The maximum we can lose from a penny share is 100%, exactly the same as with any stock. And I’d say there’s probably a greater chance of a wipeout, as something has usually gone wrong to send them to such low levels.

I’ll briefly mention one as a caution. I won’t name the company, but five years ago its shares were priced at around 1p. Not much to lose? They’ve crashed more than 95% since then.

The value of an investment depends on a company’s performance, not just the share price. Here are two that I like.

Venture capital

When you think of investing in venture capital, what comes to mind? Visions of millionaire investors ploughing serious cash into private equity firms?

With Triple Point Venture VCT (LSE: TPV), we can have a go with even modest sums.

I’d never heard of it until I read my colleague Jon Smith’s article, “This penny stock invests in start-ups. Here’s why I think it could surge“. But we Foolish investors learn from each other, right?

Investing in venture capital can be a risky business. The things they put our money into might not be easy for us to investigate and understand ourselves. We have to hope the managers are on the ball.

Trust a trust?

If trusting our cash to folks in the City without being able to properly understand what they’re doing with it sounds out of touch with the Foolish approach… well, yes, that’s a good point.

Still, the trust has put money into forestry management using artificial intelligence (AI). And some has gone to a company working on cost-effective electric vehicle (EV) schemes for businesses.

Those are high-profile right now. And it might not need much for one of them to take off and give the Triple Point share price a boost.

Things can go wrong with start-ups, of course. But I might put a small amount of my 2025 investment cash into this penny stock.

Down to earth

I’ve followed Topp’s Tiles (LSE: TPT) for a long time.

I’ve bought its products, and I like them. A lot of others do too. And over the long term, it’s built up a strong following.

The problem is, the business has been hit by multiple external crises. The most recent is the fallout from the pandemic, which immediately stopped us doing anything more than essential shopping.

Inflation, high interest rates, expensive mortgages, depressed building sector… they’ve all taken their toll.

Upbeat outlook

But at FY time in November, the company told us it’s “continuing to take market share in a difficult trading environment.” And though the market is “c. 20% down on pre-Covid levels,” Topps saw revenue 14.9% ahead of 2019.

That difficult trading environment is still a big threat, and stubborn inflation could hold the share price back in 2025. But the City expects earnings growth in the next few years, and predicts a 9% dividend yield.

That might finally move me to buy some.

The post 2 penny shares I think could shine in 2025 appeared first on The Motley Fool UK.

The firm in question

I’m talking about the Triple Point Venture VCT (LSE:TPV). The stock has a market-cap of £68m, with a current share price of 94p. Triple Point’s the investment manager responsible for making the decisions of what to buy and sell within the trust. It’s primarily focused on providing venture capital (ie early-stage cash) to hot young businesses that have some connection to tech.

In the H1 interim report, it detailed how it had deployed £4.3m during this period, investing in three new companies alongside putting more money to work in three existing firms.

Over the past year, the share price is down a modest 2%. In theory, the price should reflect the net asset value (NAV) of all the businesses that Triple Point’s invested in. From the last valuation date, the stock actually trades at a 5% discount to the NAV.

Why I think it could do well

After looking at some of the new and existing investments, I think the stock could do very well in coming years. After all, if the value of the underlying investee does well, the share price for Triple Point’s going to follow.

For example, it recently invested in Treefera, a forestry data company that uses artificial intelligence (AI) to inform users about everything from forest health to volume available to harvest. I really like how this ties in a key theme, environmental concerns, to AI.

Another new investment is The Electric Car Scheme, which works with businesses to provide attractive salary sacrifice solutions to boost use of electric vehicles (EVs). Again, the focus on going green and the way it uses tech makes this a really interesting company to be involved in.

Potential risks

Of course, investing in early-stage companies is risky. The firm tries to reduce this by using diversification in a few different ways. The obvious one is by holding a large number of portfolio companies. Another way is sector diversification via investing in businesses across several different sectors.

Finally, it “mixes earlier vintages of investee companies (that) mature over time and mix with newer investments so that the portfolio covers various stages of the venture lifecycle”.

I like this approach, which should allow the penny stock to grow in a sustainable way. One concern I do have is that most of these investments aren’t with public companies. So if it quickly needs to sell a stock for any reason, it’ll be difficult. If a company’s doing badly, it could be hard to find a buyer of the stock.

Overall, I think the trust could do well, based on the portfolio companies taking off. I’m seriously thinking about investing in the near future.

The post This penny stock invests in start-ups. Here’s why I think it could surge appeared first on The Motley Fool UK.