Having exposure to developing markets is an important part of building a quality, well-rounded shares portfolio. This is because GDP growth rates in some parts of the world have the potential to supercharge profits at many UK-listed shares.
One emerging market hero I’m considering buying in October is Russian retailer and penny stock X5 Retail Group (LSE: FIVE). A giant in Russia’s grocery sector, its brands include Perekrestok, the country’s biggest supermarket chain, and it has considerable exposure to the fast-growing convenience and online channels.
Revenues at the company jumped 10.7% between April and June. Particularly pleasing was news that e-commerce sales continued to soar. X5 is investing heavily in its digital operations, a drive that could pay off big time as Russia’s online retail industry is tipped for explosive growth.
I also like X5 because it operates in a more defensive area of the broader retail sector. This should leave it better protected than non-essential retailers if economic conditions deteriorate.
Though competition is intense and threatens future revenues, I think this penny stock’s a great share to buy as personal income levels in Russia rise. And particularly as we move into October.
At current share prices, X5 trades on a rock-bottom forward price-to-earnings growth (PEG) ratio of 0.3.
A penny stock for the green revolution
The Tharisa (LSE: THS) share price has declined sharply in recent weeks. And yesterday, it closed inside penny stock territory (97p) for the first time in 2021. I think this provides an attractive buying opportunity for long-term investors like me.
Mining giant Tharisa has slumped in value along with the prices of the platinum group metals (PGMs) it produces. Why? Well these elements are used in vast quantities to produce catalytic converters in cars and trucks.
Investors have sold out as the likely impact of semiconductor shortages on auto production — and consequently on demand for PGMs — could hit Tharisa’s profits hard.
It’s unclear at this stage how long these chip supply problems will persist for. But I still believe the earnings outlook for Tharisa remains very exciting.
The climate crisis means lawmakers are demanding higher quantities of PGMs be used in exhaust systems to better reduce emissions. Pollution regulations are set to tighten significantly in China in 2023, the world’s number-one car market. Fresh action by legislators in other parts of the world could be coming too as environmental concerns steadily grow.
Following that recent price decline, Tharisa’s share price offers great value, on paper. Today, the PGM producer trades on a forward price-to-earnings (P/E) ratio of just 4 times.
It’s a reading that more than reflects the threat of prolonged weakness in car production rates, as well as the complex nature of mining for metals which can damage earnings growth. So this is another penny stock I’d happily buy this October.
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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.