The Helium One share price is up 15%! Would I buy the stock?

 The Helium One share price is on a roll since Thursday, but can it continue or is it too good to be true?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Stack of British pound coins falling on list of share prices

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As I write this on Friday afternoon, the Helium One (LSE:HE1) share price is up by an eye watering 15%! And this is on a day when the broad markets are sluggish. So what is going on here?

Positives for the Helium One share price

On Thursday, the company, which explores and develops Helium used in scientific research and technologies, said it was starting drilling at a well in Tanzania. Its share price rose by 25% following this, and continues to do so. 

Can the Helium One share price rise more, though? 

On paper, there is a lot going for it. The gas has proven uses. Its share has been lapped up by investors since its listing on the AIM exchange last year. This suggests confidence in it. It reached a high of 28p earlier this month, up almost seven times from its listing price. 

The downside

But there is another side to the story, too. By earlier this week, its share price had lost more than half the value from its early-August highs. This followed disappointing results from exploration. It has started rallying again now as hope builds on its next round of exploration. 

And that is my problem with the stock. There is just too much volatility here. This to me, smacks of speculative trading activity. Far more than I care for among stocks I hold. As a pre-revenue company that is still looking for viable reserves, Helium One is particularly susceptible to it. 

Natural resource exploration can be difficult business, and a story that starts with great promise may not always end well. Does anyone remember what happened to Sirius Minerals? It was exploring a different resource with an as yet unproven market, but there may appear parallels with its slow-moving case, if the helium explorer is unable to become financially viable in time. 

Consider Anglo American instead

Speaking of Sirius Minerals, though, I think a good investment in the natural resources business is its acquiring company, Anglo American (LSE:AAL). Unlike Helium One, it is an established FTSE 100 stock that looks like a steal right now. Yesterday, its share price dropped by a huge 10% as it went ex-dividend. 

This is a great time to be a natural resource producer. From oil and gas companies to industrial metal miners, the rising prices of commodities have made them even more financially robust than they already were. In the last year alone, Anglo American’s share price almost doubled. The owner of De Beers, the biggest diamond company in the world, can continue to gain as the world economy gathers pace. 

There is some risk that industrial metals’ prices can fall as China withdraws its fiscal stimulus. But whether that happens remains to be seen. Besides, the US government’s spending and a pickup in global growth can still keep them elevated, positively impacting the likes of Anglo American.

My takeaway 

I reckon I am better off sticking to its likes than venturing into investing adventures like Helium One. The ride may be exhilarating but I am not sure the end will be positive. At least, not yet.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »