And that exception has been doing rather well recently.

Pedal to the floor

AI-powered driver-monitoring system specialist Seeing Machines (LSE: SEE) has been moving through the gears in recent months. In fact, the share price has now climbed over 80% since May.

Sure, some of this momentum might be down to markets having a seriously good year. But there have been a few other developments that seem to have brought out the buyers.

For one, the European General Safety Regulation (GSR) comes into effect next year. Its goal is to improve road safety and reduce deaths and injuries by making advanced safety technologies mandatory. This includes fitting camera-based driver monitoring systems in all new vehicles — the sort that can spot when someone is becoming distracted or drowsy.

Such a move clearly plays into the hands of Seeing Machines. Indeed, the number of vehicles equipped with its system rose 36% in Q4 FY2025 compared to the previous three-month period. With its tech in 3.73m vehicles according to its update in August — up from 2.21m at the same time in the previous year — it doesn’t feel outlandish to say that demand from manufacturers is ramping up.

The firm’s Guardian product – designed to be used in commercial fleets — is also showing excellent growth.

Seeing Machines has continued to win backers too. Mitsubishi Electric Mobility now owns nearly 20% of the business, helping to push its tech into new areas thanks to the latter’s global distribution network.

So, is this penny stock a slam-dunk investment from here? Well, there are no guarantees in investing.

Risks remain for this penny stock

As a holder for many years, I’ve watched the share price slip into reverse on a number of occasions. In fact, it’s only just returned to where it was at the start of the 2025. And despite recent progress and boasting a market cap of over £200m, this company is still loss-making and burning through cash.

If this doesn’t change soon, perhaps as a result of growth slowing unexpectedly or contracts hitting snags, that lovely gain (and more) could be lost.

There’s also a chance the stock could suffer heavily if general market sentiment shifts. In such a scenario, Seeing Machines might be chucked out with the bath water, even if it continues to drop encouraging news.

And as I type this (18 November), there are certainly a few jitters in the investing world.

Safety in numbers

I won’t deny that performance over recent times has been lovely to behold. If half-year numbers next March show evidence of yet more progress in terms of sales growth, it might just continue.

But that ‘if’ can’t be overlooked. As much as I’ve enjoyed the ride and would love the stock to trade for pounds rather than pennies, this is precisely why only a small amount of my wealth is invested here.

Personally, I prefer taking a diversified approach and spreading my money around.

It’s true — penny stocks have the potential to dramatically change a person’s fortunes, sometimes in a very short amount of time. As always, however, it pays to keep one’s eyes wide open.

The post My only penny stock is up over 80% in 6 months! appeared first on The Motley Fool UK.

Currys

What it does: Currys is a retailer of varied electrical goods, from TVs and appliances to computers and gaming consoles. 

By Mark David Hartley. I recently bought Currys (LSE: CURY) shares after noticing a shift in consumer behaviour, particularly towards electronics. Affordable e-commerce stores remain the biggest risk to its profits as it struggles to compete in this market. But consumers are increasingly looking for in-store advice as trust in online reviews wanes. That put Currys in a great position, especially after cornering the UK market for next-gen AI-enabled laptops.

Yes, the price is still down a massive 82% since 2016 but I think it’s a stronger company than many people give it credit for. It benefits from a well-established brand presence, a large network of physical stores, and a growing online presence. While it’s had its ups and downs, overall performance has been good and it continues to demonstrate an ability to adapt to changing market conditions. Additionally, its strong focus on customer service and after-sales support is helping solidify customer loyalty.

Mark David Hartley owns shares in Currys.

DP Poland

What it does: DP Poland holds the exclusive rights to operate and sub-franchise the Domino’s Pizza brand in Poland and Croatia.

By Ben McPoland. At a share price of 11p and market cap of £100m, I reckon DP Poland (LSE:DPP) has an outside chance of rising much higher. I say “outside chance” because the company has a history of losses and frequent share dilution to fund its operations. For it to ever deliver shareholder value – alongside its pizzas – this will need to change. And that’s not guaranteed.

