2 cheap penny stocks I’d buy in my ISA for the new bull market

These two penny stocks cost next-to-nothing at current prices. Here’s why I’d buy them in my Stocks and Shares ISA right now.

| 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.

Here are two penny stocks I’m considering adding to my Stocks and Shares ISA. I’d buy as I think they could rocket in value during the new bull market.

Switching through the gears

The amount that people and businesses spend on buying cars tends to pick up strongly during the early stage of the economic cycle. I think demand for new motors might be stronger than usual this time around as people skip using public transport in larger numbers following the global pandemic.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

This all plays into the hands of car retailers like Pendragon (LSE: PDG). Indeed, latest figures from the Society of Motor Manufacturers and Traders shows that the industry is already showing signs of recovery. New motor sales in Britain soared 11.5% in March, it said, the first month of growth since late summer.

City analysts think Pendragon will bounce back into the black in 2021 with earnings of 1.8p per share. They think, too, that annual profits will soar 23% next year to 2.1p per share. But beware that a third wave of Covid-19 infections could hammer these forecasts as economic conditions would worsen again and Pendragon’s showrooms would close. Sure, improvements to the retailer’s e-retail model during the pandemic will help it continue to do business. But a better digital offering won’t be able to blunt the damage to a considerable degree.

Image of person checking their shares portfolio on mobile phone and computer

The Pendragon share price still looks cheap despite recent heady gains. Today this penny stock trades on a low forward price-to-earnings (P/E) ratio of 11 times. It carries a 4.5% dividend yield for 2021 too. All this makes this UK reopening share an attractive buy for my portfolio, in my opinion.

Another topp penny stock

Topps Tiles (LSE: TPT) is another penny stock whose profits I think are likely to soar during the new bull market. Like Pendragon, this UK share is in danger if extra Covid-19 lockdowns are forthcoming. But for now things are looking good for the building materials supplier.

In late March it said that it expects “a sharp increase in sales” and a margin recovery to “more normal” levels from this month. The business saw like-for-like retail sales soar almost 20% in the 13 weeks from October 1 as pandemic restrictions eased. Demand from both professional traders and homeowners remains strong, and this underpins City expectations that Topps Tiles’ annual earnings will soar 144% and 22% in the fiscal periods to September 2021 and 2022 respectively.

Consumer spending always perks up strongly during the early stages of economic recoveries. This should also drive sales at Topps Tiles in the short-to-medium term. That said, a shortage of qualified tilers could hamper demand for its products over the period. This is a problem that could persist too given the impact of Brexit on worker inflows from abroad.

Still, I think Topps Tiles’ low valuations makes it a great buy for me today. The penny stock trades on a forward price-to-earnings growth (PEG) ratio of 0.2. Any reading below 1 suggests that a UK share could be undervalued by the market.

More on Investing Articles

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

£10,000 invested in BT shares 10 years ago is now worth this much

It's painful to remember that BT shares reached over £10 at the peak of the dot com bubble in 1999.…

Read more »

Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Investing Articles

Is now the time to buy bank shares?

Our writer considers whether bank shares could be a bargain buy for his portfolio right now -- or a potential…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

After steep falls, are Royal Mail shares a steal?

Royal Mail shares have more than halved since peaking a year ago. After months of steep falls, this popular stock…

Read more »

Young Woman Drives Car With Dog in Back Seat
Investing Articles

Dirt-cheap, 1 of my best stocks to buy also pays an above-average dividend!

This Fool has decided to buy the shares on his best stocks to buy now list with the shares looking…

Read more »

Light bulb with growing tree.
Investing Articles

The AFC share price just tanked! Is now the time to buy?

The AFC share price fell nearly 10% on Wednesday after the H1 revenue announcement. So, should I add this stock…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

These shares have been growing dividends for decades. I’d buy!

Our writer considers the merits for his portfolio of buying two shares with a track record of growing dividends.

Read more »

Close-up of British bank notes
Investing Articles

Is the M&G dividend yield heading to 10%?

As the M&G dividend yield heads towards double digits, out writer explains why he is considering buying more of the…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

3 top dividend shares to buy now

With weakness in the markets, I reckon it's a good time to search for top dividend shares to buy now.

Read more »