3 penny stocks to buy today

Despite their size, these penny stocks could be great ways to invest in the UK economic recovery over the next few years.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investing in penny stocks has long been a favourite strategy for investors chasing large profits. 

However, this is probably unsuitable for all investors. Penny stocks can be incredibly volatile. These small businesses may also lack the resources available to larger organisations. 

Still, as a way to capitalise on the UK economic recovery over the next few years, I think buying these equities may yield results. 

Penny stocks to buy 

The first company I’d buy is Fulham Shore (LSE: FUL). This business owns the Real Greek and Franco Manca restaurant brands. 

Like most hospitality businesses, the pandemic has slammed Fulham’s top line. Sales are running at about 46% of normal levels. 

Nevertheless, Fulham is gearing up for the reopening. It has three new restaurants in the works to add to the existing portfolio of 72 properties.  When the economy reopens, I think the company could benefit from increased demand from hospitality-seeking consumers. That’s why I’d buy the stock as a recovery play today. 

That’s not to say the organisation is without risks. Hospitality businesses face many challenges such as high labour costs, rising ingredient costs and the possibility of yet more lockdowns. All of these could derail Fulham’s recovery. Still, I think it’s one of the best penny stocks to buy. 

Diversified investments

Mercia Asset Management (LSE: MERC) is an excellent way to invest in a basket of UK start-up businesses. The group manages around £872m of assets for clients around the world. It invests these funds in both early-stage and established UK companies.

In the six months to the end of September, the group invested £10.9m in 14 portfolio businesses. Mercia also divested The Native Antigen Company for £4.8m, realising a gain of £1.7m.

As penny stocks go, I think this organisation has many advantages. It’s a way for investors to own a diverse basket of UK companies at the click of a button. 

Of course, there are lots of risks with the strategy. Investing in early-stage businesses is incredibly risky, and Mercia is a also relatively small firm. If it struggles to achieve good returns for investors, they could pull their funds, damaging its reputation. Looking past these risks, I’d buy this stock for my portfolio today as a way to play the UK economic recovery.

Spending growth

As the economy recovers, I expect consumer spending to rebound as well. I’ve been looking for penny stocks that might benefit from this theme.

As a retailer of cars, bikes and commercial vehicles, Vertu Motors (LSE: VTU) fits this theme. I think the business should benefit if consumer confidence improves and vehicle sales increase. And if vehicle sales don’t increase, the company’s service revenues should provide a stable income stream. 

City analysts believe Vertu can earn 5p per share in 2021, putting the stock on a forward P/E of 7.4. However, these these are just estimates. There’s no guarantee the company will hit these projections.

Vertu faces a multitude of risks that could hold back growth. The economic recovery may not turn out to be as strong as expected. This could hit sales growth. New tech upstarts may also grab market share, which would dent profit potential in the medium to long term. 

Despite these challenges, I’d buy Vertu as part of a diversified basket of penny stocks today. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Vertu Motors. 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.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »