Best UK penny stocks to watch for traders

What is a penny stock?

Penny stocks or penny shares are common stock that trade with a share price below £1 in the UK and below $5 in the US. The companies will also have a market cap below £100 million in the UK, and below $300 million in the US. As they are small, low-valued businesses, they can offer higher risk and reward to traders.

Penny stocks are regarded as a more speculative investment than larger businesses because they are geared for growth, with many yet to generate any income or develop a viable product or service.

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Best UK penny stocks to watch in 2022

The below list includes 8 penny stocks to watch in 2022 and is based on their year-to-date (YTD) share price increase at the time of writing.

Eco (Atlantic) Oil & Gas

An oil and gas mining company, Eco (Atlantic) focuses on the discovery and exploration of petroleum resources around the globe, in particular off the coasts on Guyana in South America and Namibia in Africa.

Eco Atlantic’s share price has appreciated by almost 70% in 2022 so far, as well as climbing over 30% in the last full calendar year.

This is unsurprising, as the company has been busy in the year thus far. In February, Eco Atlantic announced that it would be purchasing peer Azinam Group’s entire portfolio in Africa, including its numerous interests in South Africa and Namibia. This will not only increase the company’s footprint in Africa substantially, it’ll also strengthen its partnership with Africa Oil Corp, according to Eco Atlantic.3

Off the back of this, the miner is planning drilling operations in South Africa’s Orange Basin sometime during 2022.

The company also announced an increased stake in South America in January, when it announced that it had purchased shares that effectively increased its footprint in the ExxonMobil-operated Canje block offshore of Guyana.

Amur Minerals

Amur Minerals Corporation (AMC) is a Russian mineral exploration company, headquartered in the British Virgin Islands and listed on the LSE AIM All-Share Index. It deals in copper and sulphide nickel extraction. The majority of its business is based at its Kun-Manie project in Amur Oblast in the Russian Far East.

However, that looks set to change. The company announced in January 2022 that it could be selling subsidiary Irosta Trading in the future – which owns Kun-Manie – for near £100 million. Upon releasing the news, AMC’s share price soared more than 86% to trade at 3.87p.

This keeps with a general upward trend for the company. AMC has seen shares up by almost 87% in 2022 so far (in other words, in the year to date, or YTD) but it has also seen a share price increase of 96% in the past full year’s trading.

Amur Minerals is one of the smaller mineral mining companies, with a market cap of just over £44 million. Nevertheless, the stock could do well in 2022, with copper having made enormous gains in the past few months, reaching a price of over $10,000 per ton in October, with many experts tipping copper (and other metals and minerals) to have a successful 2022 as well.

GCM Resources

GCM Resources is a mining company listed on the Alternative Investment Market (AIM) of the London Stock Exchange (LSE). Formerly known as Asia Energy until it changed its name in 2003, the company mines coal in Bangladesh.

GCM Resources had a sunny start to the 2022 year, with its share price climbing 21% on 5 January, for no known reason. Share prices then rose again by more than 26% on 31 January when the company announced that it was hosting discussions around securing funding to cover its working-capital needs.

Since the year started, GCM’s share price has risen almost 90% to trade at just under 8p – impressive for a company with a market cap of just £7 million.

However, 2021 was not as kind to GCM. In December, the company announced earnings in which the company made a loss of £1.9 million, up from its £1.5 million the year before. Still, with many feeling bullish about coal prices in general for 2022, and with GCM Resource’s 2019 memorandum of understanding with China Nonferrous Metal Industry's Foreign Engineering and Construction Company (NFC) and Power Construction Corporation of China (PowerChina) extended, this could be a good year for the company.

Wildcat Petroleum

A bit of a dark horse on this list is Wildcat Petroleum – a small petrol company with a market cap under £3 million that has been making great gains, fuelled by the global oil and gas market’s outlook currently.

Wildcat Petroleum’s share price has risen by more than 27% in the YTD alone, and by more than 220% in the past year.

In 2021, its share price rose by 440% in March alone to trade at 4.4p. Then, in April 2021, shares climbed 10% again after the company announced it’s working on a proprietary and innovative model with Crown Energy to monetise hydrocarbon blocks based on Blockchain Technology. The stock price climbed another 24% again on 30 December 2021 as well, when Wildcat announced that it had appointed Pello Capital as its broker.

Similarly to gold prices, petroleum companies are likely to benefit from the headwinds 2022 promises. Oil and gas prices have been escalating steadily in recent months and show no signs of slowing down.

This is almost guaranteed to benefit smaller petroleum companies alongside their bigger counterparts. While titans of the industry like Royal Dutch Shell may be out of the reach of some investors, penny stocks like Wildcat Petroleum aren’t.

Bluerock Diamonds

Blue Rock Diamonds is an AIM-listed miner, which is headquartered in London and owns and operates the Kareevlei Diamond Mine in South Africa.

With just a £5.4 million market cap, Blue Rock Diamonds is one of the smaller stocks of its type. Nevertheless, it’s been one of the more dramatic penny stock gainers of 2022 so far. On 17 January, it released positive final FY21 results, announcing that revenues had increased by almost 70% in Q4. As a result, its share price rose by 47% – making it the best performer of the entire AIM index for the day.

Much of this was from a bumper mining year for the company, who unearthed two high value stones in the 2021 year, including its largest diamond ever - weighing over 50 carats – and another of 6.8 carats, which was sold for a glittering $63,186 in January 2022.
Overall, its YTD share price returns to shareholders have topped more than 30% in January alone.

2022 has started off on a less bright note, with the miner reporting that an unusually wet summer season in South Africa has caused Q1 production expectations to underwhelm slightly, as well as the news that Bluerock was forced to pause operations at Kareevlei temporarily in November after a perceived safety breach.

