A top penny stock to buy in July

Penny stocks can carry higher risk for investors than larger companies. However, here is one low-cost UK share I think could deliver massive returns.

| More on:
Risk reward ratio / risk management concept

Image source: Getty Images

Penny stocks can experience periods of intense share price volatility. Whats more, smaller market-cap stocks can also have much weaker balance sheets than larger businesses. This can make them much more vulnerable to economic and industry downturns.

Buying penny shares, however, could also give investors access to a growth hero of tomorrow. And this has the potential to turbocharge the returns made over the long term.

To Invinity and beyond

Investing in shares that play a role in the ‘green economy’ is one way investors can try to make big profits over the next decade.

I’ve sought to do this by buying renewable energy stock The Renewables Infrastructure Group. I have also invested in TI Fluid Systems, which makes lots of components for use in electric cars. I’m considering buying shares in penny stock Invinity Energy Systems (LSE: IES) too.

This UK share makes energy storage technology that ensures a constant stream of power supply. Energy production from renewable sources can fluctuate wildly according to when the wind blows and the sun shines. Invinity’s tech then can help prevent power outages from occurring.

Demand for the stock’s product, therefore, could rise strongly as the number of renewable energy farms across the world grows. But I like Invinity in particular because of its focus on vanadium flow batteries (VFBs).

Vanadium batteries

Lithium-ion batteries are the most widely used and therefore represent a threat to other technologies like VFBs. However, I’m backing interest in Invinity’s batteries to snowball given their superior durability, safety and long-term cost effectiveness.

Latest trading news from the company this week was highly encouraging on this front. Revenues soared almost 700% year-on-year in 2021, to £3.2m. And its sales pipeline had soared 152% between 2 November and 25 May to stand at 714.2 MWh.

Invinity plans to supercharge production over the next couple of years to keep sales soaring too. It’s why broker VSA Capital thinks revenues will rise more than fourfold to £14.1m in 2022 and then to £20.6m next year.

Risk vs reward

It’s important to acknowledge that Invinity isn’t tipped to turn a profit over the next 18 months at least. This can create higher risk for an investor, as share placings or taking on debt can be used by loss-making companies to soothe liquidity problems.

On balance, though, this is something I’d be happy to accept with Invinity. In my opinion, the potential rewards investors could receive more than make up for this risk.

Research suggests that the global VFB market will be worth $592.4m by 2026. That’s more that double the $237.5m that the industry is estimated to be worth today. If everything goes to plan then Invinity Energy Systems could have a big role to play in this rapidly growing market.

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 considered so you should consider taking independent financial advice.

Royston Wild has positions in TI Fluid Systems and The Renewables Infrastructure Group Limited. 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

A pastel colored growing graph with rising rocket.
Investing Articles

3 top shares for the ongoing stock market recovery

Although messy, I think the stock market recovery is beginning and that's why I'm now buying shares such as these.

Read more »

Mature people enjoying time together during road trip
Investing Articles

5 UK shares I bought for income of 9.5% a year

We recently bought these five cheap UK shares for their generous dividend yields. These cash payouts range from nearly 7%…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

Is there still time to buy Scottish Mortgage shares?

The Scottish Mortgage share price has risen strongly in recent weeks. Should I pile into the FTSE 100 momentum stock…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

Why I’d start buying shares with £250 today not £20,000 in future!

Is it worth waiting to start buying shares until one has more money to invest? Our writer doesn't think so…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

I’ve bought Diageo shares to boost my long-term passive income!

I plan to hold on to my Diageo shares well into retirement. Here's why I think it's a top stock…

Read more »

New virtual money concept, Gold Bitcoins
Investing Articles

Down 61%, are Argo Blockchain shares worth buying?

Argo Blockchain shares have tumbled in value. As a shareholder, Christopher Ruane considers what might come next for the business…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 UK dividend stocks with yields over 10%

These dividend stocks are the highest yielders on the UK market, says Roland Head. But how safe are these generous…

Read more »

Couple relaxing on a beach in front of a sunset
Investing Articles

I’d start buying shares for passive income with this pair

Our writer is looking to earn passive income via investing, and here are two leading stocks he might buy.

Read more »