The fight against climate change provides plenty of profits opportunity for penny stock Jubilee Metals Group (LSE: JLP). This UK share is a major supplier of platinum group metals (PGMs), essential elements in the reduction of pollution levels in catalytic converters. Approximately 40% of all platinum is used in the manufacture of car exhaust systems.
I expect demand for Jubilee’s product to rise strongly over the next decade. Firstly, more cars on the road — predominantly in response to rising population and wealth levels in emerging markets — means more catalytic converters will be needed.
Secondly, the amount of PGM content needed in each auto system could continue to climb as legislators try to combat global warming. China’s Stage 6 strict emissions brought in this year could soon draw a response from European and US lawmakers.
I also like Jubilee Metals because production from its South African assets is soaring right now. Total PGM output leapt 23% between January and June from the same 2020 period, to 50,162 ounces.
The process of hauling metal from the ground can be extremely problematic, resulting in lost revenues and unexpected costs. But it’s my opinion that the rewards of owning Jubilee Metals could well offset these potential problems.
A cheap penny stock on my radar
UK retail share Theworks.co.uk (LSE: WRKS) is a penny stock with the wind in its sails. Rocketing demand for its shares following last week’s latest financials means it’s now trading at its most expensive since mid-August. The Works has now gained 115% in value over the past 12 months.
Let’s look at those financials first of all. In better-than-expected trading, The Works said like-for-like sales in the six months to October were 14.5% higher than they were in the same period in 2019. It also said online sales were double the level recorded two years previously.
There’s a lot I like about The Works. I like its decision to scale back store openings in favour of investing in its internet proposition. I like its focus on the value-end of the books, games and crafts market, one which should serve it well in an environment where consumers demand more and more bang for their buck.
I’m also encouraged by the rate at which physical games are selling following the Covid-19 outbreak. The global board games and playing cards market is tipped to grow at an annualised rate of almost 9% through to the middle of the decade.
Today, The Works trades on a forward price-to-earnings (P/E) ratio of just 7.3 times. It’s true that the retailer faces higher freight costs because of a shortage of shipping and road capacity. This also throws up the spectre of stock shortages that could hit earnings hard. Still, it’s my opinion that these risks are more than baked into the penny stock’s rock-bottom valuation.
Like Jubilee Metals, I’d happily buy The Works for my own shares portfolio right now.
