Key points
- Penny stocks can provide excellent growth in the long term
- Argo Blockchain is vastly increasing revenues and profits
- Tullow Oil has improved free cash flow and is focused on exciting expansion in West Africa
Penny stocks can be great investment choices. Generally defined as stocks with a share price below £1, they can potentially provide excellent long-term growth. I have £1,000 to invest and I think I’ve found two interesting penny stocks. Why do I think these penny stocks warrant investment? Let’s take a closer look.
A crypto-mining penny stock
Argo Blockchain (LSE: ARB) is a company that mines cryptocurrencies, mainly Bitcoin. While it is UK-based, it operates facilities in Quebec and Texas. The site in Texas is employing greater renewable energy for its mining operation. Furthermore, investors displayed the confidence they have in the company by raising £49.2m in early 2021 to fund this new and greener facility.
This penny stock is also becoming ever more profitable. Recording a £4.12m loss for the 2018 calendar year, this quickly turned into a £10.7m profit before tax for the first six months of 2021. Revenue also increased 180% between the first six months of 2020 and the same period in 2021. For me, this is a strong indication that things are going in the right direction.
An important metric to gauge progress is the number of Bitcoin mined per month. The January 2022 figure is slightly lower than the previous month, falling from 214 to 176. This is explained, however, by “an increase in network difficulty”. This appears to be a short-term issue and should subside soon. With a recent upturn in the Bitcoin price, I think this penny stock is a very exciting opportunity indeed.
Another exciting penny stock
With the oil price recently breaking the $90 barrier, I also like the look of Tullow Oil (LSE: TLW). Trading at just over 50p, the share price has fallen 75% since the beginning of the Covid-19 pandemic in March 2020. Only last month, in a trading statement for the three months to 31 December 2021, Tullow Oil stated that its free cash flow (FCF) was ahead of guidance at $250m. In spite of this, revenue for the 2020 calendar year was about $300m less than the same period in 2019. Nonetheless, net debt has fallen to $2.1bn in 2021, compared with $2.4bn the previous year.
This all means the company can focus on expansion. It is increasing its stakes in two oil fields in the West African country of Ghana. This compelled Barclays to lift its target price on Tullow Oil to 75p from 60p, citing “updated valuations and estimates” and “a realignment of relative upside”. Together with this penny stock’s improved financial position and its exploration prospects, I think Tullow Oil is quite the bargain.
I firmly believe that my £1,000 would be well invested between these two penny stocks. They are both exciting prospects and have further growth potential. What is also heartening to see is that both companies are expanding their operations, with Argo Blockchain moving into renewable crypto mining and Tullow Oil entering into new oil fields. I will be splitting the £1,000 equally between these two penny stocks now!
Andrew Woods 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.
The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
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