3 small-cap penny shares to buy today

I reckon now could be one of the best times to buy penny shares ever, especially small-cap ones. I’ve added these three to my list of potential buys.

| 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.

British pound coins in birds' nest

Image source: Getty Images

Buying small-cap penny shares can be risky. But I see so many stocks that I think are undervalued in the aftermath of last year’s crash, that I’m convinced I’d be missing some opportunities if I ignored them. So here are three small-cap shares priced at under a pound that I have on my potential buy list.

Transport companies were hit hard by the pandemic, and that includes Stagecoach (LSE: SGC). Stagecoach shares are down 32% over two years. But the price has more than doubled since the market comeback started in November. In April, the price broke above the 100p level, but it’s since retreated to today’s 86p.

I don’t want to downplay the risk. Stagecoach carries a lot of debt, though it has slimmed down its operations. And the stock was out of favour with investors even before Covid-19. I also think this penny share could be in for a bit more volatility in the next year or two.

But as the country opens up further, I can see business improving and the share price strengthening. Initiatives to promote public transport, to help with the climate crisis, can’t do any harm either. I don’t see Stagecoach as a quick-profit investment, but I am looking at it with a five-year horizon.

Back to penny share status

I also have my eye on Card Factory (LSE: CARD), down 66% over two years. And though the price did start to pick up early in 2021, it’s turned south again since the beginning of May. The stock almost reached 100p, before falling firmly back down to penny share status at the current 59p.

It’s been another Covid-19 crash story, with Card Factory’s shops having to close during lockdown and sales suffering as a result. But I think we could be seeing an opening-up possibility here, as we head towards zero pandemic restrictions. There is plenty of competition, especially online, though the company is expanding its Internet channels. And we still don’t know how high street retail will recover, so there’s risk there too.

Card Factory is another company that managed to reduced its net debt during the year, by £35m. I would like to see debt coming down further. But I’m adding Card Factory to my list of potential penny share buys.

Another REIT

I already have a real estate investment trust (REIT) on my list of favourite penny shares. Today I’m adding another, NewRiver REIT (LSE: NRR). Now, I want to get the bad stuff out first. NRR’s latest full-year results were dreadful. The company reported a loss of £150.5m after tax. And a 13.6% like-for-like asset value decline contributed to a drop in portfolio valuation from £1.2bn to £974m. Still, some of that drop was down to disposals.

And things are starting to turn. Retail occupancy at the end of March nudged 96%, and rent collection is growing again. The liquidity situation looks fine to me too, with no refinancing needed until August 2023.

So, yes, commercial property is risky, even at the best of times. But I rate investment trusts as the best form of pooled investment, and a REIT as the way to benefit from any future upturn. I’m watching this sector closely.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Card Factory. 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.

More on Investing Articles

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 UK dividend stocks with yields over 10%

These dividend stocks are the highest yielders on the UK market, says Roland Head. But how safe are these generous…

Read more »

Couple relaxing on a beach in front of a sunset
Investing Articles

I’d start buying shares for passive income with this pair

Our writer is looking to earn passive income via investing, and here are two leading stocks he might buy.

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

Here’s the Shell dividend forecast through to 2024

The Shell dividend is still nearly 50% below 2019 levels. Will the oil giant use record profits to rebuild its…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

3 FTSE 100 stocks I think Warren Buffett might love!

Warren Buffett made his fortune thanks to the success of US shares. But here are three FTSE 100 stocks I…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

Down 75%, has the Deliveroo share price bottomed?

The last 12 months have been torrid for the Deliveroo share price. But does this open an opportunity to grab…

Read more »

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

Is now FINALLY the time to buy Lloyds shares?

Lloyds shares have leapt in value as market confidence has improved. Should I buy the FTSE 100 bank before it…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

3 high-dividend FTSE 250 stocks to buy right now!

The London Stock Market is packed with top high-dividend stocks to buy. Here are a handful I'm considering buying, despite…

Read more »

Woman using laptop and working from home
Investing Articles

How I’m using my Stocks and Shares ISA to generate lifelong passive income

I’m looking to build a portfolio of assets that will pay me an income in my retirement. Here’s how I’m…

Read more »