Skip to main content
Stocks trading window
Stocks trading window

All You Need to Know About Trading in the Best UK Penny Stocks in 2021

Ford, JD Sports, and Monster Beverage were among the many well-known firms that once traded for less than £1 a share. Those who bought these businesses because they were penny stocks may have made a significant profit over time. 

Penny stocks in the UK are a low-cost way to diversify the portfolio and have the potential to grow in value over time. They are, however, very volatile investments since the firms are typically small, inexperienced, and competitive against other companies in their industry. Despite the dangers, the prospect of profits seems to be enough to entice tens of millions of eager buyers to these low-cost stocks. 

However, it is important to understand the advantages and disadvantages of penny stocks for proper risk management. For instance, figuring stop-loss orders before entering a trade.

Definition and Working of Penny Stocks

A penny stock is a small public company's common share that is sold at a low price. Penny stocks are a form of market-traded security with extremely low valuations. The definitions of penny stocks can differ from country to country. Penny stocks, for example, are stocks that sell for less than $5 in the United States, while penny stocks in the UK are just those that trade for less than £1. The firms would also have a market capitalization of less than £100 million in the United Kingdom and less than $300 million in the United States.

Companies with smaller market capitalization ratios are more likely to sell these shares. Based on the business's market capitalization, these are nano-cap stocks, micro-cap stocks, and small-cap stocks. The product of the current price of a company's shares or stocks and the number of outstanding shares determines its market capitalization figure.

Since penny stocks are designed for growth, many have yet to produce any revenue or create a profitable product or service; they are viewed as a more risky venture than larger companies. Penny stocks in the UK are listed on the FTSE Target index.

Why Are Penny Stocks in Focus?

UK penny stocks are a hit-or-miss kind of investment. Companies that issue them may expand into large corporations with higher-than-average returns, or they may fail in their early years, resulting in massive losses. Despite these claims, penny stocks should be part of the investment portfolio. 

Below are the reasons for this:

  • Multibagger: A few of these stocks can become multibaggers in the future. It refers to stocks that payout multiples of the initial investment. A double-bagger is a security that returns double the amount invested, and a ten-bagger is a security that returns ten times the amount invested. Using them in your portfolio could boost your return chances by a significant margin and outperform large and mid-cap funds. However, study the penny stock list thoroughly to determine which stocks can be multibaggers.
  • Cost-effective: Investing in these stocks is less expensive. As a result, you can invest in them without risking a large portion of your capital. Investing a limited portion of your portfolio in the best penny stocks in the UK for 2021 will also give you the flexibility to invest in other, safer investment opportunities while lowering the risk factor.

The Best Penny Shares for 2021

The stock markets faced major obstacles due to the unprecedented global lockdowns resulting from the coronavirus pandemic. Below are some of the best penny stocks in the UK you can purchase.

Galantas Gold Corp

Galantas Gold Corp (Galantas) owns and runs a gold mine in Northern Ireland near Omagh, County Tyrone. The United Kingdom and Canada are the company's regional divisions. Silver and lead are generated as by-products at the company's mine. Omagh Minerals Limited, Galantas Irish Gold Limited, and Flintridge Resources Limited are all owned by Cavanacaw Corporation, a division of Galantas.

A metal compound is created by non-toxic, safe processing and marketed on a contract basis. Since receiving planning approval, the company has continued to mine underground, with about two kilometers of underground construction completed to date. On-vein development generates feed for the processing plant. The mine has completed a portion of a drilling exploration program that resulted in a substantial rise in resources uncovered, and it plans to proceed.

Maestrano Group 

Maestrano Group plc is a tech company headquartered in the United Kingdom that provides small to medium enterprises, banks, and accounting companies with a cloud-based enterprise Platform as a Service (PaaS). It's a cloud connectivity tool that synchronizes data through apps to enable digital collaboration for small businesses.

Users can view real-time monitoring data on the network thanks to its master data management (MDM) technology. Via in-product online chat and community forums, it also offers follow-up business and end-user technical assistance. The company's Connect! Technology provides consumers with a single point of access to all third-party apps that its clients have linked.

Via application interfaces, Impact! Technology compiles transactional data from Connec! to provide market analytics to end-users and internal resources (API). Maestrano Hub is a series of multi-tenant APIs that enable users to monitor their customers' communication with the network.

