Penny stocks are quite a risky investment, but they do open the door to potentially monumental growth opportunities. With the Bank of England predicting inflation will reach as high as 13% before the end of the year, some serious growth will be needed to stay ahead of the devaluation of my money. And the interest earned on my savings accounts definitely can’t deliver that.
To be fair, the BoE’s track record of predicting inflation and subsequent recessions is pretty dire, with most warnings being false alarms. Still, it doesn’t hurt to prepare for the worst-case scenario. So, what are the best stocks to buy today with a spare £500?
5G penny stocks of the future
In the grand scheme of things, a recession, while unpleasant, is ultimately a short-term problem. And in the long term, demand for technologies like 5G and eventually 6G will likely continue to surge.
Despite what the headlines would suggest, we’re still in the early days of the next-generation telecommunications network. But that makes it the perfect time to find the potential winners of the future. And while some big industry titans like Qualcomm are operating in this space, a handful of tiny penny stocks are also starting to make waves.
The first is an electronic equipment specialist. It works with small and medium-sized businesses that can’t afford to develop their electronics in-house and are also too small to secure deals with larger industry players. While the target market is undoubtedly niche, the group has demonstrated its ability to build strong relationships. And with its latest acquisitions significantly expanding its capacity, Solid State should be able to scale its offerings in line with customer needs.
The second is a global specialist in radio frequency communication technologies. That includes flat & parabolic antennas and custom solutions for businesses and the military. Management has also begun delving into wireless water control systems for agriculture as well as the public sector.
Seeing the risks and rewards
Both of these penny stocks have already begun to tap into the opportunities offered by the rollout of 5G. So, it’s not surprising to see their revenue streams growing by double-digits. And despite their market capitalisations being lower than £100m, both companies are profitable!
In my experience, it’s rare to see small firms having a positive bottom line. And while there’s some debt on their balance sheets, neither appears to be overleveraged. These are all encouraging signs of long-term growth potential. But that doesn’t mean they’re risk-free.
I’ve already highlighted the stiff level of competition. And with supply chain disruptions, especially in the semiconductor space, sourcing the raw materials required to fulfil customer orders is undoubtedly challenging. If these firms cannot clear their order books quickly enough, clients may start turning to competitors who can.
Needless to say, that could quickly compromise the impressive growth delivered to date. Nevertheless, it’s a risk I feel is worth taking for my portfolio with a small amount of capital, like £500.
The post Forget savings accounts! 2 penny stocks I’d invest £500 in as inflation skyrockets appeared first on The Motley Fool UK.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended MTI Wireless Edge Ltd. and Solid State. 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.