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2 penny stocks to buy

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I’ve been looking for penny stocks to buy for my portfolio. I believe investing in these companies is quite risky, but there are also more opportunities.

So I try to reduce the risk of investing in these businesses, which tend to be smaller companies, by owning a diversified portfolio. Of course, diversification doesn’t eliminate risk, but it could reduce the impact of a big disaster on my portfolio.

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Penny stocks to buy

The first company I’d buy is Airtel Africa (LSE: AAF). I think two trends will dominate markets over the next five years or so. These are economic growth and tech disruption. 

Airtel, the owner and operator of mobile phone masts across Africa, could be a great way to invest in these trends. According to its full-year results for the fiscal year to the end of March, reported revenue grew by 14.2%. Meanwhile, reported operating profit increased 24.2%. In addition, the company’s overall customer base grew by 6.9% to 118.2m

Higher customer numbers helped the group’s top and bottom lines, but it also benefited from a significant increase in data revenue as its customers tapped into the digital economy. Data and mobile money revenue grew 24.3% and 29.1% respectively for the year. 

As the African economy grows and the world becomes more digitally connected, I think these trends will continue. That’s why I reckon this is one of the best penny stocks to buy right now. 

The key risks facing the business are competition and debt. It’s facing the former from several competitors across Africa. It also has a lot of the latter. This debt could hold back growth if interest rates suddenly increase and leave the group with a larger interest bill. 

Despite these risks and challenges I’d buy this company for my portfolio today.

Growth opportunity

Another company that features on my list of the best penny stocks to buy is Seeing Machines (LSE: SEE). This company specialises in computer vision technology that helps improve transport safety.

While it is still a relatively small business, Seeing Machines is growing rapidly. Underlying revenue growth using constant currencies was 19% year-on-year for the six months to the end of December. 

On top of this, the organisation expects its technology to be used in the production of 30 different car models over the next two calendar years. This suggests to me revenue could multiply in the years ahead. That’s why I think this is one of the best penny stocks to buy now. 

Despite this potential, the company is still losing money. It lost nearly A$17m in the six months to the end of December. That suggests an annualised loss of as much as A$34m. Moreover, the group had just $52m of cash at the end of the year, suggesting its funding is limited.

Despite this risk, I’d buy the stock from my portfolio, considering its growth potential over the next few years. 

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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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