As the UK economy continues to reopen, I’ve been searching for stocks to add to my portfolio that may benefit from the recovery. I’ve been focusing on smaller businesses and penny stocks in particular. While these companies can be riskier than larger enterprises, they can also achieve faster rates of growth.
With that in mind, here are five penny stocks I would buy for my portfolio as the economy reopens.
Penny stocks to buy
The first two penny stocks I would buy are not necessarily UK recovery plays. Their performance will depend more on the global economic recovery.
These businesses are Harbour Energy and Tullow Oil. Both companies should benefit from rising oil prices as the global economy starts to recover.
I’ve picked these businesses over other companies in the sector because they both have unique qualities. For example, Harbour (previously called Premier Oil) is one of the most efficient North Sea oil producers. Meanwhile, Tullow has a strong track record of finding oil offshore in Africa.
That said, these companies may not be suitable for all investors because they have many risks. They both have a high level of debt and require a high oil price to be successful. If the oil price suddenly declines, they may struggle to meet their obligations.
Despite these risks, I would buy both stocks for my portfolio of recovery shares today.
Renewable energy
I would also buy Lamprell. This company is a bet on the green energy revolution.
Over the past few years, the company has positioned itself as one of the leading providers of fabrication services to the renewable energy industry. Organisations across the UK are committing to spend tens of billions of pounds over the next few years on renewable energy projects. This could be a boon for Lamprell.
Unfortunately, this sector is incredibly competitive. So, the company’s success is not guaranteed. It may also face higher costs that could impact profit margins.
In the property sector, I would buy penny stocks U and I and Empiric Student Property. Both of these enterprises have faced different headwinds over the past few months. However, as students return to universities, Empiric should experience a recovery. At the same time, increasing demand for new homes and property should benefit property regeneration specialist U and I.
In my opinion, these penny stocks could benefit from the UK economic recovery. However, if the recovery hits the rocks, property prices could fall, which would hurt both firms. Higher interest rates may also reduce profitability.
Buying penny stocks can be a risky way to invest. As such, the approach might not be suitable for all investors. Nevertheless, by acquiring a diversified basket of companies across different sectors and industries, such as those listed above, I believe I can reduce my risk when investing in these companies.
