3 hot penny stocks I’m buying now for long-term growth

With the potential for high growth rates, these three penny stocks exhibit strong financial results and could be shrewd additions to my long-term portfolio.

| 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.

British Pennies on a Pound Note

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Investing in penny stocks can be a great way for me to find growth for my long-term portfolio. While they sometimes carry more risk, the rewards can be great. Penny stocks are generally defined as companies with a share price under £1. I think I’ve found three such companies that could be great additions to my portfolio. Why am I attracted to these stocks in particular? Let’s take a closer look. 

#1: Pendragon

The first company is Pendragon (LSE:PDG), an online new and used car retailer. It currently trades at 24.9p. 

Between 2020 and 2021, this business swung from a loss before tax of £25.5m to a profit before tax of £78.6m. 

This is encouraging and suggests that it has rebounded strongly from a tough time during the pandemic.

What’s more, revenue grew from £2.7bn to £3.4bn over the same period. 

Investment bank Berenberg increased its price target in March from 30p to 36p. This was chiefly because the 2021 results were slightly ahead of guidance. 

Despite this, there are potential future supply chain problems as the company emerges from the pandemic.

#2: Costain

Secondly, Costain (LSE:COST) is in prime penny stock territory. It’s currently trading at 42p and is a construction business. 

Between 2020 and 2021, this company narrowed its losses significantly. These shrank from £96.1m to just £13.3m.

In addition, revenue increased from £978m to £1.1bn. Furthermore, operating margins improved to -0.8% in 2021, up from -9.4% the previous year.

It should be noted, however, that past performance is not necessarily indicative of future performance.

With an order book of £3.4bn, the firm could be in great shape moving forward.

There are risks, however, with inflation and rising commodity costs potentially eating into future profit margins and impacting balance sheets.

#3: Pan African Resources

Finally, I’m looking closely at Pan African Resources (LSE:PAF), a gold-mining business operating in South Africa.

For the year ended June, between 2017 and 2021, profit before tax increased from £44.9m to £104m. In addition, revenue more than doubled from £125m to £368m over the same period.

Recently, the Sudanese government granted the company five exploration licenses. These cover an area of 1,100 square kilometres.

For the six months to 31 December, the company reported record gold production of 108,000 ounces and initiated a one-month share buyback scheme in April, worth £2.6m.

There’s always the possibility, however, that any future pandemic variant could halt production at the firm’s gold mines.

Overall, these three penny stocks could provide excellent growth opportunities. While there are risks associated with each company, I think their respective historical financial results are strong. What’s more, future operating environments for each firm look attractive over the long term. I will be buying shares in the companies soon.


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 assessed. Consider taking independent financial advice.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended Pendragon. 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

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

Down 23% today! This one’s stinking out my Stocks and Shares ISA

Our writer's wondering what to do with a problem named Ashtead Technology (LON:AT.) in his Stocks and Shares ISA portfolio.

Read more »

Two male friends are out in Tynemouth, North East UK. They are walking on a sidewalk and pushing their baby sons in strollers. They are wearing warm clothing.
Investing Articles

Down over 20%, should I dump this FTSE 100 dividend stock?

Our writer has been loving the passive income this dividend stock has been throwing off. But does the big share…

Read more »

Businesswoman calculating finances in an office
Investing Articles

I’ve just bought this FTSE share…

Our writer explains the thought process that led to him buying this FTSE share. One that’s likely to do well…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Just over £5 now, easyJet’s share price looks cheap to me anywhere under £13.84

easyJet’s share price has dropped recently, which could mean the business is worth less than before. Conversely, it could mean…

Read more »

Trader on video call from his home office
Investing Articles

36% under ‘fair value’ and forecast annual earnings growth of 6%, should investors consider this FTSE 250 stock?  

This FTSE 250 firm is a leader in a growing sector and has secured several new sites to drive its…

Read more »

Portrait of a boy with the map of the world painted on his face.
Investing Articles

3 UK shares that have recently become takeover targets

Mark Hartley examines why these three UK shares have become takeover targets and could be bought out by rivals in…

Read more »

Young Caucasian woman holding up four fingers
Investing Articles

These 4 FTSE 100 stocks are currently yielding more than 8%!

Our writer believes there are plenty of passive income opportunities among FTSE 100 (INDEXFTSE:UKX) stocks. These are the top four…

Read more »

Close-up of British bank notes
Investing Articles

3 reasons I prefer HSBC over Lloyds shares

While this writer likes Lloyds shares for their solid passive income potential, a rival FTSE 100 bank looks even more…

Read more »