UK share markets are back on the front foot as optimism surrounding the Covid-19 battle improves. Investor appetite for ‘reopening’ penny stocks — those companies which stand to gain most from the rolling back of coronavirus restrictions — is particularly strong.
I have my eye on a number of penny stocks I think could soar in value as the world recovers from the pandemic. Here are three of these low-cost reopening stocks I’m thinking of adding to my Stocks and Shares ISA.
#1: Looking good
The easing of Covid-19 lockdowns will lead to an avalanche of people seeking to get out and about. It’s a theme that will play into the hands of penny stock Lookers. It can look forward to sales of its new and used cars leaping as its showrooms reopen. And, of course, revenues from its servicing and repairs business should surge too as people start hitting the road again in large numbers. Be warned though, the company still has a considerable amount of debt on its books (estimated at £45m as of December). This could pose a big problem if a fresh coronavirus wave forces Lookers to shut its doors again.
#2: A penny stock preparing for lift off
Airline shares like Ryanair are perhaps not for the faint of heart. The emergence of Covid-19 variants and a slow vaccine rollout means that a third wave of infections is spreading across the low-cost carrier’s European heartlands. Indeed, the business increased its loss forecasts for this fiscal year on the back of the escalating crisis. Even when Ryanair’s planes take to the skies in huge numbers again, the impact of rising oil prices on its cost base will take a huge bite of profitability too.
But as a long-term UK share investor I’d still buy this penny stock for my portfolio today. The firm has a big cash pile (€3.2bn as of March) to help it ride out a prolonged mass-grounding of its fleet. And what’s more, the outlook for the budget travel market remains exceptionally bright for the next few years, at least. Even despite last year’s hiccup, the experts at Allied Market Research expect the low-cost airline segment to grow at a compound annual growth rate of 8.6% between 2017 and 2023.
#3: The sports star
Glanbia is another reopening stock I’m thinking of adding to my ISA today. Mass gym closures significantly damaged demand for this penny stock’s high-margin sports nutrition products in 2020. Therefore, it stands to reason that takings should rebound considerably in the near future as fitness facilities steadily reopen. The protein supplements market is expected to expand significantly over the next few years as demand from people who aren’t athletes or bodybuilders grows. But remember that competition among manufacturers of these expensive consumer products is intense. And promotional activity here tends to be high, casting an extra cloud over Glanbia’s top line.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Glanbia. 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.