Penny shares: still the best kept secret in finance

Thanks to the focus on 'the economy' and 'the market', and the efforts of fund managers to gather all our money together into big funds, direct investment in penny shares is still the best kept secret in finance, says Tom Bulford. Here, he explains why.

If you hold shares in Arm Holdings (ARM) you might be feeling pretty pleased with yourself. ARM has been the best performing share in the FTSE 100 share index in 2010, rising 74%. If you hold Aggreko (AGK) you can give yourself a pat on the back. It ranks second, gaining 41% this year. Coming in third isLloyds Bank (LLOY), weighing in with a 33% gain. Not bad.

But here in the penny share market we laugh at such measly gains. We are shooting for much better. The best performing shares on AIM in 2010 are Blinkx (BLNX), Rockhopper (RKH),Encore Oil (EO.), and Petromatad (MATD). Shares of these companies have gained respectively 543%, 514%, 454% and 424%! The list of penny shares that have doubled in price this year is long and varied. ARM's 74% performance would hardly appear on page one.

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Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund. Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.