However, the firm is growing strongly right now, with group revenue jumping 26% to £26.4m during the first half of 2024. It’s gaining market share in Poland, and City analysts see revenue growing to around £65.8m in 2025, which would be a more than doubling from 2021 (£30m).

Meanwhile, the net loss was just under £0.5m for the first half, so profits are on the horizon. I expect profitability to improve as DP Poland moves towards a capital-light franchise model. This will “accelerate growth and increase return on capital”, according to the firm.

Looking ahead, the company plans to open hundreds more stores across Poland and Croatia (it had 111 at the end of June). I think the stock could do very well.

Ben McPoland owns shares in DP Poland.

hVIVO

What it does: hVIVO is a small company in the healthcare sector that offers services for clinical trials and lab testing. 

By Edward Sheldon, CFA. One stock under £1 that I believe could soar in the years ahead is hVIVO (LSE: HVO). It’s currently trading at around 26p. 

There are a couple of reasons I believe this stock has the potential to surge. One is that the company has just opened a new state-of-the-art facility in Canary Wharf, London. This should enable it to scale up rapidly in the coming years. 

Another is that the valuation is relatively low. Currently, hVIVO’s P/E ratio using next year’s consensus earnings forecast is just 15.5. Given that the company is targeting revenues of £100m by 2028 versus approximately £62m this year, I think the stock could easily command a P/E ratio in the low to mid-20s in the future. 

It’s worth noting that hVIVO faces some unique risks. For example, clinical trials can sometimes lead to complications or even fatalities. 

All things considered, however, I think the stock has bags of potential. 

Edward Sheldon has no position in hVIVO.

ITV

What it does: ITV runs a UK TV network, and produces and distributes programme content globally.

By Alan Oscroft. In the words of CEO Carolyn McCall at H1 time, ITV (LSE: ITV) “has been transformed over the last five years“.

ITV Studios, the update suggests, should produce record profits this year, due partly to improved margins. And that, I think, could take some pressure off the erratic nature of advertising revenue.

Forecasts suggest we could be looking at a 63% rise in earnings per share (EPS) between 2023 and 2026.

It could push the 2026 price-to-earnings (P/E) ratio down as low as nine by 2026. And that’s a stock with a forecast dividend yield of 6.5% for this year, and rising.

The main risks I see are that the content delivery business is highly competitive, and the advertising industry is notoriously fickle.

ITV also carries quite a lot of debt, which could put pressure in the dividend. Analysts, though, see it dropping in the next few years.

Alan Oscroft has no position in ITV.

Seeing Machines

What it does: Seeing Machines provides operator monitoring and intervention sensing technologies for the automotive, mining, transport and aviation industries.

By Paul Summers. I’ve held a small position in Seeing Machines (LSE: SEE) for a long time. Despite the occasional jump in its share price, my patience is still to be rewarded. 

However, I remain a believer in the story. The company is a leader in high-tech tracking software that monitors drivers’ fatigue levels. The laudable goal is to reduce accidents on the roads and elsewhere. And legislation requiring automotive manufacturers to fit this sort of (high-margin) tech to new cars is gradually being introduced. 

To be clear, this is risky stuff and the company has managed to burn through a lot of cash over the years. This is why I’ve only ever invested money I can afford to lose.

But if Seeing Machines manages to hit breakeven in the next couple of years, I might do very well out of this blue-sky growth stock.

Paul Summers owns shares in Seeing Machines

The post 5 growth stocks under £1 Fools believe will soar appeared first on The Motley Fool UK.

Today, I’m reviewing the three biggest detractors in my current portfolio. Do I still believe in them?

Pack your bags

The performance of online holiday firm On the Beach (LSE: OTB) has been disappointing. There was me thinking that the end of the pandemic might see an explosion in ‘revenge spending’ as people emerge from their homes.

To some extent, this is what happened. But then came high inflation and a cost-of-living crisis. These succeeded in pushing the shares down and leaving my position underwater.

To be fair, On the Beach is trading well. The company recently reported half-year revenue of £80.8m. That’s an 11% increase year on year. It also forecast a record summer thanks to a bursting order book.

