Keywords: Penny Shares, Powerleague Group (Ticker: PWR), Patron Sports, Michelmersh Brick (ticker: MBH), Public Service Properties (ticker: PSPI), Anglesey Mining (ticker: AYM), Labrador Iron Mines Holdings.
Dear Reader,
Caza jumps nearly 50% after striking oil
- Shares in Caza Oil & Gas (ticker CAZA) shot up 36% today after it struck lucky with its oil exploration in New Mexico. This penny share is up 500% from its February low of 2.25p.
- AIM-listed Caza, which owns a 12.5% interest in the well, is working to establish the flow rate of the oil before extraction starts.
Gulf Keystone’s star keeps on rising
- Gulf Keystone (ticker: GKP) announced yet another oil discovery in the Kurdistan region of northern Iraq. Anticipating the news, shares rallied almost 20% yesterday.
- The shares traded as high as 110p today, marking an 877% increase since early August.
- Red Hot Penny Shares readers banked triple-digit gains in Gulf Keystone. To join them in my next top penny share pick, click here.
Littner hits the back of the net – and penny share investors cheer all the way to the bank!
That was the big story at the end of last week as Claude Littner, former chief executive of Tottenham Hotspur and confederate of Sir Alan Sugar, announced a 52p per share takeover bid for Powerleague Group (ticker: PWR).
Mr Littner is chairman of Powerleague, which has grown into one of the leading operators of six-a-side football facilities in the UK. Nearly four years ago, he was kind enough to show me round one of Powerleague’s soccer venues in Watford.
I liked what I saw, tipped the shares in my Red Hot Penny Shares newsletter – and 18 months later my readers cashed in a 66% profit.
That proved to be an excellent move because as the recession set in, the share price slumped. Powerleague became one of the many small company shares to really dwindle in the bear market.
This year the share price has been recovering. But it was the bid from the American leisure operator Patron Sports that revealed that the City was still missing the value of the business.
Here’s proof that there’s money to be made in penny shares
Patron Sport’s bid came in at a 30% premium to the prevailing share price. Now I would not describe this bid as world-shaking, but it showed that the US company had recognised Powerleague’s upsurge – particularly in establishing itself in an industry leader in staging ‘small-sided football’ games.
Small-sided football is any football game played with seven players or fewer per team. Think ‘five-a-side’, but by a more logical, inclusive name.
It has the endorsement of the Football Association in the UK and other football governing bodies around the world. And it’s capitalising dramatically on changes in work and leisure patterns and a move towards ‘pay and play’ football. This sport has not merely held up in the recession – its popularity is ballooning.
Even if you don’t give a hoot about football, whether there are seven players on a team or 11, this deal has also proved something that does concern you. It shows, once again, that the place for great value and quick gains is down among the small companies and the penny shares.
So who should you be backing this week?
The AIM market of small companies may have risen nearly 70% from its March low, but there is still plenty of value to be found. Here are three examples that would brighten up your portfolio …
Three “extreme value” small caps to look at
Michelmersh Brick (ticker: MBH) is the country’s leading maker of handmade bricks. It makes bricks for architects who want their buildings to have a unique look. Michelmersh has a net asset value per share of 75p. It also has a lot of building land near Telford which Persimmon is due to start building homes on next year. Shares in this asset-rich business trade at just 32p.
Public Service Properties (ticker: PSPI). I am not a big fan of UK property stocks, but that does not mean there aren’t good areas to invest in. One of these is care homes. Demand for old-age care is high and keeps on rising. The government pays the bills, so long as those running the homes do the basics effectively, this should be a sound business.
Public Service Properties does not operate homes, but owns them instead. Even after the rally that followed last week’s interim results the share price is unignorably low, at 83p. This is still well below the 153p net asset value and the shares yield a lusty 8%.
The third stock catching my eye is Anglesey Mining (ticker: AYM). Anglesey’s main asset is a 50% interest in Labrador Iron Mines Holdings. Labrador is a Toronto-listed company with an opencast iron ore mine in Canada. It is due to start production there early next year.
According to analysts at Edison Research, Anglesey’s stake in Labrador is worth 9.4p per Anglesey share. This is only a shade below its 10.25p share price. This means that Anglesey’s ownership of the Parys Mountain zinc-copper-lead deposit in North Wales is virtually in the price for nothing.
Assuming that production goes ahead as planned, Edison estimates that Labrador will have earnings of over C$44m for the year ending March 31 2012. Anglesey’s share of this would deliver earnings per share of 7.7p. So the shares trade at under two times earnings – in other words, the company will only take two years to earn enough to cover the share price.
This may sound too good to be true, but this is how it is. These are all instances of extreme value. If these numbers applied to big companies you can bet that City investors would be swarming all over them.
Sooner or later this value is going to be reflected in higher share prices. And for private investors like you and I who have the nous to take advantage, this can only mean profit.
Good investing,
Tom Bulford
For The Penny Sleuth
P.S. If you're not receiving Red Hot Penny Shares, feel free to join us for an obligation-free trial. I’d be delighted to share my latest ideas. One of my most recent penny share picks raced up in the last couple of weeks. In fact, it went above my buy limit. But it’s slowly coming back down and that could give you a great chance to get in. Here’s a bit about it...
On the verge of cornering an £11bn industry, this ingenious hygiene firm is trading for just a few pennies. Not only could this innovation save many of lives every single year… it could bank you a spectacular 154% profit within a year! This share is very close to my buy limit. Discover the share here... and then buy it as soon as it hits my recommended price.
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