I believe BATM is one of the best penny stocks and is primed to continue its growth journey. Its growth to date and the demand I believe it will experience for its Covid-19 tests coupled with its growing cyber business will help this.

Finally, insiders own shares in BATM. I see this is a sign of confidence as well as determination to succeed when this happens. If I had £500 to invest in penny stocks right now I would invest in BATM for my portfolio.

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Jabran Khan 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.

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