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3 dirt-cheap penny stocks to buy in an ISA

I’m looking for the best penny stocks to buy for my Stocks and Shares ISA. The near-term outlook for global stock markets is uncertain as the economic rebound cools. But as someone who invests with a long-term view, the possibility of some share market turbulence occurring in the immediate future hasn’t put me off.

Here are two cheap UK shares that have caught my attention.

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The fashionable penny stock

There’s a lot I like about N Brown Group (LSE: BWNG) as a retail share. This clothing stock — whose offerings sees it concentrate on fashion and other products for larger-sized and older customers — sells its products at lower price points than some of its competition. This gives it the same sort of growth potential as Associated British Foods’ Primark, a business which is growing rapidly as modern shoppers demand more and more bang for their buck.

Clearly N Brown’s niches give it an edge in an incredibly-competitive retail sector. And they give the penny stock exposure to two fast-growing segments of the market too. But that will count for little if current supply chain problems persist. Office for National Statistics figures show that 11.1% of clothing retailers were unable to obtain goods to sell in August.

Still, N Brown trades at 52.5p per share. That means it carries a rock-bottom forward price-to-earnings (P/E) ratio of 7 times, well inside the bargain benchmark of 10 times and below. I think this is great value considering the retailer’s long-term outlook.

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A cheap UK mining share on my radar

I think Serabi Gold (LSE: SRB) is another stock to buy today. This isn’t just because production is soaring right now (its output between April and June came in at its highest since 2019). Nor is it because the UK mining share continues to release excellent exploration results for its Brazilian assets. It’s because I think precious metal prices could be on the cusp of soaring again.

Inflationary pressures continue to grow not just in Britain but across the globe. It’s the result of frantic money printing by central banks and intense supply chain problems. And it bodes well for gold, a safe-haven asset that rises as the value of paper currencies erode. However, rising prices aren’t the only phenomenon I think could send precious metals prices soaring. Fresh geopolitical tension between China and the West, and a slowdown in the economic recovery as Covid-19 cases rise, are other reasons why gold demand could rocket.

There’s no guarantee that Serabi Gold will be in a position to capitalise on a positive price environment, of course. The nature of pulling metal out of the ground is extremely complex and production stoppages are common. However, I’d argue that these threats are reflected by Serabi Gold’s low share price. The penny stock trades at 64.5p currently. This leaves it dealing on a forward P/E multiple of just 6 times.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. 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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