The news flow coming out of penny stock Petra Diamonds (LSE: PDL) of late has been far more positive than it was a year ago. But, then again, things couldn’t have been much worse. The diamond digger even put itself up for sale last summer because of its severe financial troubles.
There’s been a glimmer of light for the penny stock in more recent months. Precious stones prices have risen again as the economic recovery from 2020’s lows has kicked in. Fresh fundraising earlier this year, allied with an improvement on the production front, has also raised optimism over Petra Diamonds’ long-term future.
I’m still yet to be convinced to buy this stock however. I’m not just worried about how the recent resurgence of Covid-19 cases could impact the diamond market again. And especially what this would mean for Petra Diamonds, given that its balance sheet is still looking petty fragile. The patchy long-term outlook for the natural diamond market also gives me reason to be concerned.
Demand for lab-grown stones has been steadily increasing in recent years. And researchers at Statista expect the market to explode over the next decade. They reckon market volumes will stand at 19.2m carats in 2030. That compares with 6.2m last year and 1m carats in 2010.
It’s also possible that investor interest in Petra Diamonds’ shares will fall as the importance of responsible investing grows. Concerns over worker conditions in South African mines has, along with price, driven the popularity boom for artificial stones. These rising ethical concerns are something that could also drag the Petra Diamonds share price lower over the next decade. Today, the company trades at 1.7p per share.
A better penny stock to buy
I’d much rather buy UK healthcare share Shield Therapeutics (LSE: STX) for my shares portfolio. This penny stock trades at 45p per share, and I think it could soar in value as the problem of iron deficiency explodes.
Shield Therapeutics’ leading product is Feraccru/Accrufer, a treatment for iron deficiency anaemia. Sales of the drug are rocketing in Europe, with volumes ballooning 51% in the first half of 2021 versus the final six months of last year.
Encouragingly, the pharma firm launched the product in the US on 1 July after getting regulatory approval there. And China has potentially opened the door to the drug being released in that gigantic growth market too, having recently received approved of a new drug application for Feraccru.
Remember that regulatory approval is, of course, by no means guaranteed in China (as is the case elsewhere). Thus, all the hard work Shield Therapeutics has carried out could fail to meet expectations. Still, I’m encouraged by the thumbs ups the penny stock’s product has received from European and American regulators.
I think the company’s work to treat a major global health problem could reap huge rewards.
Royston Wild 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.