Rolls-Royce

Rolls-Royce Motor Cars Limited is a luxury car manufacturer based in the United Kingdom. This firm, which was established in1998, is a wholly-owned subsidiary of the German company BMW. Rolls-Royce plc sold the rights to the Rolls-Royce brand name and logo to the German automaker. Volkswagen AG has sold the rights to the Spirit of Ecstasy and the Rolls-Royce grill shape trademarks. The Rolls-Royce Motor Cars division of BMW AG has no direct relationship to Rolls-Royce branded vehicles produced before 2003, although the Rolls-Royce name has been in operation since 1906.

Rolls-Royce Motor Cars Limited is based in Goodwood, West Sussex, England, and functions from purpose-built operational and manufacturing facilities that opened in 2003 across from the historic Goodwood Circuit. In 2003, the Rolls-Royce Phantom four-door sedan was the first model to hit the market. Since then, the brand also added a two-door coupe and convertible version of the Phantom sedan, a Dawn convertible, Cullinan SUV, and many more to its global model range.

Wishbone Gold

Wishbone Gold Plc is an AIM-listed company with two objectives in the precious metals industry. It owns and operates a wholly held precious metals trading company in Dubai, United Arab Emirates. 

In addition, the company owns four mining licenses in North East Queensland, Australia, totaling over 34,000 acres and noted for substantial precious metal mineralization. The FTSE AIM All-Share index includes Wishbone. Wishbone Gold Plc Ord 0.1P (Di) is a company that trades on the London Stock Exchange under the ticker WSBN. With approximately 159 million shares in issue, it has a market capitalization of £22 million. Wishbone's stock has traded in a total of 16.85 over the past year, with highs of 18 and lows of 1.15.

Conroy Gold

Conroy Gold and Natural Resources plc is a company that focuses on mining discovery and production in Ireland and Finland. The company's main focus is on finding gold, lead, and zinc deposits. Its exploration activities are mainly focused on the Longford-Down Massif region. Conroy Diamonds and Gold Plc was the company's last name until January 2011, when it was renamed Conroy Gold and Natural Resources plc. Conroy Gold and Natural Resources plc is based in Dublin, Ireland, and was established in 1995. It became famous in 2020 after signing a deal with Anglo Asian Mining.

The FTSE AIM All-Share index includes Conroy Gld&nres. Conroy Gold & Natural Resources Plc Ord Eur 0.001 (Cdi) is a London Stock Exchange company that trades under the ticker CGNR. It has a market capitalization of £10 million and nearly 39 million shares outstanding. Conroy Gld&nres stock has traded in a 35.85 range over the last year, with a high of 45.6 and a low of 9.75.

Alien Metals

Alien Metals Ltd is a London Stock Exchange AIM (Alternative Investment Market) listed exploration and mining project operator (LSE: UFO). The company's primary emphasis is on precious and base metals. Alien Metals has embarked on an acquisition-led approach to developing a robust portfolio of diversified investments, including two recent acquisitions in 2019.

The Brockman and Hancock Ranges high-grade (Direct Shipping Ore) iron ore projects and the Elizabeth Hill Silvermine are all located in Western Australia's Pilbara area. The Company's Mexican operations are located in Zacatecas Province, Mexico's largest silver-producing state, which produced over 190 million ounces of silver in 2018, accounting for nearly half of the country's total silver output. 

Alba Mineral Resources

The FTSE AIM All-Share index includes Alba Mineral Resources. Alba Mineral Resources is a company that works in the Industrial Metals industry. Alba Mineral Resources plc is mainly involved in discovering and producing natural resources in the United Kingdom, Ireland, Australia, and Greenland through its subsidiaries. Graphite, limonite, base metals, copper, zinc, lead, and iron ores are the primary targets of its exploration.

Alba Mineral Resources Plc Ord 0.01P is a company that trades on the London Stock Exchange under the ticker ALBA. With approximately 6,228 million shares in question, it has a market capitalization of £17 million. Alba Mineral Resources' stock price has fluctuated between 0.49 and 0.56 over the last year, with a high of 0.56 and a low of 0.07. 

The firm has a 90% stake in the Amitsoq graphite mine, a 100% stake in the Thule Black Sands project, a 51% stake in Melville Bay iron ore, a 100% stake in the Inglefield Land multi-element project, a 90% stake in the Clogau gold project, and a 100% stake in the Limerick base metals project.

It also has an 11.765 percent direct interest in Horse Hill and a 5% interest in development licence 235, which includes the onshore Brockham Oil Field and a stake in the Gwynfynydd Gold Mine in the north Wales' Gwynedd region. The business was founded in 2004 and is headquartered in London, England.

