Many UK share investors remain reluctant to invest their cash in penny stocks. These cheap shares can be prone to bouts of massive price volatility due to their low liquidity. And their prices can fall off a cliff if negative news flow related to the company hits the airwaves.
I don’t have a problem buying penny stocks for my own shares portfolio, however. This is because I buy UK shares with the aim of owning them for a long period of time, say 10 years or more. So the possibility that prices could be choppy at times doesn’t put me off. I’m confident that the stocks I’ve chosen to buy will demonstrate the quality to rise in price over the next decade.
Here are what I think could be two of the best UK penny stocks to buy right now.
Companies that help develop and manufacture so-called ‘clean’ and meat-free foods could prove to be great investments as people change their diets on health and welfare grounds in huge numbers. This is where Agronomics (LSE: ANIC) comes in, an investment firm chaired by Innocent Foods co-founder Richard Reed. This penny stock’s investments include fake beef manufacturer Mosa Meat, synthetic cheese maker Formo, and Bond Pet Foods which makes meat-free foods for companion animals.
The field of ‘next gen’ foods is attracting huge investment from specialised businesses (like those of Agronomics) as well as from multinational food manufacturers. Even global meats giant Tyson Foods is splashing the cash to exploit the vegan revolution. So Agronomics is operating in an extremely competitive environment which means that success is not guaranteed.
That said, the stock has stakes in a number of cutting-edge firms whose industry-leading technologies could have a huge part to play in our dietary changes over the next few decades. Nielsen says that plant-based food sales rocketed 264% year-on-year in the nine weeks to 2 May, illustrating the huge potential of companies like this.
Another top penny stock
I think getting a slice of the electric vehicle (EV) market is another good idea for UK share investors like me. And I believe that investing in Savannah Resources (LSE: SAV) is a good way to play this theme.
Why? Well this penny stock owns the Mina do Barroso lithium project in Portugal. And so it’s in the box seat to exploit exploding demand for EV vehicles. The European Commission has set a target of having 30m EVs on the road by the end of the decade. That compares with fewer than 2m at the end of 2020.
A word of warning, though. Setbacks in the development of Mino do Barroso could have serious ramifications for Savannah Resources’s profits outlook and cost models, and critically for small-cap UK shares like this, its balance sheet. Still, the company’s share price has dropped sharply in recent months due to fears over car production rates on supply chain issues. And I think this makes the penny stock an attractive dip buy for long-term investors like me.
Royston Wild 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.