The Woodbois Limited (LSE: WBI) share price is rising strongly. At 2.75p per share it’s currently 8% higher in Monday business.
Woodbois shares are charging right now. But as a potential investor I need to remember that volatility is common among penny stocks like this. Prices can fall as suddenly and as sharply as they rise.
So should I buy the timber titan today? Or does it carry too much risk?
The case for
The possibility of share price choppiness isn’t a dealbreaker when I buy shares. This is because I invest in companies with a view to holding them for the long term, perhaps a decade or more.
Over this sort of timeline, the impact of temporary volatility — whether caused by company, industry, or economic factors — on my returns can be greatly reduced or even eliminated.
As in other aspects of life, the cream rises to the top when it comes to investing. And I’m confident that the UK shares I buy will deliver big profits (and share price gains) over the long term.
In the case of Woodbois I’m quite confident of strong earnings growth as timber demand rapidly improves. In addition, its involvement in the carbon capture business adds an extra reason to be excited.
The case against
Having said that, long-term investors like me still need to be mindful of volatility when it comes to penny stocks.
I might buy Woodbois shares with a view to holding them for several years. I could even want to stay invested for the rest of my life.
However, I could find myself in a situation where I’m forced to sell them for reasons out of my control. Alternatively, I might find what I consider to be a better investment opportunity, and want to offload my penny stock holdings to get involved.
I could potentially hang onto them for the long term so I don’t make a loss. But I would lose the chance to latch onto that exciting investing opportunity.
I therefore could make a loss if I sell out in the short-to-medium term. There’s a chance I could end up selling them for a lot less than I bought them for.
The verdict
The question, of course, is whether Woodbois shares are worth me taking on this risk.
Like any investor, I don’t have a bottomless reserve of cash to draw upon. But with funds to invest I’d happily buy the timber producer today. This is because sales of its natural products looks set to soar.
Demand for timber is tipped to rocket as populations grow and global construction rates increase. Sales of wood-based products will also grow as builders shift towards more environmentally-friendly products.
Analysts think the global timber and wood product market will grow 35% between now and 2027 (to $844.3bn). And Woodbois, with its wood-producing assets in Gabon and Mozambique, could prove a lucrative investment on the back of this.
The post Should I invest in Woodbois as its share price soars? appeared first on The Motley Fool UK.
5 stocks for trying to build wealth after 50
Markets around the world are reeling from the current situation in Ukraine… and with so many great companies trading at what look to be ‘discount-bin“ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…
We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.
Claim your free copy now
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
3 reasons to buy Woodbois shares today
3 popular penny shares to buy in November?
With the Woodbois share price under 3p, would I be mad not to buy?
Woodbois shares are cheap. Should I buy them?
Where will the Woodbois share price go next?
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.