Thor Mining

Thor Mining PLC is an Australian- and American-based natural resources firm focused on tungsten, molybdenum, and copper. The FTSE AIM All-Share index includes Thor Mining. The company works in the Industrial Metals industry. Thor has schemes in the Northern Territory, Western Australia, and South Australia, among other places in Australia. Thor also has tungsten mining claims in Nevada and uranium and vanadium exploration claims in Colorado and Utah.

Thor Mining Plc Ord 0.01P is a company that trades on the London Stock Exchange under the ticker THR. With approximately 1,623 million shares in question, it has a market capitalization of £16 million. Thor Mining's stock price has fluctuated between 1.095 and 0.28 in the last year, with a peak of 1.375 and a low of 0.28.

Eve Sleep

Eve Sleep is a company that is part of the FTSE AIM All-Share index. It works in the Household Goods industry. Eve Sleep Plc Ord 0.1P is a company that trades on the London Stock Exchange under the ticker EVE. With roughly 274 million shares in question, it has a market capitalization of £12 million. Eve Sleep's stock has traded in a range of 6.13 over the last year, with a high of 7.18 and a low of 1.05. In France, UK, Ireland, France, remaining Europe, Eve Sleep plc functions as a direct-to-consumer sleep business.

In the United Kingdom and Ireland, France, the rest of Europe, and globally, Eve Sleep plc functions as a direct consumer sleep business distributor. It sells its goods both in stores and on the internet. The business was founded in 2014 and is headquartered in London, England.

Red Rock Resources

Red Rock Resources plc is a natural resource discovery and mining firm headquartered in the United Kingdom. The company's main operations include gold mining in Kenya and the Ivory Coast. The investment includes Jupiter Mines Limited and other investments; Discovery, which includes Australian and African exploration; and more is the company's divisions. Jupiter Mines Limited owns a stake in Tshipi e Ntle's manganese mine in South Africa, a direct shipping ore iron plant in Western Australia's Mount Mason, and a magnetite project in Mt Ida.

The Migori Gold Project, located in southwest Kenya, is owned by the company and consists of two adjacent exclusive prospecting licenses (SPLs): SPL122 and SPL202. The company explores gold and manganese in the Ivory Coast's Birimian greenstone belt in nearly three permits. The Shoats Creek Area also has a stake in around three wells.

ValiRx

The FTSE AIM All-Share index includes Valirx, which is a company that works in the field of medicine and biotechnology. It trades on the London Stock Exchange under the ticker VAL. With approximately 65 million shares in question, it has a market capitalization of £14 million. Valirx's stock price has fluctuated between 59.375 and 6.625 over the past year, with a high of 66 and a low of 6.625.

Steps to Trade Penny Stocks

Let's go through the steps to begin trading penny stocks in the UK:

  1. Select a stock exchange site.
  2. Create an account. When you sign up, you'll be asked to check your identification.
  3. Deposit into your account. To return money to your trading account, you'll usually be able to use a bank transfer.
  4. Locate the stocks you intend to purchase. Click "Buy" after searching the website for the shares you want.

How to Analyze Penny Shares in the UK?

Penny Stocks Analysis

Here are some of the same mathematical instruments to decide whether penny shares in the UK are worth our money if we have accurate financial reports. Because too much of the value of a penny stock is dependent on potential projections of success, strong figures and a favorable trend on the balance sheet, income statement, and cash flow statement are critical.

Liquidity Ratios

The first ratios that a UK penny stocks investor can calculate are liquidity ratios (such as the current ratio, quick ratio, capital ratio, and operating cash flow ratio). Penny stocks are often unable to fund their short-term obligations on time. Lower liquidity levels (say, less than 0.5) indicate that the firm is having difficulty staying in business or expanding its activities.

Leverage Ratios

Leverage ratios are another significant category of ratios. They're close to liquidity levels except that they're concerned about a company's ability to pay off debt. It is the long-term debt that we are talking about in this situation. The debt ratio and the interest payout ratio are two significant leverage ratios. 

The Debt Ratio = The Total Liabilities / The Total Assets

We're looking for patterns here, such as whether the debt burden is shrinking or growing. If it is developing, it can only do so to promote further corporate expansion and growth opportunities. The interest coverage ratio is used to calculate whether a company's debt burden is sustainable and whether it provides enough profits to repay its outstanding debt.

The interest coverage ratio is used to calculate whether a company's debt burden is sustainable and whether it provides enough profits to repay its outstanding debt.

