Searching for penny stocks to buy can be a great way to identify the growth heroes of the future. Here are two such low-cost UK shares I think are terrific buys for my portfolio following recent market volatility.
What it does: Sells new and used vehicles (and provides after-sales services) through its 160 showrooms.
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Friday’s closing price: 58.4p per share
I believe revenues at motor retailer Vertu Motors (LSE: VTU) could rocket as demand for electric vehicles (EVs) increases.
According to Uswitch, the number of EVs on British roads leapt tenfold between 2015 and 2020 (to 447,359 units). Uptake of these low-carbon vehicles has boomed all over the world as worries over the climate crisis have intensified. And EV sales have been boosted more recently by soaring petrol and diesel prices.
I’m concerned about how supply chain issues could damage profits at businesses like Vertu. This threatens to keep nudging vehicle prices higher — a dangerous scenario as the cost of living crisis worsens — and could also result in stock shortages.
However, Vertu Motors has so far been able to navigate these problems effectively. And this fills me with encouragement. Adjusted pre-tax profits soared to a record level of £80.7m in the 12 months to February. This was helped by gross margins rising to a fatty 12% as unit shortages boosted prices.
Today Vertu Motors trades on a forward price-to-earnings (P/E) ratio of just 7.7 times. I think this fails to reflect the penny stock’s excellent growth opportunities during the EV explosion.
What it does: A supplier of construction products with a focus on the ‘green’ economy.
Friday’s closing price: 75.9 euro cents per share
I believe Kingspan Group (LSE: KGP) could thrive over the next decade too as the drive for energy efficiency picks up.
Kingspan sells a huge range of building materials but is perhaps best known as a titan in the field of insulation products. Sales of these products are rising as companies and consumers try to reduce their carbon footprints and cut power bills.
Indeed, emergency callout specialist Homeserve has witnessed “early signs of a shift of emphasis” towards green home improvements. It said last week that people are beginning to switch away from kitchen and bathroom upgrades, for example, towards cost-saving improvements like insulation and fitting solar panels.
Penny stock Kingspan is about more than just insulation, however. It supplies products that improve the amount of natural light entering a building, reducing the need for lighting. Other solutions include the management of water and wastewater and boosting a structure’s ventilation.
Sales at Kingspan would take a hit if inflation keeps soaring and the construction industry slows. However, I think this threat is more than reflected by the company’s recent share price slump. As a long-term investor I think Kingspan could be a brilliant dip buy for me right now.