I have been looking for penny stocks to add to my portfolio that may profit from the global economic recovery. Here are two stocks trading for less than £1 that I’d buy today, based on my research.
Recovery penny stocks
The first is engineering group Renold (LSE: RNO). I should point out this company has a market capitalisation of just £52m, making it a tiny business that might be unsuitable for some investors. However, I am entirely comfortable investing in small enterprises, which is why I’m considering buying.
The industrial supplier of chains and other power transmission products suffered a decline in demand for its goods last year. For the financial year ending 31 March, revenues and operating profits were £165.3m and £11.2m respectively. That compares to revenues of £187.6m and operating profits of £13.1m for the financial year ending 31 March 2020.
While these new figures are disappointing, the company is already seeing a recovery in demand. CEO Robert Purcell believes the group will return to growth in its current financial year, based on current order book volumes.
This growth potential is the reason why I’d buy Renold for my portfolio of penny stocks.
That said, while I believe the group has plenty of potential, I am also aware it operates in a fiercely competitive sector. Lower-cost international competitors could undercut the group, which could harm its recovery. This is something I’ll keep an eye on as we advance.
Booming market
The second company I’d buy for my portfolio of penny stocks isn’t a traditional recovery investment. Airtel Africa (LSE: AAF) provides mobile telecommunication services across its continent, and the firm is currently benefiting from a surge in demand for mobile data.
The pandemic has changed how many people live and work with the world now relying on technology more than ever before. I think this could drive outperformance in the tech sector for years to come and increase the demand for services such as fibre broadband and mobile data.
This is why I’d buy Airtel. Even though the company has a market capitalisation of £3bn, it’s still technically a penny stock.
The company’s earnings are expected to grow 11% this year and 23% in 2023. These numbers imply the group has the growth potential of a small business, but its market capitalisation suggests it has all the experience of a blue-chip stock.
Despite its potential, Airtel will undoubtedly face challenges in the future. Providing telecommunications services can be costly as it could require billions to maintain equipment. The sector is also competitive, with providers constantly undercutting each other. These are the main risks and challenges the group faces right now.
Still, I’d buy the company for my portfolio of penny stocks considering its growth potential and 4.3% dividend yield.