However, given that diamond prices are still trading on a high in 2022 so far, the company looks set to safely expect another brilliant year on the whole.

Galantas Gold Corporation

AIM-listed Galantas Gold is a Canadian miner which was formerly European Gold Resources Inc until 2004. It produces gold, silver ore and lead. Its chief interests are in its gold mine based in Omagh, Ireland.

Galantas has had a positive past few months. In December, the miner reported positive drilling results from its ongoing Omagh Project, which saw shares rise almost 5% to 22p on 14 December. Then, it announced a $1.06 million loan for the Omagh Project from Ocean partners in January. It also recently released a mining plan for its newest project – the Cavanacaw gold mine in Co Tyrone, Ireland.

Galantas’ share price is up nearly 30% in 2022 so far, with a one-year share price rise of over 110%.

But what may make Galantas a great penny stock for 2022 isn’t its recent achievements – it’s simply that the company deals in gold.

With a market cap of about £48 million, Galantas is not in the same league as some of the better known South African miners – still, a rising tide tends to lift all boats. One of the chief headwinds of 2022 promises to be rising inflation rates and interest rate hikes – which traditionally has been good for gold prices. Gold is often seen as a hedge against inflation, which could well boost Galantas’ lustre in coming months.

t42 IoT Tracking Solutions

One of the stranger names on this list is t42 IoT Tracking Solutions, previously Starcom Systems. Originally a security solutions company, its specialty is now the monitoring of freight, using its technology to enable real-time tracking of shipping containers. Based in Jersey, in the Channel Islands of the UK, the company operates around the world and is listed on the FTSE AIM index.

Started in 2004, the company has had smooth sailing in 2022 so far. On 4 January, the company’s shares surged by more than 70%, closing at 27.5p, after it announced the signing of a five-year contract with OpenBox Ventures, effectively meaning that t42’s technology will be used for the first time in the USA. The company said at the time that it expects to earn roughly $21 million from the deal in the first three years alone.

Then, towards the end of January, the company also announced that it had won a second lucrative contract – this time with logistics and shipping titan DHL, to track the company’s shipments worldwide.

The company’s share price has risen by more than 200% in the past year, with its YTD return to shareholders having increased by more than 45% to date.

Ebiquity

Ebiquity is an independent marketing and media consultancy. It has 18 offices internationally and operates in 14 high-value advertising markets, including London, Paris, New York, Madrid, Singapore, Shanghai and Sydney.

The company aims at minimising wasteful media expenditure and maximising the effectiveness of investment by looking to data and analytics when consulting with clients.

It reports that it has the most comprehensive view of the global media market as it analyses $55 billion in media spend from 75 markets, and that its compliance division, FirmDecisions, audits $40 billion of contract value annually.

Founded in 1997, Ebiquity was admitted to the London Stock Exchange AIM in 2000. It’s also been one of the FTSE AIM All-Share’s leaders in recent weeks. For example, its share price was up almost 8% on 31 January alone to 62p.

Its YTD return so far has been more than 18%, with its return in the past year up by almost 190%.

On 31 January, Equity reported its latest results, including revenues up by 12% and an expected profit for the year of at least £4.8 million. This duly boosted the company’s share price by more than 4% to 60p on the day.

With advertising spend continuing to improve as the world reopens to business as usual after the pandemic, Ebiquity could definitely benefit.

How to trade penny stocks

1. Create an account or log in and go to our platform
2. Search for your opportunity
3. Select 'buy' to go long, or 'sell' to go short
4. Set your position size and take steps to manage your risk
5. Open and monitor your position

When you trade penny stocks, you do so with CFDs. You won’t own the stock, but you can use leverage to open a position while putting up just a percentage of the capital.

It’s important to bear in mind, however, that leverage will amplify both your profits and your losses, and that you could lose more than your deposit. You should never risk more than you can afford to lose, and always take steps to manage your risk.

You’ll also be able to go short on penny stocks – profiting if the share price falls, but your risk is unlimited in this case.

What are the risks and rewards associated with penny stocks?

A number of well-known companies started off as penny stocks. Those that invested in companies such as Ford Motor Co or JD Sports Fashion in the early stages have been well rewarded; however, it’s important to stress that many penny stocks ultimately fail and that investing can be highly unpredictable.

The share prices of penny stocks can be volatile, either as a result of lower liquidity or because they are sensitive to news and market developments. Penny stocks can turn into a huge success or an utter failure overnight: winning or losing one contract or the level of success of a new product, for example, can decide their future. Many penny stocks have no track record and it isn’t uncommon for them to have no assets, operations or revenue.

Products and service offerings are often still in development and yet to be tested in the actual market. This could range from a small pharma stock developing a new drug to a junior miner digging for gold in foreign destinations, both of which are highly risky endeavours but ones that can be ad if they are successful.

News coverage and analysis of penny stocks is harder to come by compared to gaining insight into larger, more popular stocks, and issues of corruption and fraud tend to be more prominent, although even the largest stocks are exposed to these matters too.

Read more about Singapore's penny stock crash of 2013

It’s also worth noting that penny stocks are more likely to raise equity from investors on an ongoing basis as it gives them a way of securing vital funds for growth if traditional lenders refuse to provide debt, or if any available debt is too pricey. Each fundraising dilutes the shareholding of existing investors and devalues the price per share.

Footnotes

¹ As measured from 3 January 2022 to market opening 1 February 2022
² Awarded ‘best finance app’ and ‘best multi-platform provider’ at the ADVFN International Financial Awards 2020

Sources

³ Offshore Engineer, 2022