What are the best penny stocks for UK traders and investors to watch?
Want to know more about penny stocks? Find our top penny stocks here and learn how to take a position on them in the UK through trading or investing.
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What is a penny stock?
A penny stock is a unit of common stock that trades with a low share price: below £1 in the UK and below $5 in the US. They’re also referred to as penny shares. The companies will also have a lower market cap: under £100 million in the UK and under $300 million in the US.
These stocks are regarded as a more speculative investment because they’re geared for growth, with many penny companies yet to generate noteworthy income.
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Best UK penny stocks to watch
These are not necessarily the best performing penny stocks, with several having seen their share prices decline over the past year. This list shouldn’t be construed as financial advice.
Many of these penny stocks have been hit by the wider market downturn since the start of 2022. However, while their share prices may have fallen in recent months, this is not necessarily a reflection of their true value.
However, with interest rates rising, it is true that growth is becoming more expensive, increasing the risk of investing in many penny stocks. Those on this list could well see further falls.
1. Ondo InsurTech (LON: ONDO)
Ondo InsurTech has developed the ‘LeakBot,’ a patented tech designed to dramatically reduce water damage, which should in turn significantly decrease insurance premiums and payouts.
It’s signed a go-to-market channel partnership to accelerate LeakBot deployment in North America with $3.25 billion WNS, as well as deals with leading companies in Denmark, Sweden, and New Zealand.
Most recently, ONDO signed an affiliate partnership agreement with Waterwise, giving it much wider UK exposure.
2. Shoe Zone (LON: SHOE)
Shoe Zone shares are up 29% over the past year to 239p. The budget-friendly penny share saw significant growth by dint of its value offering during the pandemic. To date, it’s sold nearly 17 million pairs of shoes at an average of just £12 per pair.
In May’s interim results, the company saw revenue rise by 7.9% to £75.4 million, and it held a net cash position of £12.9 million. In a more recent mini-update, SHOE informed investors that it saw 'particularly strong' demand in May and early June, supported by healthy orders for summer goods — while also seeing margins improve as container shipping costs fall.
It now expects to earn at least £10.5million in adjusted pre-tax profits for the 12 months ending 2 October.
3. Power Metal Resources (LON: POW)
Power Metal Resources is a multi-commodity project generator operating across the United States, Australia, and Africa. The company recently completed a placing to raise £2.7 million cornerstoned by Term Oil, a company controlled by Rick Rule.
The business seeks to acquire undervalued opportunities, and then add value through exploration and development. It then either vends out the asset to IPO, sells the asset, or enters a Joint Venture partnership.
As part of its diverse asset base, POW owns a sizeable portfolio of uranium properties in the Athabasca Basin in Canada, alongside a majority shareholding in Golden Metal Resources and a further shareholding in First Class Metals.
4. Harland and Wolff (LON: HARL)
Lat year, Harland & Wolff was awarded ‘preferred bidder’ status as part of a team effort for a £1.6 billion shipbuilding defence contract. With the contract now set in stone, PM Sunak has publicly visited the company on-site in Northern Ireland, and 2023 could be HARL's transformational year.
The company is also developing gas storage at Islandmagee which has shot up the political agenda - and it expects the ongoing judicial review concerning the project to end in its favour.
On the other hand, HARL shares have fallen sharply due to its cash and debt position. The company is currently in negotiations with lenders including UK Export Finance over long-term debt restructuring and further funding.
5. Savannah Resources (LON: SAV)
Savannah Resources is the 100% owner of the Barroso Lithium Project in Northern Portugal, widely considered to be Western Europe’s most significant spodumene lithium project.
Savannah’s updated scooping study results show ‘outstanding economics,’ including post-tax NPV of $953 million, IRR of 77% and a payback of just 1.3 years. It predicts life of mine revenue to be $4.2 billion, alongside EBITDA of $2.8 billion.
The project is scheduled to come online in mid-2026, but an initial $236 million of capex will need to be found. However, this may not be a problem as it recently completed a £6.5 million placing at almost no discount.
6. Abingdon Health (LON: ABDX)
Abingdon Health is becoming a popular penny share after launching its patented Salistick pregnancy test in partnership with Salignostics last quarter. The test is the first to use saliva rather than urine and there could be strong growth potential; 12.5 million pregnancy tests are used in the UK every year, while the global pregnancy test kits market is expected to reach $2.28 billion by 2028.