Surely this makes the stock– at less than 10 times forecast earnings — an absolute steal? It seems the market is unconvinced.

Since the next update (due September) covers that vitally important summer season, I’m staying put. I’m also crossing my fingers that there aren’t any more geopolitical wobbles or inflation spikes in the interim. These could do a lot of damage.

On the Beach is definitely ‘on the naughty step’.

Great company, bad investment?

Another loser has been Vimto owner Nichols (LSE: NICL). Again, a lot of this seems to be down to inflationary pressures.

This is particularly frustrating as this bears all the hallmarks of a ‘quality’ company.

First, it sells low ticket soft drinks that people buy out of habit. This makes earnings fairly predictable.

Second, its got solid fundamentals. It consistently makes great margins on what it sells and, outside of a pandemic, stellar returns on the money it puts to work.

There’s also virtually no debt on its books. Put another way, Nichols should easily survive another period of economic upheaval.

The problem is that these things look priced in (17 times forward earnings). I’m also not seeing anything that will put a rocket under sales in the near future.

I always intend to hold stocks for the long term but Nichol’s time could be up.

Blue sky bet

A third stinker is AIM-listed penny stock Seeing Machines (LSE: SEE). It runs high-tech tracking software that monitors drivers’ levels of fatigue. The goal is to reduce accidents on the roads.

Sounds good, right?

Sadly, it’s been anything but a smooth ride for investors so far. This is despite fairly frequent news on partnerships with major manufacturers.

Now, this was always going to be a risky buy. Growth stocks like this often need regular injections of cash to keep the lights on, regardless of how good its products are.

At least my holding is modest. As always, maintaining a diversified portfolio can help to minimise some of the financial pain that comes with less successful stock picks.

Perhaps the first cut to interest rates may finally spark life in more volatile, small-cap UK shares. Or perhaps confirmation that the company is now at breakeven (expected in 2025) will get things motoring.

I’m loath to cut my position. But a deadline has been set.

The post These UK shares are stinking out my ISA. Time to sell? appeared first on The Motley Fool UK.

Here, I’m going to highlight a 6p penny stock that appears to have a lot of potential. I think it’s worth a closer look right now.

Life-saving technology

The stock I’m going to zoom in on today is Seeing Machines (LSE: SEE).

It’s an AIM-listed company that specialises in technology that helps machines (cars, planes, trucks, buses, mining equipment, etc.) see, understand, and assist human operators.

The goal of its technology – which monitors drivers’ faces and eye movements – is to reduce human fatalities to zero and make the world a safer place.

Founded in 2000, the company is headquartered in Australia. However, it operates globally, and generates a lot of its revenues in North America.

Its customers include GM, CAT, Emirates, Qantas, Transport for London, and Magna International (a large Canadian parts manufacturer for automakers). This distinguished list of customers suggests that the company has some decent technology.

At present, its market cap is around £240m.

Source: Seeing Machines, YouTube

Strong growth ahead

Seeing Machines’ most recent results were strong.

For the year ended 30 June 2023, revenue was up 48% to $57.8m (ahead of market expectations) with annual recurring revenue increasing by 27% to $13.6m.

Meanwhile, gross profit was up 65% to $28.9m.

What caught my eye, however, was the medium-term outlook.

Looking ahead, the company said that by FY26 (the year ending 30 June 2026), it expects revenue to be not less than $125m.

In other words, it reckons it can more than double its top line in the next three years.

That’s pretty exciting.

It’s worth noting that the company believes that new European safety regulations will provide a tailwind going forward.

“Our three business units are now well established, and we are expecting to see continued growth from each of them as we move closer to compliance deadlines in Europe, where every vehicle on European roads will require technology to mitigate risks associated with fatigue and distraction,” commented CEO Paul McGlone.

High risk, high reward

Now, this is a high-risk stock.

Currently, the company is not profitable.

For the year ended 30 June, it generated a loss of about $15.5m.

Companies that are not profitable are harder to value accurately. As a result, they tend to have volatile share prices.

