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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 in the future! Lately, I requested the chatbot to call me penny shares to purchase.
Let’s see what it spat out…
Houston, we’ve got confusion
ChatGPT Plus is snug rattling off blue-chip shares like Rolls-Royce and Nvidia to think about. My concept is that it simply goes by the biggest listed firms whose share costs have been performing strongly and names them.
However it appeared to have an issue arising 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 worth beneath £1.
The primary was Foresight Group Holdings, an funding supervisor with a £433m market cap and £3.75 share worth. 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 instances actually could be exhausting.
The bot’s second choose 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 worth is even larger (£4.45).
The AI assistant had a little bit of an amusing meltdown once I pointed this out, lastly stating that my set process “could be difficult, as these parameters usually lead to a restricted choice“. In fact, that is nonsense, because the UK market accommodates a great deal of penny shares.
Lastly, a inventory
Anyway, with a little bit of cajoling with the prompts, I lastly bought 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 commercial chains, gearboxes, and associated energy transmission merchandise. In line with ChatGPT, the agency’s “world presence, modern product choices, and strategic acquisitions place it effectively to capitalise on tendencies 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 worth goal of 88p, suggesting potential good points of 75% from its present 50p. Properly-spotted, although I’d add that worth 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 threat right here.
ChatGPT ends with: “Traders in search of publicity to a resilient UK industrial agency with progress potential could discover Renold a sexy consideration.”
I’d second that. Actually, I wrote in July that Renold was a “small-cap inventory is price contemplating” as its “revenue margins are increasing“. Earnings per share are anticipated to rise round 39% subsequent 12 months.
I agree with the bot. I believe Renold is a really low-cost small cap price contemplating and have put it on my watchlist.
