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While the recent interest rate hikes have made savings accounts more attractive. But while they’re is a risk-free home for my money, I believe there are far better opportunities among certain penny stocks.
There’s no denying that these tiny enterprises carry a lot of investment risk, especially compared to the safety of a savings account. However, every so often, some promising firms emerge. And two stocks I’ve covered before continue to look like exciting candidates for impressive long-term growth.
The penny stocks powering 5G
With so much economic turmoil plaguing the financial markets lately, the excitement surrounding 5G technology seems to have died down. And artificial intelligence (AI) is now the current flavour of the month.
However, the next-generation telecommunications network has been quietly expanding in the background. And today, over 60% of the British population has access to 5G. There are obviously a lot of players behind the rapid expansion of coverage. But Solid State (LSE:SOLI) and MTI Wireless Edge (LSE:MWE) are two companies operating from the shadows.
Solid State is a designer and manufacturer of specialist electronic equipment catering to many industries. However, among its diverse product portfolio resides cellular routers and antennas that serve as critical components of 5G infrastructure.
MTI Wireless is a similar enterprise specialising in radio frequency antennas targeted to the 5G backhaul market. Its automatic beam steering technology allows antennas to adjust for mast movements that distort 5G signals caused by changes in wind speed and temperature – solving an industry-wide problem.
Progress vs share price
Since I last covered these penny stocks in November, neither firm has delivered particularly spectacular returns. But that doesn’t mean the underlying businesses have been idle.
Looking at the latest results, Solid State has been busy securing new contracts, including a £9.8m deal with NATO to supply telecommunications equipment. Meanwhile, MTI Wireless has seen its top line slow, due to macroeconomic headwinds, but profits are up by double digits as management improves profit margins.
Both companies continue to see significant growth in their respective order books, providing a clearer insight into the near future. And given the increasing reliance on 5G technology from consumers, companies and governments, this trend seems likely to continue in the long run.
Of course, there are risks. Both penny stocks have, and continue to endure, supply chain disruptions. While these may only be temporary, it gives the upper hand to larger competitors with more connections to alternative suppliers. Given the fierce level of rivalry in this space, prolonged delays will likely result in customers looking elsewhere.
Having said that, with these penny stocks trading at lower prices today and the potential long-term demand for 5G solutions, this is a risk that could be worth taking, in my opinion. That’s why the next time I’m looking to add penny stocks to my portfolio for some extra growth, these are at the top of my list.
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