Large swathes of UK share investors don’t like to take the plunge with penny stocks. They are put off by their low cost, a characteristic that can sometimes cause massive share price volatility.
I think that this is a great shame. Sure, penny stocks can be subject to bouts of choppiness. But there are some truly great companies that reluctant share pickers are missing out on by avoiding all sub-£1 shares. In this article I’ll look at a penny stock I think could deliver mighty long-term returns for me. But first let me tell you about another white-hot UK share on my radar, Ocean Outdoor (LSE: OOUT).
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Making waves
Ocean Outdoor is a UK stock whose share price has already responded to signs of economic improvement on these shores. In fact, at almost $8 per share, the advertising expert’s share price has recovered almost all the ground it lost following the 2020 stock market crash. I think it can expect to record more meaty near-term gains as marketing budgets always rise strongly in the early stages of economic recoveries.
In its own words, Ocean Outdoor is “a facilitator of digital connectivity in the OOH [out of home] world.” What this means is that is the company allows companies to advertise their brands and products on its outside screens. This is a market analysts think will experience high growth in the years ahead given the proven effectiveness of moving images in attracting consumers’ attention versus static billboards. Research house Future Market Insights think this market will have expanded at a compound annual growth rate of 11% between 2018 and 2028.
But this UK share is highly dependent on its relationships with media agencies. So any deterioration on this front could result in a huge hit to revenues. Meanwhile, any trend shifts in the fast-moving tech world could change how advertisers try to reach their consumers. Demand for Ocean Outdoor’s screens might slump as a consequence. However, I’d still buy it.
A top penny stock
I think that penny stock Residential Secure Income (LSE: RESI) — which changes hands at 94p per share — would be another great addition to my Stocks and Shares ISA.
Residential Secure Income is a great play on the shortage of available rental properties in the UK. It collaborates with local authorities and housing associations to build smart new homes. It also operates in the fast-growing field of shared ownership. Another reason why I like this penny stock is because of its exposure to the retirement homes segment. I expect demand here to get steadily stronger as the country’s population ages.
There are some risks that investors like me need to bear in mind with this penny stock. Any changes to the housing market could significantly dent demand for shared ownership properties. Meanwhile, Residential Secure Income’s thirst for acquisitions creates additional risks as such activity can often fail to deliver the desired awards. That said, I still think the possible benefits for me here outweigh the risks.