Adding risk is the fact that the company has a relatively large amount of borrowings ($40m at 30 June) on its balance sheet.

Of course, another risk is that in a decade’s time, cars, buses, trucks, and planes may be driving themselves. So, the company’s technology could become obsolete.

All things considered, however, I think the stock looks interesting.

It’s not a penny stock I’d load up on. But I’m tempted to take a small position.

The post A 6p penny stock that’s worth a closer look right now appeared first on The Motley Fool UK.

On a mission

That stock is Australia-based Seeing Machines (LSE: SEE), which is attempting to reduce the number of road accident deaths. This figure is currently more than 1.3m every year, worldwide. A significant proportion of these accidents is due to the fatigue or distraction of drivers.

The company’s AI-powered driver monitoring system (DMS) is embedded in vehicles and planes to detect drowsiness in human drivers and pilots. At the end of June last year, there were more than 447,000 cars on the road enabled with its DMS technology. And the company says that it has detected over 3.6m fatigue and distraction-related driver events to date.

The company’s Guardian technology has been used inside commercial truck and bus fleets around the world since 2016. This system monitors the driver’s facial position and eye movements to determine whether they are alert and looking out the front windshield. If the system detects that the driver isn’t alert, it will sound an alert or flash interior lights. It can even apply the brakes if the driver doesn’t respond.

The opportunity

Guardian is already used in 26 countries. It’s connected to a 24/7 monitoring centre in the cloud that enables fleet owners customizable intervention and analytics options.

By 2030, it will be mandatory to embed DMS technology in all new automobiles in the US, EU, and China. This makes the opportunity extremely large.

Back in October, the company inked a deal with automobile parts provider Magna International to embed a camera in rear-view mirrors to monitor both the driver and occupants of vehicles.

And just today, Seeing Machines announced a non-exclusive distribution agreement with Mobileye. Under the agreement, Guardian will incorporate Mobileye’s suite of advanced driver assistance systems to alert drivers to a whole range of potentially dangerous situations. The companies will jointly market the combined offering to transport and logistics customers worldwide.

The stock and financials

At 7p a share, the company today has a market cap of £290m. The stock is down 21% over the past year.

This lacklustre performance is probably related to the company — which reports in Australian dollars (A$) — posting widening losses. For the full year up to June 2022, it generated revenue of A$54.4m. That was year-on-year growth of 15%, despite being hit by supple chain issues. However, the loss for the period ballooned to A$25.3m, a 45% increase over 2021.

This gives the stock a price-to-sales (P/S) ratio of around nine, which is very expensive. The company isn’t expected to become profitable for a couple more years. So one risk is shareholder dilution as it raises more cash. Otherwise it’ll have to prudently manage its cash position of A$59m (as of June 2022).

Overall, I like the long-term market opportunity here, especially as DMS becomes a mandatory safety feature in all vehicles. But I won’t be adding to my small position in the stock until I see evidence of sales re-accelerating and losses narrowing.

The post 1 AIM stock under 8p with huge potential upside! appeared first on The Motley Fool UK.

With this in mind, let’s take a closer look at car shares and some of the top options available to investors.

What are car stocks?

Car shares can be defined as those companies operating in the automotive industry in some capacity. These include manufacturers, those supplying parts or technology such as seats, tyres and batteries, auto dealer groups and parts retailers. There really is a lot of choice for the nimble private investor.

What makes this sector particularly interesting is the differing levels of competition companies face. Some firms have a commanding presence in a niche part of the car market; others are forced to battle it out to attract consumers to their products and services. Other companies operate exclusively online; others adopt a more hybrid approach. At the same time, some have brands that are household names; others have no direct contact with the consumer and are only known by the most committed of car aficionados.

Top car stocks in the UK

Here are some of the largest cart stocks listed on the London Stock Exchange by descending market capitalisation as of February 2026.

Auto Trader

Online marketplace Auto Trader has arguably become the go-to destination for anyone interested in buying a vehicle in the UK. This popularity has driven many investors to take a position, pushing the company into the FTSE 100.

