I think buying penny stocks can be a great way to gain exposure to some of the fastest growing small companies in the market.

However, this strategy can also be precarious. It is certainly not suitable for all investors. That’s why I only have a modest allocation to penny stocks in my portfolio.

And recently I looked for more small cap stocks to buy for my portfolio. Here are two stocks that I would buy with a relatively small investment of £ 2,000.

Penny stocks to buy

Tribal (LSE: TRB) provides software and services to the international education market. The company had a mixed 2020 year.

During the first six months of its financial year, overall sales fell by almost 4%, at constant exchange rates. But recurring revenue increased 3.3%.

It was a positive development. The company is transforming into a pure software as a service (SaaS) business. As such, management aims for recurring revenue growth.

In addition, the group is also focusing on building its product offering. It recently acquired Semestry Limited, which adds cloud-based scheduling and scheduling capability to its Tribal Edge ecosystem software. This will provide opportunities for upselling products and expanding into new markets.

It seems to me that Tribal is in full swing. However, the group is likely to face some challenges as we progress. It is still a relatively small business. As such, like many penny stocks, it is likely to face significant competition in the future.

Additionally, small businesses may also find it difficult to raise capital to finance their expansion.

Despite these risks and challenges, I would buy the stock for my portfolio today.

Reverse takeover

I would also buy Insig AI (LSE: INSG) for my penny stocks portfolio today. It is a leading AI and machine learning company serving the asset management industry. It recently entered the market following the reverse takeover of Catena Group.

The company offers a suite of tools designed to help asset managers streamline and modernize their processes. These include a portfolio management tool and a “develop and execute a data-driven ESG investment strategy.

The business is still in its early stages, so it’s a risky proposition. It will publish more information on its strategy and growth in the coming quarters.

Nonetheless, I think this company deserves to be added to my penny stock portfolio for its potential. The demand for technology, especially in the financial sector, is booming. And there are only a few companies in the market that offer investors exposure to this theme.

Yet, as noted above, Insig has yet to prove itself. Information available on the company and its prospects is limited.

Therefore, this investment may not be suitable for everyone due to the risks involved. Buyers may not be interested in the company’s products.

The post 2 penny stocks to buy with £ 2,000 appeared first on The Motley Fool UK.

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Rupert Hargreaves has no actions mentioned. The Motley Fool UK has no position in any of the stocks mentioned. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.

Motley Fool United Kingdom 2021

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