The prospect of more market volatility isn’t damaging my investing appetite. I buy UK shares based on the rewards I can expect to make over the long term. Thus the prospect of some further near-term choppiness isn’t enough to put me off.
Here are four top penny stocks Id happily sink £500 into right now.
A high-energy growth stock?
Hydrogen power could be a massive growth market in the 2020s as people seek cleaner energy sources. It’s why I’d buy AFC Energy (LSE: AFC) for my portfolio. It’s a company whose alkaline fuel cells are used to power vehicles in the Extreme E racing series.
AFC’s contribution to Extreme E (for which it extended its contract last month) has given it a stage to show off its technology and prove its reliability. It’s a strategy that could reap huge rewards because sales of hydrogen-powered vehicles are tipped to boom.
Indeed, Transparency Market Research thinks demand for hypercars — a category which is leaning more heavily on hydrogen technology to improve speeds — will grow at an annualised rate of 11.6% between now and 2031.
It’s possible that AFC could enjoy soaring demand for its products for other applications as well. Just this week, the business announced an agreement with Spain’s ACCIONA to deploy its first hybrid fuel cell at a site near Cádiz, Spain.
AFC Energy faces intense competition from other providers of energy-producing technology. But this is still a penny stock that’s packed with potential as the clean energy revolution takes off.
Going for gold
I think gold stocks remain an attractive asset class to buy today. Buying bullion-producing companies rather than the metal itself exposes investors to the often-risky mining sector. Exploration, development and production setbacks that smack profits can be common.
That being said, the pull of big dividends still makes many gold producers highly attractive, in my book. This is why I’d buy shares in Centamin (LSE: CEY) today. The dividend yields here sits at 5% for 2022 and 5.1% for next year.
Gold prices recently exploded to their highest since late 2020 as tension surrounding the Ukraine war intensifies. At $1,940 per ounce, it seems that the yellow metal could be primed for a charge to fresh record highs in the days ahead too.
But it’s not just geopolitical and macroeconomic worries that are spooking investors as the West and Russia collide. Gold prices have been steadily gaining ground because of fast-rising inflation in parts of the world. This is a problem that threatens to worsen too as energy values increase along with prices of other key commodities, from wheat and aluminium to coffee beans.
Consumer prices are rising at a rate not seen for decades in the US and the UK. And data earlier this week showed such inflation hit 5.8% in February. This was up sharply from 5.1% a month earlier and the highest level on record.
I wouldn’t just buy Centamin shares because of the positive near-term outlook for gold prices however. I think the penny stock could deliver excellent shareholder returns as it steadily ramps up annual production from its African assets. It is looking to produce half a million ounces of gold each year from its Sukari mine.
Riding the gaming revolution with penny stocks
The mobile gaming segment looks set for further strong growth in the post-pandemic era. It’s why I’m considering buying Gaming Realms (LSE: GMR) today. This penny stock develops and licences games software to betting companies and broadcasters. The business is perhaps best known for the blockbuster Slingo line of games.
I like the aggressive steps the business is taking to exploit this theme as well. The US market is opening up rapidly to the gambling industry and Gaming Realms last year launched its products into Pennsylvania and Michigan. Its rapid international expansion has also seen the software giant launch its titles in the Netherlands and Spain in more recent months.
Gaming Realms added dozens more licensing partners to its books in 2021. This helped revenues and adjusted earnings rise 27% and 70% respectively year-on-year.
But I am concerned about the threat of tightening regulations to the gambling industry and, by extension, to Gaming Realms. Last week, UK regulators slapped 888 Holdings with one of the largest fines in history in a sign that patience is beginning to wear thin. But, on balance, I still think the potential benefits of owning Gaming Realms outweigh the possible risks.
Things are warming up
I think demand for insulation products could also soar as fears over the climate crisis increase. This is why I’m considering loading up on Kingspan Group (LSE: KGP) shares right now. The business sells a wide range of building materials across 70 countries, but is perhaps best known for its energy-saving products.
Kingspan reckons the total energy saved by its insulation boards, panels and similar products between 1993 and 2018 was equivalent to 20m cars being taken off the road. The huge difference that these types of products can make to reducing carbon footprints means people are spending small fortunes to improve their home insulation. Businesses are also spending increasing amounts here to help them meet their carbon targets.
Sales of Kingspan’s insulated panels leapt 45% year-on-year in 2021. And I think they could continue rising strongly too as people take steps to protect themselves from soaring energy costs. A recent study showed that Britons living in F- and G-rated homes on the energy efficiency scale stand to be £390 worse off than those in C-rated properties when new price-cap rules come into force in April.
It’s true that Kingspan could see demand for its materials sink if the global construction market slows. But, on balance, I still think the pivotal role of its products in tackling climate change could help me make solid long-term returns.
