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2 penny stocks to buy now and one to avoid

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I’ve recently been looking for new penny stocks to buy for my share portfolio. I’ve found two companies I’m interested in and one I’ve decided to avoid, following recent news.

Ready to lift off?

Global air travel is gradually recovering as the pandemic eases. Some areas are further ahead than others — according to jet engine maker Rolls-Royce, domestic flying and private jet activity are already back to 2019 levels. International flying is still well down.

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My pick for aviation exposure is chartering specialist Air Partner (LSE: AIR). This business provides a wide range of charter services to governments, companies, and individuals. It also provides aviation training and security.

Air Partner’s share price is still slightly below 2019 levels, but the outlook’s improving. And despite its small size, this business has a much longer and more consistent record of profitability than many airlines.

The main risk I can see is that growth hasn’t been consistent — I wonder if the business will struggle to get much bigger. Even so, this penny stock looks reasonably valued to me, on 13 times forecast earnings. With a useful 3% dividend yield, I’ve been buying the shares for my portfolio.

Profit from gold

My second pick is a company I’ve owned before and probably shouldn’t have sold. Capital (LSE: CAPD) is a mining services company. Formerly known as Capital Drilling, the group provides drilling and other services for some of the biggest gold miners in Africa.

The growth story here’s quite exciting, in my view. Historically, the company just provided drilling rigs for hire. But under chairman Jamie Boyton, who has a 12% shareholding, Capital is expanding to offer other services, such as earth moving. Effectively, the group appears to be moving towards becoming a contract mining company that can operate gold mines on behalf of their owners.

What could go wrong? Capital is having to invest significant amounts in new equipment to win bigger contracts. If the contracts don’t deliver the level of profitability that’s expected, then the group could find itself losing cash fast.

So far, progress seems good. Capital shares are broadly flat on a year ago, but profits are rising steadily. The shares look reasonably valued to me, on less than 10 times earnings. I’m tempted to buy back in.

A penny stock I’m avoiding

One business I’m avoiding today is consumer goods producer McBride (LSE: MCB). This company makes cleaning products, mostly own-branded items for customers such as supermarkets.

Last year saw strong demand, due to Covid-19, but even so the company’s profit margins came under pressure and underlying profits were flat. Things have since taken a turn for the worse. McBride has issued two profit warnings since May. The company says raw material and transport costs are rising, while passing price increases onto its customers is taking time.

These problems highlight a long-term risk with this business — big customers will always put pressure on pricing. McBride’s operating profit margin has always been low, peaking at 4.8% in 2016. Margins have fallen since then.

Despite those two profit warnings, McBride shares are actually up by 33% over the last year. But I don’t expect further gains until the outlook improves. For me, this is a stock that’s not worth the risk right now.

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Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

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In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Roland Head owns shares of Air Partner plc. 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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