According to Auto Trader, consumers spend 10 times more minutes on its site compared to its nearest rival and over 75% of all time spent looking at classified advertisements of vehicles for sale.

The boom seen in car sales since the Covid-19 pandemic has only served to reassert this dominance. Not just for new cars, but second-hand ones as well. And while the motor industry is notoriously cyclical, the company remains an industry titan within the online space.

Aston Martin Lagonda Global Holdings

Aston Martin doesn’t need much in the way of an introduction. Regularly featured in the James Bond movies, the firm designs and produces some of the most luxurious cars in the world, including the Vantage, DB12, DBX, and Valhalla. It then exports and sells these highly coveted vehicles in 55 countries around the world.

Unfortunately, this quality hasn’t been reflected in the performance of Aston Martin shares. Since listing in October 2018, the company has lost over 98% of its value due to concerns over its finances and pandemic-related headwinds.

Despite efforts to right the ship, multiple CEOs have struggled to get the group’s finances under control. However, after being appointed in September 2024, Adrian Hallmark has begun executing a revamped turnaround strategy aiming to bring the group back to profitability, using his prior experience at Bentley.

This multi-year process is still ongoing, with early signs of improvements beginning to emerge.

Halfords

As any car owner will know, regular maintenance of one’s vehicle is essential. This is where Halfords comes in.

From fluffy dice to child seats to engine oil, the company sells every conceivable product a driver might need for keeping their car in top condition and passengers safe.

In addition to this, the mid-cap also runs a huge estate of Autocentres, delivering services that every owner needs to factor into their running costs every year.

Seeing Machines

The vast majority of UK investors are unlikely to know about Australia-based minnow Seeing Machines. However, this could be set to change as it rapidly becomes the biggest player in software and systems designed to monitor driver distraction and fatigue and, in doing so, reduce accidents on the road.

Although only currently available on the premium models, this tech is likely to become standard over time in accordance with legislation. Seeing Machines also makes money from having its Guardian tech fitted retrospectively to fleets.

But Seeing’s eye-tracking tech isn’t just limited to cars and trucks. The company also has its fingers in multiple pies, including aviation and rail. This could further turbocharge growth in the years ahead.

How have car stocks performed?

The car stocks mentioned above go some way to demonstrating the variety of opportunities available to UK investors in this space. This is not to say that they are necessarily right for everyone.

Depending on the time period used, there have certainly been some winners. Those investing in Auto Trader between March 2020 and March 2025 have reaped a 76% gain before factoring in dividends. Yet between March 2025 and the end of February 2026, the stock has taken a near-40% tumble due to wider market forces and cyclicality.

The share price of Seeing Machines also climbed from under 2p to 12p from March 2020 to August 2021. Sadly, those who hopped on the bandwagon at this high price point have been sorely disappointed as the stock has steadily declined back towards 2p as of March 2025. Yet since then, the car stock has started making a comeback, rising by over 100% since May 2025 to February 2026.

In sharp contrast, anyone holding Aston Martin will probably be nursing significant losses on paper, even since Adrian Hallmark moved into the corner office. But with deliveries of its long-awaited Valhalla supercar starting to ramp up, the tide may soon start to change.

This diverse range of investment returns perfectly demonstrates the cyclicality and difficulty for businesses to execute within the automotive sector. However, for investors who can identify where a company sits in the current cycle, some tremendous gains can be unlocked.

Are car shares right for you?

Investors also need to remember that demand for vehicles can depend on a huge range of factors that are beyond the control of these businesses. Tricky economic times can force people to postpone a new purchase, especially if there is nothing wrong with their existing vehicle. High fuel prices can also impact demand.

On a more positive note, some UK car stocks generate income for those holding them, which may help to take the sting out of any temporary fall in a company’s value. Naturally, these can never be guaranteed.

In summary, car shares certainly have the potential to generate great returns for those who are willing to take more risk with their cash. The gradual switch away from internal combustion engines to more environmentally friendly solutions, combined with lowering production costs and rising levels of affluence, could see even more investors pile into the space over the next few years.

