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AI bot ChatGPT has grown like wildfire since being unleashed into the digital wilderness in late 2022. Even Eire’s newly appointed minister for AI oversight reckons she’ll get spherical to utilizing it someday! Just lately, I requested the chatbot to call me penny shares to purchase.
Let’s see what it spat out…
Houston, we’ve confusion
ChatGPT Plus is snug rattling off blue-chip shares like Rolls-Royce and Nvidia to contemplate. My concept is that it simply goes by the most important listed corporations whose share costs have been performing strongly and names them.
But it surely appeared to have an issue developing with UK penny shares. Two it named weren’t even penny shares in any respect, primarily based on the widely-used definition of a market cap beneath £100m and share value under £1.
The primary was Foresight Group Holdings, an funding supervisor with a £433m market cap and £3.75 share value. Furthermore, this agency is a member of the mid-cap FTSE 250 index!
Granted, the London Inventory Trade is combating delistings and attracting new IPOs. But when the FTSE 250 needed to begin together with sub-£100m market cap penny shares to make up the numbers, then occasions actually could be onerous.
The bot’s second decide was much less off-mark, because it went with Safe Belief Financial institution. Nevertheless, whereas the market cap is £84m, this financial institution’s share value is even increased (£4.45).
The AI assistant had a little bit of an amusing meltdown once I pointed this out, lastly stating that my set job “will be difficult, as these parameters usually lead to a restricted choice“. After all, that is nonsense, because the UK market incorporates a great deal of penny shares.
Lastly, a inventory
Anyway, with a little bit of cajoling with the prompts, I lastly obtained it to call me one a bit nearer to what I used to be asking for. It went with Renold (LSE: RNO).
Now, the market cap right here is above the technical threshold at £114m, however I didn’t wish to quibble any extra.
Renold is a producer of business chains, gearboxes, and associated energy transmission merchandise. In accordance with ChatGPT, the agency’s “international presence, revolutionary product choices, and strategic acquisitions place it nicely to capitalise on traits resembling onshoring, re-industrialisation, automation, and defence“. Sounds good to me.
Renold inventory is up 247% in 5 years, but nonetheless trades very cheaply. The ahead price-to-earnings a number of for FY26 (beginning in April) is simply 5.7.
It additionally factors out that analysts have set a median 12-month value goal of 88p, suggesting potential good points of 75% from its present 50p. Properly-spotted, although I’d add that value targets usually don’t come to a lot.
One factor it fails to say is that the corporate has fairly a little bit of debt on the steadiness sheet (round £42m web debt). So this provides a little bit of danger right here.
ChatGPT ends with: “Traders looking for publicity to a resilient UK industrial agency with development potential might discover Renold a horny consideration.”
I’d second that. In actual fact, I wrote in July that Renold was a “small-cap inventory is value contemplating” as its “revenue margins are increasing“. Earnings per share are anticipated to rise round 39% subsequent yr.
I agree with the bot. I believe Renold is a really low-cost small cap value contemplating and have put it on my watchlist.