The company is selling the test directly and also through 400 Superdrug sites in addition to Superdrug.com. In a July trading update, Abingdon noted that FY23 revenue is expected to be 42% high year-over-year at circa £4 million.
7. Poolbeg Pharma (LON: POLB)
Poolbeg Pharma is working towards its first partnering transaction for flagship POLB001 after a recent successful human challenge study. It’s also developing two more promising treatments — POLB0002 for respiratory infections, and POLB003 for melioidosis.
Encouragingly, the company recently appointed Brendan Buckley as an Independent Non-Executive Director. Buckley has been an advisor since its founding and was a member of the Board of Directors of the Irish Medicines Board, chairing its Advisory Committee for Human Medicines.
8. Baron Oil (LON: BOIL)
Baron Oil owns two sizeable hydrocarbon assets, both of which are up for sale to the highest bidder. The first is UK-based Dunrobin which could see interest from UK-invested oil majors, though the windfall tax environment is making closing a favourable deal more complicated than it may have been only a couple of years ago.
The second is Chuditch, a promising East-Timor based field with a large recoverable resource confirmed by a Competent Person's Report. The field, having been independently analysed to verify prior internal results, will need significant infrastructure investment to get the gas out of the ground.
However, multiple oil majors are considering developing adjacent projects, so a buyout of the asset may be coming.
9. Blencowe Resources (LON: BRES)
Blencowe Resources' Orom-Cross project in Uganda is widely regarded as a potentially world-class graphite deposit. The company has sent multiple samples to China which have confirmed high quality potential product — and has passed a key project screening test set by the US International Development Finance Corporation to gain funding assistance to bring the project to production.
This would include DFC funding for 50% of its proposed Definitive Feasibility Study costs, but the company still needs to find a Joint Venture partner given that it estimates it will need £62 million to build a production plant.
10. OptiBiotix (LON: OPTI)
OptiBiotix operates in the progressive domain of biotechnological research, with a focus on the modulation of the human microbiome.
The company’s R&D approach leverages pharma-grade platforms specially targeted at the food and dietary supplement markets. Its extensive portfolio includes 65 patents across 17 families, 8 strain deposits, and more than 28 trademarks.
The current flagship is SweetBiotix — a patented sugar substitute which is classed as a dietary fibre and attached to several health benefits. The company signed a significant manufacturing agreement with a US partner in September 2020, guaranteeing annual milestones and royalties on sales with blue chip companies including Kellogg’s, Nestle, and Coca Cola.
How to trade or invest in penny stocks
With us, you can get exposure to penny stocks via trading or investing. See the differences below, and find out how to get started,
|Trading penny stocks||Investing in penny stocks|
|Speculate on the price of penny stocks rising or falling||Buy and sell underlying penny stocks|
|Leverage your exposure – you’ll only pay a 20-25% deposit to get exposure to the full position size2||Pay the full value of the shares you buy upfront|
|Leverage means both profit and loss will still be magnified to value of the full trade – so you could gain or lose money faster than you’d expect||You may get back less than you put in because the value of shares can rise or fall|
|Trade tax-free with spread bets and offset losses with CFDs3||Invest tax-free with a stocks and shares ISA3|
|Take shorter-term positions||Focus on longer-term growth|
|You can look to hedge your portfolio when trading||Build a diversified portfolio|
|Trade without owning the underlying asset||Take ownership of the underlying asset|
|No shareholder privileges||Gain voting rights and dividends (if paid)|
|Trade via both a spread betting account and CFD account||Invest via a share dealing account|
Note that leverage will amplify both your profits and your losses, and you could lose more than your deposit. Manage your risk carefully.
Risks and rewards of penny stocks
- 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 is not 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
- News coverage and analysis of penny stocks is harder to come by compared to gaining insight into larger, more popular stocks
- Penny stock companies are more likely to raise equity from investors on an ongoing basis, as it gives the business a way of securing vital funds for growth if traditional lenders refuse to provide it
- When trading on penny stocks with us using spread bets or CFDs (but not with share dealing), you’ll do so using leverage. Leveraged trading comes with a high risk, as both profits and losses will be amplified. Always take steps to mitigate your trading risk.
1 As at 5 October 2022
2 Trade in your share dealing account three or more times in the previous month to qualify for our best commission rates. Please note published rates are valid up to £25,000 notional value. See our full list of share dealing charges and fees.
3 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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