I think these penny stocks could considerably boost my investment returns over the next decade. Here’s why I’d buy them right now.
Kropz
What it does: Searches for and produces rock phosphate in Africa.
Price: 8.5p per share
Producing enough food to go round is becoming increasingly hard as population levels rise and global warming worsens. It’s why companies like Kropz (LSE: KRPZ) will play a critical role in the food industry in the decades to come.
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This penny stock mines for rock phosphate in Africa, the basic material that’s then used to produce phosphate fertilisers. Virtually all of these types of fertiliser are based on rock phosphate, a raw material that Kropz hopes to produce from its Elandsfontein open pit project in South Africa later in 2022.
Kropz also 100% owns the Hinda rock phosphate asset in Republic of Congo. The business has said that the project could be “one of the world’s largest undeveloped sedimentary-hosted phosphate reserves.”
Production problems
Operational news from the firm hasn’t been hugely encouraging recently. In April it warned of production issues at Elandsfontein that would push its first bulk sale of rock phosphate further back into Q2.
This delay also means Kropz has had to raise ZAR58m, it said. It’s done raise this by drawing down remaining funds from a conditional convertible equity facility and by sealing a bridge loan facility.
A big market
Buying mining shares can always be considered risky. Problems at the exploration, mine development and production stages can be commonplace. And as Kropz has shown, this can be particularly problematic for smaller operators with no revenues and fragile balance sheets.
Still, it’s my opinion that this is an attractive penny stock for me to buy. First off, its projects in Africa are potentially world-class assets. And secondly the business could profit considerably from soaring fertiliser demand.
Analysts at Grand View Research think the phosphate fertiliser market will grow from $63.81bn today to a whopping $176.06bn by 2040.
Corero Network Security
What it does: Provides products that protect websites from cyber attacks.
Price: 12.25p per share
The Covid-19 crisis had led to a sea change in employee expectations. In particular demand for more flexibility in regard to working arrangements has taken off. This bodes well for many businesses that supply software and IT services like Corero Network Security (LSE: CNS).
This particular tech stock provides protection against so-called Distributed Denial-of-Service (or DDoS) attacks. These malicious actions work by attacking a website with large amounts of fake traffic to cause a crash.
With more and more people working from home the opportunity for cyber criminals to wreak havoc is growing. Companies are therefore are having to spend huge amounts on tech security to plug their vulnerabilities. Corero itself saw revenues rocket 24% year-on-year in 2021.
A small player
The problem for Corero Network Security is that it’s tiny compared with the industry’s big beasts. Today the penny stock has a market cap a shade above £60m.
Compare this with the multi-billion (and even trillion) dollar valuations that businesses like Microsoft, NortonLifeLock and McAfee command. Corero then has a fraction of the budgets that its US heavyweight rivals have to develop and market their products.
Making great progress
Corero will have to paddle extremely hard to avoid being swept away by the competition. But having said that, I find the rate at which the UK underdog is winning business highly encouraging. And it could continue to impress as the global cybersecurity market rapidly grows.
Researchers at Quince Market Insights think this sector will expand at a compound annual growth rate of 12.5% between now and 2028. They say the cybersecurity industry will be worth a gigantic $418.3bn by then.
US Solar Fund
What it does: Invests in solar farms in the US.
Price: 88 US cents share
Investing in renewable energy stocks is also appealing to me today. I’ve taken the splash in recent weeks by buying shares in solar and wind farm owner The Renewables Infrastructure Group. I’m considering increasing my exposure by snapping up stock in US Solar Fund (LSE: USF) as well.
As the name suggests, US Solar Fund is focused on creating green energy from photovoltaic cells in the States. Its assets can be found predominantly in North Carolina with the remainder in Oregon, California, and Utah.
Favourable locations
The problem with renewable energy is that it’s sometimes more difficult to generate than electricity from fossil fuels. In the case of US Solar Fund, power generation can tumble during cloudy periods. This can have a significant impact on near-term profits and, by extension, shareholder returns.
The good news for US Solar Fund, though is that the four states it operates in receive more sunshine than the national average. The places in which its assets are located are also well distanced from one another. A wide geographic footprint helps mitigate the impact of poor weather in one or two places at group level.
I also like US Solar Fund because of the favourable legislative conditions in the US that makes it easier to operate. In fact President Biden this week announced plans to halve the amount it charges companies to build wind and solar projects on federal land in a bid to boost investment.
A top dip buy
Demand for renewable energy is soaring as public awareness over the climate change issue grows. The West’s need for clean electricity is set to increase further it tries to wean itself off Russian oil in particular.
The US Solar Fund share price has reversed sharply over the past year. And as someone who invests for the long term, this has attracted my attention. It’s my opinion that this penny stock could deliver excellent returns over the next decade and potentially beyond.
