Penny stocks may be cheap – but that does not always mean they are good value. When considering penny stocks to buy for my portfolio, I ask the same questions as I do for pricier shares. Is this a business likely to see growing demand in the future? Does it have some sort of competitive advantage that can help set it apart in its marketplace? Does the share price seem attractive given the long-term profit generation potential of the company?
Here are a couple of penny shares I would consider adding to my portfolio in April based on those criteria.
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Some people spend their spare time casting around in the stock market for promising shares to buy. Others prefer to rest on the riverbank casting for fish. The two come together in the form of Angling Direct (LSE: ANG).
The company is a retailer of angling supplies. As its name suggests, it has a sizeable digital commerce operation. But the company has also been building a network of retail branches. I think that two-pronged approach makes sense. The retail network can help build awareness of the company as well as serving anglers who prefer to buy in person. Meanwhile, the digital operation helps the company build national scale.
Even in a world with online retail beasts, I think there is a place for specialist retailers. Their focus and customer service can help them build a reputation with a particular target customer group. Anglers are often happy to spend on their hobby and I expect the popularity of fishing to endure. There are risks – for example, a cyber attack not only hurt the company’s reputation but also lost it some sales. That might happen again. But I am tempted to take a bite on the shares.
Another area I expect to experience enduring demand is healthcare provision. That requires staff, equipment, and medicines – but it usually also needs buildings. Whether it is a doctor’s surgery or ambulance depot, such buildings are likely to see ongoing use for many years.
One property company that has decided to focus on serving the healthcare sector is Assura (LSE: AGR). The business model here is quite simple: Assura builds or buys properties then lets them out to healthcare tenants. I reckon the profile of such tenants makes them attractive: they will often be happy to stay in one place for the long term, and have the resources to pay their rent on time.
If the portfolio is well chosen and maintained, I think that ought to add up to a profitable formula for success. Assura has raised its dividend annually over the past few years. It is firmly in growth mode, adding more properties to its portfolio. That brings additional risk as the company is carrying debt on its balance sheet. If it struggles to lease properties, servicing the debt could eat into profits. But I am positive about the firm’s business model and would consider adding it to my portfolio.
Penny stocks to buy now
I like the look of both Angling Direct and Assura as potential purchases for my portfolio. But I do not see them as penny stocks to buy now just because of their price. Rather, I reckon their strong business models could be profitable for years to come.