I’m searching for the best penny stocks to buy for my portfolio. Here are two sub-£1 shares I think could deliver explosive profits growth.
Electric vehicle (EV) makers like Tesla and NIO remains extremely popular shares today. But as competition among US and Chinese manufacturers intensifies the risk to investors’ capital is also rising.
For this reason I’d rather find other ways to ride the EV boom, like investing in companies that make parts for these cleaner vehicles. Opening a position in producers of key commodities like copper, nickel, and cobalt is another option for me.
With this in mind I’m giving CleanTech Lithium (LSE:CTL) a close look. Buying mining shares comes with a high degree of operational risks. But I believe the potential rewards of investing in this penny share make it an attractive place to spend my cash.
The business owns several lithium assets in Chile, and recent drilling work at its Laguna Verde mine has got me especially excited. Last month the Alternative Investment Market (AIM) stock lifted its JORC* resource estimate there to 1.8m tonnes of lithium carbonate equivalent. This would support annual production of 20,000 tonnes over a 30-year mine life.
The business also expects to release updated JORC resource numbers from its Francisco Basin project in the current quarter. Analysts at broker Fox Davies Capital believe CleanTech has the potential to produce 40,000 tonnes of lithium across its assets within a decade.
Getting through the exploration and development phases is highly expensive. And any setbacks can put huge strain on miners that aren’t generating revenues. But most recent financials suggest the company has the financial headroom to get its projects off the ground (it had cash of £12.4m on the balance sheet at the end of 2022).
* The Joint Ore Reserve Committee (JORC) code is an established framework for reporting mining exploration results.
Brake manufacturer Surface Transforms (LSE:SCE) is another penny stock I’d buy to get exposure to the auto market. In this case, revenues could soar as sports car sales balloon. Analysts at Statista expect sales of fast cars to rise 11% globally between now and 2030, to $70.7bn.
The business is rapidly hiking production capacity to meet growing demand from carmakers. By next month it expects its production lines to support £50m worth of annual sales.
But this is just the beginning: it is making progress on opening a new factory that will take yearly sales to £150m by 2026.
Sales of Surface Transforms’ carbon-ceramic disc brakes rose by 14% between January and June, with volumes rocketing 80% due to those capacity increases. The company’s patented products have significant advantages over iron brakes like reduced wear and weight and better vehicle handling. So demand from major automobile OEMs should remain strong.
Profits here could disappoint in 2023 and 2024 as the global economy splutters. But as a long-term investor, I still believe the AIM company is a top stock to buy.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. 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.
Motley Fool UK 2023