The following small-cap shares fall just outside classic penny stock territory. They trade just above the price limit of 100p per share, and/or have a market cap above £100m.
But here’s why I think they could deliver the kind of significant earnings growth over the next decade that some penny stocks deliver.
The Gym Group
In recent months I’ve noticed a steady pick-up in the number of people using my local gym. Sometimes I’m having to wait to use the chest press, treadmill, or one of its other many fitness contraptions.
I don’t think it’s a coincidence that my club is owned by The Gym Group (LSE:GYM). Its cut-price no-contract business model is attracting huge numbers of people during this cost-of-living crisis.
Latest financials last week showed revenues up 18.5% in the six months to June at £99.8m. This was driven by member numbers rising to 867,000, a jump of 77,000 from the turn of the year. Gym attendance remains stable even during downturns, and this almost penny stock is booming as people switch to cheaper operators.
The importance of value across the retail and leisure sectors has been growing strongly over the past decade. It’s a trend that has much further to run and makes The Gym Group — which owns 230 clubs across the country — a top buy. That’s despite the impact of rising costs on its bottom line.
Andrada Mining
Purchasing lithium stocks could be another good way to build a winning portfolio. Demand for the silvery-white metal looks set to boom as sales of electric vehicles take off.
Goldman Sachs believes there will be 73m of these vehicles on the world’s roads by 2040. Yet the current mine development pipeline suggests that lithium supply will struggle to keep up with demand, at least over the next decade. In this landscape, producers of the metal should be able to command a premium price for their product.
Andrada Mining (LSE:ATM) is one lithium stock I’m considering buying to capitalise on this. It owns the Uis lithium mine in Namibia, an asset from where it already produces large amounts of tin and from where it recently made its first bulk lithium concentrate sale.
Andrada has described Uis as “a globally significant lithium and tin resource.” Current mineral resource estimates suggests it contains 138m tonnes, but exploration work is ongoing to lift this figure to 200m.
The AIM company also owns a string of other exciting exploration and development assets in Namibia. Testing at its Spodumene Hill project has also shown high-grade lithium intersections that “suggest the presence of significant spodumene mineralisation.”
Investing in African mining companies carries extra risk for investors. Political instability can be commonplace in the region and mining operations can be disrupted as a result. But on balance I think this stock could be a great way to make large long-term returns.