However, the potential for significant volatility can’t be overstated. As such, ensuring a portfolio that also has exposure to other sectors and is intelligently diversified is a prudent move.

The post Investing In Cars: Top UK Car Stocks of 2026 appeared first on The Motley Fool UK.

AI tech

Seeing Machines is a tech stock with operations primarily based in Australia. It specialises in designing, creating, and selling technology related to artificial intelligence (AI) that will reduce and prevent transport-related accidents. Its technology can be applied in the automotive, rail, aviation, and off-road sectors currently. It counts some major businesses as its customers already, including General Motors and Emirates Airlines.

So what’s the current state of play with Seeing Machine shares? Well, as I write, the shares are trading for 6p. At this time last year, the shares were trading for 10p, which is a 40% drop over a 12-month period. It is not uncommon to see penny stocks fluctuate up and down this much.

The Seeing Machines share price has dropped more so since the turn of the year due to the stock market correction. The correction is linked to macroeconomic headwinds and geopolitical issues.

A growth stock with risks

The biggest risk I must consider as a shareholder of Seeing Machines is that of competition. As with most penny stocks, there is a high likelihood that a larger, more established business in the sector could out-muscle and outmanoeuvre a smaller firm like Seeing Machines. AI-based technology is a growing market and many firms are vying for market share and dominance, some of which are bigger and better known with more financial clout.

Generally speaking, macroeconomic headwinds such as soaring inflation, the rising cost of raw materials and the global supply chain crisis are real threats to the progress of a growth stock like Seeing Machines.

Why I bought the shares

I always look at performance when deciding to buy shares for my holdings, although I do understand that past performance is not a guarantee of the future. Looking back, I can see Seeing Machines has increased revenue for the past four years in a row. It has consistently recorded a profit in each of these fiscal years too, even in the face of tough trading caused by the pandemic in the past 18 months.

Coming up to date, Seeing Machine released a half-year report at the end of March for the six months ended 31 December 2021. It reported revenue was up nearly 20% compared to the same period last year. Furthermore, it managed to conserve more cash and boosted its coffers by nearly 50%. Cash on a balance sheet is a big positive for me in any growth stock. This cash can steady the ship in uncertain times as well as fund growth initiatives.

At current levels, Seeing Machine shares are dirt-cheap, in my opinion. I paid 6p per share and purchased a total of 15 shares at a total cost of just over £1. I don’t see much risk here and if I lost all my money, it wouldn’t concern me too much.

My investing mantra has always been to buy and hold for the long term. I believe Seeing Machines could develop and grow into an AI leader and provide me excellent returns. I rate it as an exciting growth stock and will keep a keen eye on developments.

The post Here’s why I just bought this growth stock for my holdings! appeared first on The Motley Fool UK.

I would want to buy these soon or early in 2022 as they could offer lucrative returns over the longer term. As the year progresses, their prices could rise higher so I see an opportunity to get in early, while they are cheap and add them to my portfolio.

Definition and risk

Sometimes referred to as penny shares, these are stocks that trade with a share price below £1. The firms also have a market capitalisation of below £100m usually. In most cases, these firms are small, lower-valued businesses. Due to this, there is a higher element of risk involved. The reward can also be higher if things go to plan based on product and services offered and performance. 

It is worth noting some of the general risks associated with penny stocks. Firstly, there is usually scare information available about these firms, as they aren’t followed by many research analysts. I like to do lots of research and due diligence before I buy any shares. Often, these shares either simply don’t have enough information out there or it come from sources that I wouldn’t consider credible. This can be a red flag that puts me off.

Next, penny stocks can often have a lack of history due to the fact they are newly formed. I understand past performance is not a guarantee of the future but I review it as a gauge when reviewing investment viability.

Finally, these shares can often have a lack of liquidity meaning they have little cash for the business to invest into product launches, research and development, and other activities. Penny shares can often be victims of stock price manipulation too. This can happen when someone buys a large amount of stock, hypes it up, and then sells it after other investors find it attractive.

