Many UK share investors don’t like to get involved with penny stocks. This means that those who are prepared to take the plunge could dig out some undervalued gems.
Even the best penny stocks to buy can be prone to extreme share price volatility though. But as someone who invests for the long term, the prospect of some choppiness doesn’t put me off. Like any other UK share, I’m confident that with the right research I can find low-cost stocks that should rise in value over a longer time horizon.
Here are two such penny stocks I’m thinking of buying in September.
AfriTin Mining (LSE: ATM) is a share that’s not without its degree of risk. The process of digging for raw materials is a costly and complex endeavour and problems can be common that can significantly hit the bottom line. What’s more, the company trades on a price-to-earnings (P/E) ratio of around 19 times. This sort of valuation could prompt a share price correction if confidence in the company starts to wane.
That said, this is a penny stock I’m paying very close attention to. AfriTin’s share price has risen 160% over the past 12 months, carried higher by an electrifying rise in tin prices. The soldering metal recently hit record highs of around $36,600 per tonne. And I think it could keep going as Covid-19-related supply issues drag on and demand from the consumer electronics sector rises strongly.
I also like AfriTin’s plans to add lithium and tantalum to its product suite. Lithium uptake looks set to soar thanks to its critical role in powering electric vehicles, a market set for explosive growth. And tantalum demand should rise as global smartphone production steadily rises.
Another thriving penny stock
Glenveagh Properties (LSE: GLV) is another penny stock I’m thinking of buying today. The Irish housing market is suffering from the same supply crunch as here in the UK, a dynamic I’ve sought to play by buying FTSE 100 stocks Barratt Developments and Taylor Wimpey.
Latest financials from Glenveagh have illustrated the great investment potential across the Irish Sea. All 1,150 properties it plans to build in 2021 have been sold, the builder said, and a further 300 that are scheduled for next year too. Unsurprisingly, Glenveagh is ramping up production to make the most of this environment and it expects to build 3,000 homes a year by 2024.
Home price growth continues to pick up steam and latest data showed the average property value jumped 6.9% year-on-year in June. A major shake-up in housebuilding policy is needed to soothe the supply and demand imbalance and stop prices from continuing to rocket. But signs of progress on this front are not yet forthcoming, meaning that profits at the likes of Glenveagh remain on course to continue booming for some time yet. A word of warning, though: this penny stock is still highly cyclical and so a severe economic downturn could hit demand for its product hard.
Royston Wild owns shares of Barratt Developments and Taylor Wimpey. 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.