3 penny stocks to buy for 2022

These penny stocks could be some of the best shares to buy in 2022 for growth, says Rupert Hargreaves, who would buy all three.

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I have been looking for penny stocks to buy for my portfolio in 2022. Some investors avoid these smaller businesses, but I think there are some great opportunities at this end of the market. 

As such, here are three top penny stocks I would acquire for the year ahead

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Stocks to buy in 2022

The first company is the photo booth and coin-operated washing machine business Photo-Me (LSE: PHTM). I have always liked this enterprise because it is highly cash generative. Once it has bought and installed its photo booths, it does not need to spend significant sums maintaining the asset.

As a result, the company has a robust balance sheet and relatively attractive profit margins. It has also paid out a lot of cash to investors with dividends in the past. The firm last paid a dividend in 2018. As profits rebound after the pandemic, I think the corporation will likely look to restore its payout. 

Unfortunately, Photo-Me also has some challenges to overcome. Consumer trends are unpredictable, and the market is becoming more competitive. These are the biggest threats to the group’s business model right now. It has been able to navigate these threats in the past, but past performance should never be used to guide future potential. 

Penny stocks for growth

One theme I am building exposure to in my portfolio for 2022 is construction. The sector has quickly recovered from the pandemic, which is good news for companies like Speedy Hire (LSE: SDY)

Analysts believe the company’s earnings will jump around 30% this year and a further 20% in 2023. This will take profits to a multi-year high. In fact, if the corporation hits these projections, it will earn more in the next two years than it did in the last six. I think these numbers illustrate the company’s potential over the next couple of years. 

Of course, there is no guarantee the company will hit these growth targets. If the economy starts to struggle again, the construction sector will be the first to suffer in any downturn. Speedy’s growth could come shuddering to a halt in this scenario. This is the most considerable risk facing the corporation right now. 

A return to outsourcing

The final company I would buy for my portfolio of penny stocks is outsourcer Mitie (LSE: MTO). Over the past couple of years, this company has struggled to earn a consistent profit. That will change over the next two years, according to City analysts.

If the corporation can return to profit and stay there, I think the stock deserves a re-rating. The shares are selling at a single-digit price-to-earnings (P/E) multiple. If the company returns to growth, the market may reward the stock with a higher group multiple. This could lead to a substantial return on the current share price. 

Still, this is far from guaranteed, which is why I would only buy the stock as a speculative position for my portfolio. Some challenges it could encounter as we advance include higher wage costs resulting from inflation and higher interest costs. 

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Rupert Hargreaves 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.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

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