3 penny shares I’d buy to hold for the next 5 years!

Buying penny shares can be high risk. But when investors get it right, these small-cap stocks can supercharge long-term capital gains.

| 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.

Middle-aged black male working at home desk

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.

Here are three top penny shares I’ll be looking to buy when I have extra cash to invest.

Gaming Realms

A change to gambling legislation is a constant threat to Gaming Realms (LSE:GMR). But the profits potential here remains immense as online gaming goes from strength to strength.

This UK share builds and licences casino games that are played on mobile phones and tablets. Its most famous franchise is the Slingo line of games, the popularity of which helped drive group revenues 27% higher in 2022.

Unsurprisingly Gaming Realms remains committed to developing its cash cow. It launched three new Slingo titles last year and signed an intellectual property (IP) agreement to release a Tetris-based game later in 2023.

I also like the company’s ongoing commitment to rapid expansion to boost user numbers. It has launched with 13 new partners in the year to date (including with Bet365 in the UK and Betway in Pennsylvania). I’m especially excited by plans for further launches in the gigantic US marketplace.

OnTheMarket

The dangers to Britain’s homes market remain severe as interest rates rise and the cost-of-living crisis endures. Property listings business OnTheMarket (LSE: OTMP) is one UK share that could suffer if housebuyer appetite remains weak.

Yet encouragingly the company continues to grow revenues at a rapid pace. And its technology-led approach is proving popular with major estate agency chains.

OnTheMarket is moving away from simply providing property listings. It’s designing technologies that provide a one-stop-shop for estate agents and housebuilders, its platforms also providing data and information management and marketing functions.

This provides considerable potential for earnings. And pleasingly the company has a strong balance sheet to help it develop its suite of tech products. It had cash of £10.4m on its books at the end of 2022.

Rainbow Rare Earths

Profits at commodities businesses like Rainbow Rare Earths (LSE:RBW) are very vulnerable during economic downturns. As consumers and businesses feel the pinch, the amount they spend on products loaded with metals can be impacted.

But this wouldn’t deter me from investing in certain mining stocks given that we’re likely on the cusp of a new ‘commodities supercycle.’ Demand for rare earth minerals (such as neodymium and praseodymium) is tipped to grow strongly too as the manufacturing of electric vehicles and renewable energy projects both heat up.

Rainbow Rare Earths owns the Phalaborwa mining project in South Africa and Gakara asset in Burundi. Both of these are significant sources of such minor metals. They also have other benefits like close proximity to good infrastructure and low cost bases when production begins. The profits potential here is colossal.

Mine development is a risky business and setbacks can place huge strain on the balance sheet. But Rainbow is well capitalised following a recent $7.52m share placing that will fund Phalaborwa through to early 2024. This provides an added layer of protection to investors and makes the stock worthy of serious attention, I feel.

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.

Royston Wild 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

Young black man looking at phone while on the London Overground
Value Shares

After a 16% drop, FTSE 100 stock JD Sports Fashion looks like a steal to me

This FTSE 100 stock has tanked since mid-September. Edward Sheldon believes that there's value on offer after the share price…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Is now the time to buy BP shares? Here’s what the charts say

The best time to buy shares in a company is when they’re trading at a discount. But the future is…

Read more »

Investing Articles

Here’s how I’d use £50K to aim for a million when the stock market crashes

Seeing a stock market crash as a buying opportunity could prove lucrative for a well-prepared, long-term investor. Christopher Ruane explains…

Read more »

Stack of one pound coins falling over
Investing Articles

It’s up 27% with a P/E of 9! I’m considering the potential of this blossoming penny stock

Despite several years of losses, this UK penny stock has an impressive valuation. I’m looking to see if it could…

Read more »

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »