Penny stocks to consider buying while their prices are this cheap

Some of the penny stocks I’ve been watching have already climbed above the 100p level. But I see potential in a number of others.

| More on:

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.

Whenever I search for potential penny stocks to buy, one small pharmaceutical firm keeps popping up.

It’s Poolbeg Pharma (LSE: POLB), and it has a novel research model that’s light on cash, and offers the potential to develop multiple product lines at lower costs than traditional methods.

There’s artificial intelligence (AI) in there, and I find that both exciting and cause for concern. The potential for AI is huge, but any stock that merely mentions it seems to get a boost.

Poolbeg shares have been climbing since late 2022. But we’re still looking at a market cap of only £62m.

There’s no sign of profit yet, and that has to be the biggest risk. But when I look at a company with promising technology and that is valued so lowly, I see the cost of a takeover at just pocket money for a big pharma giant.

Even in terms of specific research products, the company talks about possible sales of the whole production at an early stage.

If I went for Poolbeg, it might be in the hope of a future buyout from a big company… and it would only be with a small amount of cash.

Lithium please

The Kodal Minerals (LSE: KOD) share price is only 0.44p. But it was as low as 0.27p in February, so that’s a gain of more than 60% already.

To be fair, it did briefly peak at nearly a full penny in early 2023. But that’s when a lithium stock boom was on, and it’s well down since then.

With a market cap of £89m, Kodal isn’t far under the usual limit for UK penny stocks of £100m.

The main risk is the lack of current profits. But analysts are tentatively forecasting modest positive earnings by 2026.

After its recent funding round, Kodal reported £11.2m in cash on the books. So its lithium development plans don’t seem to be under any financial threat right now.

Still, until we see profit, and know the extent of any shareholder dilution before we get there, there’s still a fair bit of risk.

Not a penny stock

I’m going to cheat now, and make a third pick. This one, Michelmersh Brick Holdings (LSE: MBH), is not quite a penny stock any more at 105p. But it was less than £1 very recently, and the market cap is still below the £100m mark.

For me, the investment case here is straightforward. We have profits, with forecast rising earnings. And there’s a forward dividend yield of 4.3%, expected to grow to 4.7% by 2027.

And that’s from a small-cap company with price-to-earnings (P/E) multiples that look set to drop below 10.

With its last FY results, the firm spoke of maintaining a well-balanced forward order book, after a decline in the market, and remaining resilient as it awaits new growth.

A lot depends on a UK property market and housebuilding recovery. And that could take longer than bullish investors like me might think. But it’s another possible long-term buy for me.

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.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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

Young black man looking at phone while on the London Overground
Investing Articles

1 delicious penny stock I reckon can deliver juicy returns and growth

This food delivery penny stock has experienced a surge in performance and uptake recently. Our writer is excited by its…

Read more »

Investing Articles

If I’d bought Rolls-Royce shares the day Tufan Erginbilgiç joined here’s what I’d have now

Harvey Jones is startled by just how fast the Rolls-Royce share price has risen since its transformative CEO took over.…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

How much do I need to invest in Lloyds shares to earn income of £1,000 a year?

Harvey Jones is getting income and growth from his Lloyds shares but wished he'd bought more of them. So he's…

Read more »

Illustration of flames over a black background
Investing Articles

Down 75%! Will the Saga share price ever be loved again?

The last few years have been incredibly difficult for those watching the Saga share price. But what does the future…

Read more »

Investing Articles

What kind of return could I expect by investing £100 monthly in a Stocks and Shares ISA?

Using a Stocks and Shares ISA to avoid capital gains tax could grow a £100 monthly investment into a second…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Can strong operational momentum keep the Informa share price rising?

FTSE 100 company Informa has been performing well, but this may be just the beginning of a multi-year trend for…

Read more »

Market Movers

What’s going on with the Britvic share price?

Jon Smith flags up why Britvic's share price is surging on Friday, but believes that the company is in a…

Read more »

Cheerful young businesspeople with laptop working in office
Dividend Shares

2 super-cheap passive income shares I’m eyeing up right now

Jon Smith discusses two of his favourite passive income shares in the banking and property sectors, both featuring yields above…

Read more »