Investing in penny stocks can be high risk. Small-cap businesses like these can be more vulnerable during economic and industry downturns. Their share prices can also be extremely volatile, owing to low market liquidity.
But buying smaller companies like these can also turbocharge an investor’s wealth. Profits growth can be extremely rapid and, by extension, share price increases can also be stratospheric.
I don’t have unlimited reserves of cash to spend on UK shares. But here’s a cluster of top penny stocks I’m considering buying this year. I think their profits could soar over the long term.
Passive income stocks: our picks
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Gensource Potash
A soaring global population means that maximising crop yields is becoming increasingly important. A recent study suggests that total food demand will grow 35-56% between 2010 and 2050 as the number of mouths to feed increases.
This provides an enormous opportunity for mining businesses like Gensource Potash (LSE:GSP). This AIM-quoted business owns the low-cost Tugaske potash asset in Canada. Last year, it announced plans to double annual fertiliser production capacity to 500,000 tonnes a year during the second phase of the mine’s development.
First supply is scheduled to come online in 2024, and the business has the financial backing of chemicals giant Helm AG to get the project off the ground. Under the deal, Gensource will supply product to the German company for 10 years.
Mine development is highly complex and expensive business. And any setbacks between now and first production could wallop Gensource’s earnings. But this is a risk I’d be prepared to take, given the bright demand outlook for its essential product.
Everyman Media Group
Like Cineworld, cinema chain operator Everyman Media Group’s (LSE:EMAN) share price has been slipping of late. This reflects the gloomy near-term outlook for the box office as the cost-of-living crisis endures. Box office takings look highly uncertain as people tighten their belts.
But I think Everyman could be an attractive dip buy at current prices. It isn’t on the brink of extinction like Cineworld. And the company offers a more complete leisure experience for moviegoers, an important weapon in the fightback against streaming services like Netflix and Amazon’s Prime.
Visitors can enjoy a drink at the bar or a savoury bite before or after their movies. They can also catch up with special events and screenings of independent as well mainstream films. These are the sort of things that will encourage people to leave their sofas.
It’s possible that takings at Everyman could perform better than expected too. This is because of a strong schedule of movies this year following a weak 2022.
A string of hot releases — including fresh chapters in the Indiana Jones, Mission: Impossible, John Wick and Spider-Man franchises — could all court massive ticket sales in spite of the cost-of-living crisis. I’m seriously considering buying Everyman shares before this potential upturn.
