These 3 penny stocks might become long-term leaders!

These 3 penny stocks might become long-term leaders!

Stocks are traditionally classified as “penny stocks” if their share price is below $1 and their total market capitalization is below £100 million.

For investors willing to assume significant risk, penny stocks may provide a significant potential gain. The majority, though, frequently lose popularity as rapidly as they gain it.

So, which penny stocks could become household brands for long-term buy-and-hold investors? Here are the opinions of some of our contributors!

1. CleanTech Lithium

An AIM-listed lithium exploration company called CleanTech Lithium is the owner of three important properties in Chile.

The industrial uses of metal in electric vehicle batteries provide a compelling case that lithium will be the essential resource of the twenty-first century. The company CleanTech Lithium (LSE: CTL) is in a good position to gain from rising demand.

In order to assure that its production is carbon-neutral, the business wants to deploy Direct Lithium Extraction technology, which uses an absorbent to separate lithium from a brine solution.

However, the business confronts significant risks. It is initially in the pre-revenue stage. Concerns have also been raised by President Boric’s recent declaration that the government will need to work with private enterprises to develop Chile’s lithium reserves.

Aldo Boitano, CEO of CleanTech Lithium, has reassured investors that the company is still in “very positive discussions” with state authorities.

Overall, the company appears to have a promising future given its strong ESG credentials and the lack of rival projects in its prime locations.

2. Epwin Group

The Epwin Group distributes building supplies like conservatories, energy-efficient windows, and doors.

Building goods made by Epwin Group (LSE: EPWN) are low-maintenance and energy-efficient. The stock is trading far below its 2021 peak, which is not surprising given the downward pressure on the housing industry. Market capitalization at the time of writing was little around £100 million.

So, what makes this company so exciting? Due to medium- and long-term factors, such as a lack of affordable housing, worries about the quality of the existing housing stock, and initiatives to increase the energy efficiency of British homes, its energy-efficient goods are still in high demand.

In a trading update in May, Epwin stated that revenue was running 3% higher than the previous year and that 2022 was a record revenue year. This is a remarkable accomplishment and a testimonial to the power of its offering in the tumultuous housing market of 2023.

Of course, even rising interest rates are a bad headwind, but they should subside in 2023. Despite this, all indications point to a promising future.

3. Kodal Minerals

Kodal Minerals is a miner with a concentration of lithium, with a strong emphasis on West Africa. 

 Kodal Minerals (LSE: KOD) shareholders will be overjoyed by the stock’s 150%+ increase in 2023. And we believe it might be headed toward establishing itself as a future stalwart. 

With a focus on lithium mining, the company is situated in a market that is anticipated to have rapid growth in the next years. Electric cars and cell phones both need lithium as a crucial component. As a result, it is expected that between now and 2030, the worldwide lithium market would expand at a compound annual growth rate of nearly 15%. 

The company also owns the Bougouni mine in Mali, which has a maximum annual production capacity of 220,000 tonnes of spodumene, a mineral rich in lithium. The Bougouni project’s potential is further shown by China’s Hainan Mining’s recent $100 million investment in it. This is supported by a recent encouraging drilling update in which Kodal mentioned potential “additional prospects” for Bougouni. 

Geopolitical conflicts pose the largest threat to Kodal. The market is tightly controlled by China, therefore the West might turn away from lithium. On the other hand, we believe Kodal has the potential to become a stalwart in the long run.

Also read: How to buy Shares- Complete Guide

Are penny stocks profitable?

Penny stocks can be profitable. On the other hand, you can theoretically profit from any stock. Successful investors typically concentrate on the potential for their chosen stocks to increase in value over the long term, independent of price.

There are many justifications for investing in small businesses. Investors who purchase stock in rapidly expanding businesses while they are still tiny stand to gain far more from share price increases than those who wait until the businesses have become market giants.

But penny stocks are nearly never the deals they seem to be. There is a clear reason why their shares are inexpensive. At best, penny stock companies are unproven, small, and have questionable long-term success prospects; at worst, penny stock companies are tools used by swindlers to take advantage of unwary investors.

Investors in penny stocks frequently mistakenly believe that a low share price means a company has more potential to expand than companies with larger share prices. In actuality, the stock price and the total number of outstanding shares constitute a company’s market capitalization, often known as its valuation.

Because the corporation solely controls the number of shares issued, the second component is essential. A million shares that are still outstanding at $100 each are worth precisely the same as a hundred million shares that are still outstanding at $1 each. But compared to a company with a $1 share price, a company with a $100 share price most likely has considerably greater growth potential.

Regulatory authorities are quite clear when describing the risks associated with penny stocks because they are aware of how alluring they are to many investors. Although technically conceivable with any stock investment, penny stocks are much more likely to experience a complete loss of value.

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