I’m looking for the best penny stocks to buy in 2021. Penny stocks can often be much riskier than established FTSE 100 stocks. Share prices can be much more volatile and large swings are not uncommon.
Even the best penny stocks can be relatively illiquid, making it difficult to buy in larger quantities. This can be a barrier for institutional investors. It also often leaves penny stocks under-researched. However, for smaller private investors like me, it can present an opportunity to find undiscovered gems.
Best penny stocks to buy now
Pci-Pal (LSE:PCIP) provides companies with secure cloud payment solutions for business communications. It recently reported annual revenue growth of an incredible 60%. It’s experiencing positive trading momentum and is generating cash that is ahead of management expectations.
Management also sounds positive for the future. CEO James Barham remarked, “We are at a very exciting point in our growth story.”
Also, I like that it has long-term contracts, which can provide more predictable earnings.
That said, it’s still currently loss-making, so I might have to be a patient investor. Also, cyber threats such as data breaches pose a significant risk to its business. In addition, sales are heavily dependent on the security of the company and its systems.
Overall, I think many of these risks can be mitigated and I’d buy these penny stocks as a small part of my Stocks and Shares ISA.
High risk, high reward
When looking for the best penny stocks, I’m looking for outsized reward potential. That’s because even the best penny stocks can carry greater risks compared with larger, more established companies.
One of the best penny stocks with considerable reward potential is Helium Global (LSE:HE1). It aims to explore and supply helium to several fast-growing industries. Although helium is most commonly known for its use in party balloons, this is just 8% of the market. It’s actually used in several globally growing markets. 20% of helium is used in MRI scanners, and other uses include data centres and rockets.
Pros and cons
So what’s great about this helium explorer? I like it because it has a pipeline of advanced targets and it’s ready to drill. It has some of the best locations in Tanzania and it has been active in the region for five years. I’m also impressed by its management’s track record. They seem to have plenty of experience with similar projects.
That said, exploration is risky and not guaranteed. Much can go wrong with drilling. Also, mining licences in the area are dependent on local authorities. Although Helium One has a good relationship with the authorities, there is still a risk of licences being reviewed. Its share price has risen considerably this year, and some short-term consolidation is possible.
Overall, I think the potential upside is significant and management are capable. So, I’d be happy to buy a small amount for the speculative part of my portfolio.
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Harshil Patel 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.