Penny stocks to buy #1

Seeing Machines (LSE:SEE) is a tech stock based in Australia. It specialises in artificial intelligence (AI) tech to help reduce transport-related accidents with real world applications. This tech is applied in automotive, rail, aviation, and off road sectors. Seeing Machines has a global presence already and can count some major names among its customers. These include Emirates Airlines and General Motors.

As I write, the Seeing Machines shares are trading for 11p. At this time last year, the shares were trading for 5p, which is a 120% return. I am a fan of tech stocks generally so when a penny stock is on my radar with new and exciting tech applications, I take a good look at it. So far Seeing Machines looks an exciting prospect for such a cheap price. It seems to be using technology to solve a real problem and save lives.

Seeing Machines released year-end results last week, which made for excellent reading. Revenue increased 18% compared to last year and profit increased by 44%. Net cash also increased, which will solidify its balance sheet. Operationally, it reported its tech was now implemented in further General Motor’s models and new strategic deals were close to being signed off with other manufacturers of transport modes. This will boost performance in 2022.

Seeing Machines also has a decent track record of performance. I can see that revenue and profit have been increasing year on year for the past four years.

All penny stocks have risks. Seeing Machines could be out-muscled by larger tech firms that might decide enter the same space, despite its good progress to date. Furthermore, share prices can be volatile for small caps. Seeing Machines is trading close to all-time highs, so any negative news could cause a major shock to the share price.

Overall I would happily add Seeing Machines shares to my portfolio for 2022. I believe it is an exciting company at a cheap price with some excellent fundamentals to date behind it. I wouldn’t be surprised to see the share price continue to climb in 2022.

Pick #2

Zephyr Energy (LSE:ZPHR) is an investment platform designed to undertake economically attractive gas and oil projects. It is designed to focus on developments in the Rocky Mountain region of the US. Zephyr was formed by individuals with lots of experience in the gas and oil industry. 

Part of my bullish stance on Zephyr stems from oil and gas demand. The demand for both is high right now and a small cap like Zephyr could capitalise. Oil demand may be declining in the very long term but for now there is lots of demand, especially as the world recovers from the pandemic.

As I write, shares in Zephyr are trading for just over 6p. A year ago shares were trading for less than a penny, at 0.63p. That equates to a return of over 800%. Penny stocks can often experience huge share price increases in a short space of time so I am not getting too excited.

This year has been a particularly fruitful one for Zephyr. A re-brand and new management team have renewed focus and strategy since 2020. It has also made significant drilling progress in some of its prominent sites, especially one in Utah for which it has a lot of expectations. At the site drilling operations had been completed, it hit primary and secondary targets, and there were signs of natural gases and oil. A further update since points to the finalisation of well design so things are looking good.

Zephyr does come with risks. Like Seeing Machines, it is a very small fish in a large pond and could easily be out muscled and outmanoeuvred by a larger firm if they entered the same space geographically. Finally, Zephyr’s progress is based on projections to date rather than tangible results, which is a credible threat to any investor returns.

Overall, for 6p per share, I would happily add a small amount of shares to my portfolio. I would expect the share price to rise in 2022 and beyond. I believe my investment could grow and offer me a return in the long term, especially if some current projects begin to yield tangible results by way of oil and gas.

The post Here are 2 penny stocks to buy in 2022! appeared first on The Motley Fool UK.

However, this comes with a downside. Smaller companies can grow faster than larger corporations, but they are also riskier investments.

As such, I cannot take their growth for granted. So I will be keeping a close lookout for the challenges these businesses may face when I buy them. 

Penny stocks for growth

Seeing Machines (LSE: SSE) designs and produces driving safety technology. The £450m market capitalisation company is still in its early stages of growth. Revenues are expected to total A$47m this year.

However, sales have grown at a compound annual rate of 26% over the past six years. I think it is likely this trend will continue as organisations try and improve efficiency and digitisation.

Analysts appear to agree. Sales are projected to jump to nearly A$60m in 2022. 

Unfortunately, the group is still losing money. This is the most considerable risk involved with this stock. Losses have been funded over the past six years by issuing new shares diluting existing investors. With no sign of profits on the horizon, it seems likely the company will continue to ask investors for more cash. 

