3 penny stocks I’d buy to hold for FIVE years!

I’m scouring the UK share markets for penny stocks to add to my portfolio. Here are three that I’d be happy to own for the next several years.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shopping cart with boxes labelled REITs, ETFs, Bonds, Stocks

Image source: Getty Images.

I think these top penny stocks could make me great returns over the next five years, at least. Here’s why I’d buy them for my shares portfolio today. 

Long live the King

Revenues at Kingspan Group (LSE: KGP) are climbing strongly amid growing concerns over the climate emergency. The building products business — a big player when it comes to insulation materials — saw sales leap 44% in the nine months to September, latest financials showed.

Kingspan has a huge opportunity to make big profits as interest in foam insulation rises. Analysts at BCC Research think the global market will be worth $29.5bn by 2025, up more than $7bn over a five-year period. I like Kingspan’s wide geographic footprint that should allow it to capitalise fully on this fast-growing industry too. The penny stock operates in more than 70 countries.

A word of warning however. Demand for Kingspan’s product could take a hit if incentive schemes to encourage people to insulate their homes end. Indeed, the UK government is said to be considering rolling back a £1bn levy that helps fund home insulation work.

A penny stock for the pandemic

Concerns over the Covid-19 crisis have dialled down several notches in recent weeks. Worries about the ferocity of the Omicron mutation have dropped on a raft of positive medical data. But it’s far too early to claim that the pandemic is over.

It’s why I still believe buying UK healthcare shares like BATM Advanced Communications (LSE: BVC) is a good idea. And news in recent days that a new Omicron variant is under investigation illustrates why. It seems that living alongside Covid-19 will be the new norm, as many scientists now predict. So I expect the sort of Covid-19 testing equipment that BATM manufactures to remain in high demand.

I am concerned by the amount of competition in the Covid-19 testing space. But I think the potential size of the market of the long term still makes the penny stock an attractive buy today. Besides, the steps it is taking to expand into new geographies also gives it an opportunity to capture significant sales (its RAPiDgen antigen test was approved for sale in Russia just before Christmas).

Call me up

Strong recent trading over at Netcall (LSE: NET) is encouraging me to give this tech firm a close look too. The business — which makes software that allows companies to automate their operations — saw revenues soar 10% in 2021, predominantly as demand for its cloud-based services took off. The rapid pace at which businesses are digitalising their operations is yielding big returns at companies like this.

My main concern with buying Netcall shares is the company’s high valuation. Today, the penny stock trades on a forward P/E ratio of 43 times. It’s the sort of rating that could prompt a sharp share price reversal if signs of explosive profits growth appear in danger. That said, it’s my opinion that Netcall merits such a premium, given the investment businesses are increasingly making to automate their processes.

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.

Royston Wild 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.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

GSK shares plummet 15% in a week! What’s going on here?

GSK shares had a bad time last week. They're down 15% as investors' sentiment soured ahead of litigation proceedings in…

Read more »

Burst your bubble thumbtack and balloon background
Investing Articles

Stock market recovery: have all the bubbles now burst?

Asset bubbles keep on coming, and here's what I'm doing to navigate through them and invest for the stock market…

Read more »

Shot of an young Indian businesswoman sitting alone in the office at night and using a digital tablet
Investing Articles

How I’d invest £290 a month in UK shares for a passive income that beats the State Pension

UK shares can offer a lucrative path for passive income. Our writer considers a plan to double his State Pension.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

3 of the best shares to buy now with £2,000

I reckon the best shares to buy now have strong growth in earnings and recent good news flow, such as…

Read more »

Young female analyst working at her desk in the office
Investing Articles

How I’m aiming for £500 a month in income from dividend stocks 

Here's my three-step plan for achieving a growing income from dividend stocks and three companies I'd use to help execute…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

UK shares are cheap! So why is Warren Buffett ignoring them and should you too?

Many British shares are trading cheaply and pay dividends. This is normally the hunting ground for Warren Buffett, yet he's…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How I’ve increased my passive income by 600%

Finding the right opportunities can bring spectacular results. Here’s how our author has managed to increase his monthly passive income…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

Could lithium shares make my Stocks and Shares ISA a goldmine?

Our writer is considering buying lithium shares for his Stocks and Shares ISA. Here, he outlines the decision process he…

Read more »