2 penny stocks that could be great recovery plays for 2022 

These penny stocks were badly impacted by last year’s stock market crash. But as the recovery continues in 2022, these laggards could come out ahead, according to Manika Premsingh. 

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While many stocks have recovered from the pandemic quite significantly over the past year, some are still lagging. These include stocks that were the most impacted by lockdowns. Think of hospitality, travel, and financial services stocks. I reckon these could, however, recover fast in 2022 as uncertainty about economic conditions continues to ease. The penny stocks I talk about here are among these. 

Restaurant Group: signs of recovery

The first of these is the Restaurant Group (LSE: RTN), which owns restaurant brands like Wagamama and Joe’s Kitchen.The stock has seen some recovery over the past year, to be fair. When the stock market crash happened last year, it had fallen to a quarter of its present price of around 84p. 

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But the recovery has not been consistent. And this is evident from the fact that it is still a penny stock. Earlier this year, it had broken out of its pandemic blues to touch pre-pandemic levels. But this resurgence was short-lived. In the last couple of months it has fallen back into penny stock territory. 

It is not hard to see why. The company’s performance is still lagging, considering that the lockdowns in the UK finally eased only in the last quarter. And there was only so much that restaurants and pubs could do during the height of the pandemic to keep the cash coming in. I think this could change, though. In its recent trading update, the company spoke of outperformance compared to the market. It also increased its profit expectations. I think these are good signs that bode well for the stock. I would consider buying it now. 

Just Group: penny stock, but for how long?

Another penny stock I’d consider now is Just Group (LSE: JUST), a financial services company focused on retirement solutions. Much like the Restaurant Group, it too showed a smart recovery following the stock market rally that started last November. By April this year, it had shed its penny stock status and was also trading way beyond its pre-pandemic levels. 

However, the continued cloud of the pandemic has done no favours to stocks almost across the board. Additionally, the company reported a loss for the first half of 2021 on account of increased interest rates. This was a huge downer for investors, evident in the fact that its share price has dwindled to penny stock levels in the last few months.

When I last wrote about the stock right after its results were released, it was on my watchlist for this reason. And after a few months of watching its falling share price, I am more inclined to buy it. While it is true that the company made a loss on a reported basis, it did turn in an underlying operating profit, which could hold it in good stead. Also, as the recovery continues, I reckon its prospects could also improve on greater demand for its products. And with the population ageing fast in the UK, its long-term prospects also look good. I would consider buying it now. 

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Manika Premsingh 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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