I’m searching for the best cheap UK shares to buy for my portfolio this April. Here are two ‘almost’ penny stocks on my shopping list right now.
Driving the workplace revolution
I think the post-pandemic boom in remote working provides plenty of opportunity for stock investors like me. One ‘nearly’ penny stock I’m considering buying to play this theme is Redcentric (LSE: RCN).
A survey by telephone equipment supplier Poly shows the enormous sales opportunities IT services businesses like Redcentric have. It showed that just 48% of employers are “fully prepared” for a blend of office-and-home-based working.
At the same time, 80% of companies reckon that flexible working should be offered to new employees, the data showed. This underpenetrated market provides massive opportunity for firms like Redcentric.
Redcentric provides the network and cloud computing software that allows people to work from anywhere. And the business remains busy on the acquisition front to maximise this enormous market opportunity.
The tech giant sealed the game-changing takeover of cloud computing specialist Piksel during the autumn. And in March, it picked up cyber security specialist 7 Elements for a fee of up to £2.4m.
Too cheap to miss?
Now Redcentric doesn’t have the financial clout or the brand recognition of its US tech rivals. The likes of Microsoft and IBM have the means to make things very difficult for smaller players like this.
Still, it’s my opinion that this risk is baked into Redcentric’s low valuation. At 112p per share, the business trades on a forward price-to-earnings growth (PEG) ratio of 0.9.
Remember that any reading below 1 suggests a stock could be undervalued.
Another ‘near’ penny stock to buy
Like Redcentric, Michelmersh Brick Holdings (LSE: MBH) also trades on a sub-1 PEG ratio today. At 117p per share, the building products manufacturer boasts a reading of just 0.4.
As we saw last week, property prices in the UK continue to soar because of a chronic shortage of new homes. Latest data from Nationwide showed average home values rising at their fastest pace since 2004 in March.
It is clear that Britain will need to supercharge build rates over the next decade to soothe the problem. And businesses like Michelmersh will play an important role in this journey. The UK government has laid out plans to create 300,000 new homes each year by the mid-2020s.
Risk vs reward
I am concerned by the impact of rising costs on Michelmersh’s bottom line. Pleasingly, the business has hedged the costs of expected energy usage in the future (making bricks requires massive amounts of power). But inflation elsewhere still poses a risk to profits.
That said, it’s my opinion that the possible benefits of owning this stock outweigh the dangers. Housebuilders are aggressively stepping up construction activity to capitalise on the booming homes market. Pleasingly for Michelmersh, this is a phenomenon that looks set to run and run.
