How I’ll invest £1,000 in penny stocks in July!

Although riskier, penny stocks can bring unprecedented growth to a portfolio. Could my £1,000 be well-spent on two such stocks?

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Penny stocks can provide exciting opportunities for large-scale and swift growth. They can be a little bit riskier, purely because they trade below £1 and usually have lower market capitalisations. Regardless, I’ve found two penny stocks I’ll buy next month with £1,000. 

Pharos Energy

Pharos Energy (LSE:PHAR) has performed reasonably well over the past year. As markets have slumped, the firm’s share price has only fallen by about 6%. It currently trades at 23.1p. 

The firm, which is an oil and gas explorer and producer, has quickly revived its fortunes over the past two years.

In 2020, it reported a pre-tax loss of $241m. By the next year, this had turned into a pre-tax profit of $38.6m.

It’s no secret that most oil companies are currently benefiting from surging prices of both Brent and WTI crude oil. This price trend essentially makes Pharos Energy’s produce more valuable.

The company stated in November that it had seen high flow rates from the first three wells dug at its Vietnam operation, with a fourth well to be perforated in due course.

Well Initial Flow Rate (barrels of oil equivalent per day)Flow Rate (November 2021)
H4-34P1590760
12XPST19101770
H1-33P28802540

It has also drilled three wells at its project in Egypt, but recently agreed to sell 55% of its assets to a private equity firm. This transaction bags the company $5m immediately, plus significant performance-based add-ons.

Given the nature of oil exploration, however, it’s always possible that projects could deliver little or no oil.

Marston’s

Secondly, Marston’s (LSE:MARS) endured a torrid time during the two years of the pandemic. With restrictions on eating out, this pub firm really felt the pinch. It currently trades at 54p.

For the year ended October, between 2020 and 2021, however, pre-tax losses narrowed from £388m to £171m.

Furthermore, for the six months to 2 April, pre-tax losses were just £7.5m, down from £122m for the same period in 2021. Revenue also increased from £55.1m to £370m over the comparison period.

Although past performance is not necessarily indicative of future performance, these improving financial results do give me confidence as a potential investor.

While the business is now benefiting from the relaxation of pandemic restrictions, it’s also now feeling the effects of higher electricity prices, tighter food supplies, and wage inflation. 

The company does have certain pricing strategies up its sleeve to try and relieve this pressure, but there’s the very real chance that these economic factors begin to eat into future balance sheets.   

Overall, these two businesses are currently in decent shape. While their penny stock status does heighten my investment risk, I will be splitting my £1,000 equally and buying shares in both stocks next month.

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.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended Marstons. 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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