I’m looking for the best bargain penny stocks to buy following recent market volatility. Here are two dirt-cheap UK shares I’d buy to hold for the long haul.
Playing the gold price boom
Many gold-producing stocks have risen strongly as prices of their precious metals have ballooned. Shanta Gold (LSE: SHG) hasn’t recorded strong gains, however. Yet a look at the company’s share price suggests that it remains massively undervalued. Today its shares trade on a forward price-to-earnings (P/E) ratio of 7 times. I think this makes it a brilliant buy.
Demand for precious metals is rising spectacularly right now. Latest data from the World Gold Council showed holdings in gold-backed exchange-traded funds (or ETFs) rose 35.3 tonnes (or 1%) in February. The organisation thinks safe-haven demand for bullion could continue climbing too.
It says that “the risk of economic slowdown amid high inflation could complicate monetary policy decisions, further supporting investment demand for gold.” Central banks may have to maintain a landscape ultra-low rates following the Russian invasion of Ukraine. This would help gold prices and by extension Shanta Gold’s revenues.
Intensifying safe-haven demand has today driven gold to its most expensive since summer 2020, above $2,000 per ounce. Yet the tragic events in Eastern Europe aren’t the only reason why gold could keep climbing. Growing Covid-19 cases in China (which have just hit two-year peaks), for example, could also drive the yellow metal northwards.
My main concern for Shanta Gold is the highly-complex nature of its operations. Profits-sapping production problems can be common for miners. And this can have a significant impact on shareholder returns. In my opinion, though, this threat is reflected in the company’s ultra-low share price.
Another unloved penny stock I’d buy
Like Shanta Gold, the Brickability Group (LSE: BRCK) share price also offers terrific value right now. Today the building products manufacturer trades on a forward price-to-earnings growth (PEG) ratio of 0.3. This is well inside the benchmark of 1 and below that suggests a stock could be undervalued.
Brickability’s share price has been edging steadily lower since the end of 2021. And today it’s slumped to its cheapest for almost a year. This to my mind represents a great dip-buying opportunity. I think the rewards of owning this stock outweigh the potential risks that rising interest rates create for the housing market. Higher rates are bad for buyer affordability.
I’m encouraged by a steady stream of positive data showing how strongly UK homes demand continues to grow. Just today Nationwide said that homes prices rose at their fastest rate since 2007 as demand continued to outstrip supply. Average property values have now grown for eight months on the spin, according to the building society.
Britain’s major housebuilders are planning to exploit this fertile trading landscape by building their land banks and upping their production targets. This all bodes well for Brickability and its profits column. This is a penny stock that could thrive over the next decade as the building boom continues.