The Interest Coverage Ratio = Earnings before the Interest and the Taxes / The Interest Expense

The higher the interest coverage level, the better. Anything less than two indicates potential difficulties in repaying long-term loans.

Performance Ratios

Gross profit margin, net profit margin, operating profit margin, return on investment, and return on equity are all performance measures that help measure the profits made at each stage of a company's income statement. In the initial phases of expansion, the problem is that penny stock profit margins are always very thin. In the case of UK penny stocks, stable and reliable growth in operating earnings is much more important.

Valuation Ratios

They assist in determining the stock's attractiveness at the current price. Shares in penny stocks can be extremely overvalued. The price-to-earnings (P/E) ratio is the most often used metric for determining worth.

Are Penny Stocks a Good Investment?

There are two sides to penny stock trading, and they are completely contradictory. The truth is right in the middle of these two extremes. Before diving into the penny stock pool, investors must thoroughly comprehend the potentials and risks.

Pros

Cons

  • Some companies involved have the potential for significant growth.
  • Investors can turn small investments into bigger returns. They are the highest dividend-paying stocks.
  • Penny stocks move quickly within the market.
  • Cheap and exciting.
  • Many companies are of low quality.
  • Investors may lose money since penny stocks are risky.
  • Very volatile with surprising valuations.
  • The regulations set by stockbrokers vary.
  • They are highly speculative and have wide bid-ask spreads.

Final Thoughts on Penny Stocks in the UK

Penny stocks in the UK are appropriate for buyers willing to take a high risk in exchange for a high yield. Do not invest in these stocks if you have a low-risk appetite. To summarize, you should consider the company's value proposition. Understand the company's operations, products, and resources, among other things. 

Purchasing a penny stock is not the same as purchasing a lottery ticket. Penny stocks are extremely volatile. Since these stocks are famous for making wild swings, keep an eye on them at all times. Buy more if the stocks are doing well. Get rid of them if they are consistently doing adversely.

UK penny stocks can be a good addition to your investment portfolio because they're inexpensive, allowing you to purchase a large number of shares for a small sum of money–but they're still riskier. 

Keep in mind that you can also diversify your portfolio and spend assets willing to risk. Although some people have made large sums of money by trading in penny stocks, for the most part, penny stocks are asset destroyers. If you're going to invest in penny stocks, do your homework and avoid speculating on the stock. Furthermore, these stocks carry a high level of risk as compared to higher-priced stocks.

You may also choose to invest in other financial opportunities that are more appropriate for your goals and risk tolerance. You can check out the higher-priced stocks on Libertex. Through CFD, you can gain potential profit in shorter timeframes. To further minimize risk, open a Libertex demo account.

Why to trade with Libertex?

  • access to a demo account free of charge
  • technical assistance to the operator 5 days a week, from 8 a.m. till 8 p.m. (Central European Standard Time)
  • leverage of up to 1:600 for professional сlients
  • operate on a platform for any device: Libertex and Metatrader

FAQ

What Are the Best Penny Shares to Buy?

Galantas Gold Corp is the best penny stock you purchase in the United Kingdom.

What Are the Second-Best Options of Penny Stocks in the UK?

Maestrano and Rolls-Royce groups are the second-best penny stocks you purchase in the United Kingdom.

Can You Trade Penny Stocks in the UK?

Yes, you can trade penny stocks in the UK. When buying penny stocks, the broker will either go the long way and buy the commodity or the short way and sell it. The ability to ‘buy' or ‘sell' allows a trader to participate on all sides of the exchange, effectively doubling the number of possible profits in penny stock markets.

How Do I Start Buying Penny Stocks?

To trade penny stocks, create an online trading account, finance it, enter the company's stock sign, and then place a buy order.

Are Penny Stocks Low Risk?

Penny stocks are highly risky. This is because no investor can determine the necessary exit levels from a penny stock, including if it becomes profitable. Furthermore, there is no certainty that a penny stock can remain viable over time.

How Do I Choose Which Penny Stocks to Invest in?

Keep these tips in mind to select a winning penny stock:

  1. Since penny stocks are high-risk, make sure you can invest in them comfortably.
  2. Research and understand the various factors that influence stocks.
  3. Practice paper trading.
  4. Recognize your investment limits instead of betting on them.
  5. Avoid approaches you are unsure of.

What Is the Difference Between Penny Stocks and Blue-Chip Stocks?

Unlike penny stocks, blue-chip stocks are well-established firms with promising market opportunities.

Back