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2 ‘nearly’ penny stocks I’d buy for my Stocks and Shares ISA

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I love a good bargain. So I like to scan the market for the best penny stocks to buy at every opportunity.

Low-cost UK shares like these can be prone to bouts of extreme price volatility. But as a long-term investor this doesn’t put me off. The cream usually rises to the top, as they say. And by doing some decent research I can identify great stocks that should rise in value in the years ahead.

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Here are two top ‘nearly’ penny stocks I’d buy for my Stocks and Shares ISA. They trade just above the penny stock limit of £1.

Block party

As an owner of Ibstock shares I think Brickability Group (LSE: BRCK) could be a great former penny stock to buy right now. As the name suggests this UK share generates profits by making bricks, though it also manufactures roofing, heating and plumbing products.

So, like Ibstock, I think it’s in great shape to make investors lots of money as the housebuilding sector booms. The housing ministry is aiming for 300,000 new homes to be created by the middle of the decade.

I also like this operator because of its aggressive approach to M&A. The business has snapped up timber and cladding specialist Taylor Maxwell and roofing expert Leadcraft in the last few months. And it recently embarked on fresh fundraising to keep its acquisition-led growth strategy moving.

A word of warning, though. At current prices Brickability trades on a high forward price-to-earnings (P/E) ratio of 23 times. This sort of valuation could cause the share price to plummet if trading begins to slow. A worsening economic landscape and rising interest rates could, for instance, damage housebuilding in the UK and consequently demand for Brickability’s building products.

Another ‘nearly’ penny stock on my ISA shopping list

Calnex Solutions (LSE: CLX) is another low-cost UK share I’d buy despite its premium rating. At 28 times, in fact, this stock’s P/E ratio sits even higher than that of Brickability’s. Still, I think the company’s improving position in a fast-growing market merits such a chunky premium.

Calnex makes specialised testing and measuring technology that allow telecoms companies to gauge the speed and reliability of their networks. It therefore has a huge opportunity for growth as these businesses invest heavily in areas like high-speed broadband and 5G. I’m also encouraged by the work Calnex has undertaken to enhance and develop its product ranges. Speaking of which, its new Paragon-neo platform is already attracting promising levels of pre-orders as the cloud computing and 5G spheres take off.

Profits at Calnex could take a hit if the global semiconductor crunch persists. Still, on a long-term basis I think the tech business still provides plenty to get excited about. I’d buy both this and Brickability in my Stocks and Shares ISA today.

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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.

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