One penny stock that’s getting a lot of attention from investors right now is Helium One Global (LSE: HE1). Last week, it was the second most purchased stock on Hargreaves Lansdown.
Should I follow the crowd and buy this stock for my own portfolio? Let’s discuss.
Exploring for helium
First, let’s take a look at what this company does.
Should you invest £1,000 in Babcock right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Babcock made the list?
Helium One is an AIM-listed company that’s engaged in helium exploration (helium is a colourless, odourless, non-toxic gas that’s used in a wide range of industries). Its aim is to eventually become a producer of the commodity.
The company’s main assets are located in Tanzania where it holds 2,840 square kilometres of prospecting licences. These are divided into three distinct project areas (the Rukwa, Balangida, and Eyasi projects).
At the current share price of 1.3p, Helium One has a market cap of just £80m. So, it’s a very small company.
Exciting growth story
Now, I can see why investors are excited about this one.
For starters, demand for helium looks set to rise going forward. According to the company, global demand is projected to rise to 8.5 billion cubic feet (Bcf) by 2030 from 6 Bcf today.
It’s worth noting here that helium – which is produced by the slow radioactive decay of elements within ancient continental crust – can’t be manufactured artificially. It also can’t be commercially extracted from the atmosphere.
Helium is a vital resource across the technology, science, medicine, and manufacturing industries. It is widely regarded as the unsung commodity of the digital revolution given its importance in a range of high-tech manufacturing applications.
Helium One Global
Additionally, the company recently entered into an agreement to acquire a 50% interest in ASX-listed Blue Star Helium‘s Galactica-Pegasus project in Colorado as well as a similar interest in the leases associated with 246 square kilometres of acreage in the proven helium fairway of Las Animas County, southern Colorado.
Helium One has said that this partnership with Blue Star will allow it to build an expanding global footprint in the helium sector at a pivotal time in the industry.
High-risk
For me though, this stock is a little too risky. Like a lot of small-cap commodity stocks, it’s very speculative in nature.
Now don’t get me wrong – I like to invest in growth stocks. Most of my portfolio is invested in companies that have the potential to generate huge returns for me in the years ahead.
But when I’m investing in growth shares, I nearly always seek out companies with a) revenue growth and b) profits (and profit growth), as I’ve found that these types of companies tend to be far safer investments.
Right now, Helium has no revenues or profits. So, it’s a high-risk investment.
This was illustrated recently when the company had to raise £6.4m and issue 590m new shares (at a price of 1.09p) to fund the Blue Star deal. This move sent its share price down significantly, in a big blow to existing investors.
Given the high level of risk here, I’m going to pass on this stock and focus on other exciting opportunities in the market. All things considered, I think there are better growth stocks to buy for my portfolio today.
