Pennystock junkies are spoilt for choice nowadays. If you don't believe me, check the accompanying shares page and count how many shares are trading under 50c.
Unlike a few years ago when the handful of companies trading under 50c were deemed basket-cases, some of today's "cheapies" present extraordinary value. Of course, there's still a lot of low priced scrip that fit stockbroker David Sylvester's oft aired "tin pot, piddly-widdly" description.
Admittedly penny stocks are not cheap relatively speaking. A R100 share can in fact be fundamentally cheaper than a 10c stock, depending on the amount a company earns and the number of shares in issue. But the beauty of penny stocks is that the small punter can buy volume.
While the investor holding 1 000 SA Breweries shares will probably not lose much sleep over this investment, there is undoubtedly a thrill seeking element in holding the equivalent 120 000 shares in Unispin.
Of course every locker room has a story of some poor soul who lost fortunes on penny stock classics like New Company Investments (NCI) or Equikor. Then again how many lucky investors bought Winbel at 2c in the early 1990's or Usko at 35c in 1997?
It's difficult to advise penny stock players on how to pick winners, other than urge the precursory solvency level checks before committing hard earned cash on market gossip.
On a safety first basis I recommend Vestacor, the investment trust headed by Gerald Rubenstein. At current levels the share presents value, considering its not insubstantial stakes in Moresport, Fashion Africa and Micor Industries as well as R30 million cash. The trust recently unbundled Value Truck Rental and it probably won't be amiss to speculate that a hyperactive Rubenstein has other ventures in the pipeline.
The Beverages, Hotel and Leisure sector offers some interesting options with investors able to choose from Cultel (can their niched brand defy current room occupancy trends?) and Stocks Hotels and Resorts (which boasted a net asset value of R1,74 a share in the year to end April). Gamblers can also bet on whether Errol Grolman (ex Investec) can turnaround The Don Group, the self catering apartment group.
Awethu Breweries could also be worth topping up on, especially since its not treading on SAB's toes and has diversified into food and franchising. Savanah Wines, a prolific exporter, could add some long term cheer despite a recent profit warning.
Unispin recently used as an option vehicle for Steinhoff's listing is worth watching as long as Claas Daun, the mercurial German investor, remains onboard. The same goes for Rainbow, under Rembrandt's wing. Engineering firms Scharig/Schamin probably don't deserve such low ratings but there is apprehension ahead of a restructuring with with parent company, Scharrighuisen Holdings.