Many UK share investors don’t like penny stocks. This is because such low-cost shares can be prone to extreme share price movements.
I’m not afraid to take the plunge, though. As a long-term investor, the prospect of some temporary share price volatility isn’t a dealbreaker for me. There are plenty of low-cost UK shares out there I’m confident can rise strongly in value in the years ahead. Here are two top-quality penny stocks I’m considering buying right now.
A dirt-cheap UK share
Residential Secure Income (LSE: RESI) offers the sort of all-around value I think is hard to ignore. The property play trades on a forward price-to-earnings (PEG) ratio of 0.7. A reminder that a reading below 1 suggests a stock could be undervalued. On top of this, it sports a mighty 5.2% dividend yield.
Demand for quality rental homes is rocketing in the UK. This is driving rents at Residential Secure Income higher and higher. The shared ownership sector is also soaring as buyers seek a quicker route to get on the property ladder, another area in which this property stock operates. Finally, Residential Secure Income also has exposure to the retirement property market. This is one I think could be set for strong and sustained growth as Britain’s elderly population is set to jump in the coming decades.
I believe the company is a particularly sage buy as the UK economic recovery runs out of steam, too. The residential property market is quite resilient during all sorts of crises, as seen in the Residential Secure Income’s 99% rent collection rate since the coronavirus outbreak. However, profits at the business could suffer if government policy surrounding housing policy changes. All things considered, I think this is a great stock to buy for my portfolio, especially at current prices below £1.
A penny stock for the esports revolution
The video games market is worth more than the sports and movie industries combined. And it’s tipped to keep growing at a breakneck pace amid changing consumer habits and ongoing technological improvements. I invested in software development specialist Keywords Studios to grab a slice of this action. And I’m thinking about buying esports company Gfinity (LSE: GFIN).
This penny stock operates websites like gfinityesports.com that provide the latest news and features on the esports industry. It also operates the UK’s sole dedicated esports arena in Central London, and helps organise and run gaming events. Last month it was appointed to create a launch campaign for Amazon’s massive New World online role-playing game launched in September.
The esports industry is forecasted for stunning growth this decade. Grand View Research think it’ll be worth $6.8bn by 2027, up significantly from $1.5bn last year. And Gfinity is clearly in good shape to capitalise on this mighty growth, at least in my opinion. I do have to bear in mind that earnings could take a hit if the Covid-19 crisis worsens and live events like esports tournaments are shut down again. But I still think it’s a top buy for my portfolio.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild owns shares of Keywords Studios. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Keywords Studios and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. 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.