Penny stocks are some of the riskiest equity investments around. After all, most of them are small businesses and many are loss-making, with seriously restricted access to capital. In fact, that’s often why they’re penny stocks in the first place. However, this area of the market is also where I find some of the most exciting businesses.
Recently I’ve stumbled across two promising (although early stage) companies that I’m keeping a close eye on. Let’s take a look.
The penny stock reinventing copper
It’s no secret that the UK and other nations are undergoing a technological shift to eliminate carbon emissions by 2030. This transition is undoubtedly going to be a resource-intensive process. And one metal that has proven to be essential in many green energy technologies is copper.
Copper has some very favourable thermal and electrical conductive properties. The problem is, it’s exceptionally dense, making it quite heavy. Historically, this problem was simply something engineering companies just had to deal with. But thanks to the latest innovations from Tirupati Graphite (LSE:TGR), that may no longer be the case at some point soon.
The company is mainly a graphite producer. However, according to a story published by The Daily Telegraph, its scientists successfully synthesised a new aluminium-graphite composite. This composite not only has similar conductive properties to copper but is also significantly lighter, potentially making it a viable substitute. Needless to say, if this material proves to meet expectations, the company could be on the verge of some explosive growth for many years to come.
However, as exciting as the breakthrough is for this penny stock, there are still plenty of unknowns. The material is still firmly within its testing phase and has yet to prove itself an economically viable project. In other words, this may never turn into the profitable source of income investors are hoping for. That’s why I’m watching from the sidelines for now.
Turning helium into cash
When someone thinks about helium gas, often their first thought will likely be squeaky voices. However, it has several practical uses. For example, hospital MRI machines, optical fibre manufacturing and spaceflight technology.
Helium is the second-most abundant substance in the universe. Yet it’s quite difficult for businesses to get their hands on it. Economically viable helium deposits on Earth are actually quite rare. Most of the helium gas available today is collected as a by-product of the oil industry. But it looks like Helium One (LSE:HE1) might soon change that.
The penny stock is an exploration company with the land rights to an area estimated to contain up to 138bn cubic feet of high-quality helium gas. The project, is called Rukwa and the firm has recently begun drilling down to begin wireline logging tests. These experiments will check the existence and concentration of any potential helium reservoirs. Should these results be positive, the company may be on the verge of seeing some explosive growth later this year.
Unfortunately, the opposite is also true. Helium One is a pre-revenue business that has already invested a considerable amount of capital in Rukwa. And so, if the quantity or quality of the helium gas turns out to be below expectations, then this penny stock may stay a penny stock for a long time. So for now, it’s also saying on my watchlist.
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Zaven Boyrazian 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.