Despite this risk, I am attracted to the enterprise for its growth potential. 

Another penny stock I would buy for growth is aquaculture biotechnology company Benchmark Holdings (LSE: BMK). The group develops treatments for the aquaculture industry to help improve output and reduce wastage. 

As the world’s population continues to expand, food security is becoming a pressing issue. Therefore, it seems likely technology to help improve food production yield will continue to be a hot market. 

Benchmark’s established reputation in the sector, coupled with the group’s existing portfolio of products, puts it in a great position to capitalise on this trend, in my view. 

Challenges the enterprise could face include competition and regulation. These may weigh on growth if the firm has to hike spending to deal with additional regulatory requirements. 

Economic recovery

I think one of the best penny stocks in the oil and gas sector is Jadestone Energy (LSE: JSE). 

Over the past couple of years, the group has built a portfolio of oil and gas assets throughout the Asia-pacific region. It concentrates on cash generative, low-cost prospects. This strategy is now paying off thanks to higher oil prices. 

During the first half of 2021, the group generated $54m of cash from operations. It ended the period with net cash on the balance sheet of $48m. 

This cash provides further scope for expansion. It will also help support Jadestone’s dividend. The shares currently support a dividend yield of 1.6%, a rare quality among penny stocks. 

Unfortunately, as an oil producer, the price of this commodity dictates its fortunes. A fall in oil prices could have a significant impact on its bottom line. This is the leading risk I will be keeping an eye on going forward. 

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Life-saving tech

SEE may not be familiar to a lot of readers so let’s have a quick recap. The Canberra-based, London-listed company is a specialist in eye-tracking. It creates tech for monitoring drivers’ level of alertness with the aim of reducing traffic-related accidents. The business has been around for over 20 years but it’s only now, thanks to new legislation and higher-spec vehicles, that the true opportunity is becoming apparent. This is, to some extent, borne out by today’s full-year numbers.

Revenues rise

This morning, Seeing Machines revealed an 18% rise in revenue to A$47.2m in the year to the end of June. The vast majority of this came from the company’s Aftermarket division where its Guardian tech is retrospectively fitted to fleets. The A$35.1m generated here was up 30% from last year.

All told, almost 32,000 vehicles had been fitted with Guardian by the end of June. And if the recent agreement with Royal Dutch Shell is anything to go by, I can see this number rising substantially in the years ahead.

Arguably the most important development over the last year, however, has been the start of OEM royalty licence revenue as cars begin to be fitted with its driver monitoring system (DMS) software. As things stand, nine models (roughly 120,000 cars) have this installed, including the new Mercedes Benz S-Class. It’s this part of the business that I think will eventually drive the share price a lot higher.

Can anything hold this penny stock back?

Absolutely. Even if it manages to avoid all general obstacles in its path (Covid-19, supply chain issues), progress won’t come cheap. Only yesterday, the company announced that it had raised US$41m to help it capture as big a share of the “rapidly expanding” driver monitoring system (DMS) market as possible. Such a move dilutes existing shareholders. It might not be the last time either.

Potential buyers like me also need to be comfortable with a volatile share price. A rise of almost 190% over the last five years masks the roller-coaster journey in the interim. The shares rose from below 3p in 2017 to 13p+ back in 2018. They then sank below 2p in March 2020 before recovering to just shy of 12p today. To be clear, an investment here is not for the faint of heart. 

Happy to hold

I’ve taken reasonable steps to avoid getting too dependent on Seeing Machines for growing my wealth. This includes being invested in more established businesses in a variety of industries and owning a number of quality-focused funds. To be clear, I’m not betting the farm on it. I never will. 

Notwithstanding this, the prospect of it revealing the full identities of its latest OEM customers in the months ahead could easily move its shares into a higher gear. And should the company succeed in capturing even a modest proportion of the opportunities in other sectors such as aviation, I think this could be one of the best penny stocks for me to buy more of for 2022.

The post I think this is one of the best penny stocks to buy for 2022 appeared first on The Motley Fool UK.