The economic outlook is fraught with danger as the Covid-19 crisis rolls on. Soaring inflation and fresh trade spats between major economies threaten to destabilise the recovery too. But these fears haven’t stopped me from continuing to invest for my Stocks and Shares ISA in recent times. I have my eye on plenty of penny stocks ahead of the 5 April deadline too.
I believe that stock market crashes provide an opportunity for UK share investors to make lots of money. Buying after the correction that accompanied the 2008 financial crisis enabled hundreds of Stocks and Shares ISA investors to make millions too. They bought quality stocks in the aftermath of the initial crash and watched them rocket in value as economic conditions improved, corporate profits bounced back, and share prices soared.
It’s important not to get carried away though. The battle against Covid-19 is far from won and a sudden uptick in global cases could derail any profits recovery and put balance sheets under fresh stress. No one should spend any money they can’t afford to lose.
A penny stock that’s attracted my attention
Marston’s (LSE: MARS) is one UK share that carries a considerable amount of risk. But is this penny stock an attractive dip buy for the eventual bull market? The pub operator trades at a 20% discount to what it was at the beginning of 2020. At 96p the company trades inside ‘penny stock’ territory of below £1 per share.
Takings at Britain’s pubs have tanked over the past year as Covid-19 restrictions have shuttered the leisure sector. Marston’s swung to a £22m pre-tax loss in the 12 months to September 2020 from a profit of £95.1m the year before. It’s hoped that the steady restriction rollbacks which the government plans from next month will help UK shares like this get back on their feet, however.
But huge uncertainty remains over whether Marston’s and its peers will be able to reopen and keep their doors flung open. Infection rates spiked when coronavirus restrictions were eased back in 2020. Meanwhile a third wave of Covid-19 cases is sweeping across Europe and threatens to move to these shores too.
Worth the risk?
There’s a lot I like about Marston’s. As my colleague Rupert Hargreaves recently commented, the UK share has a strong balance sheet to help it navigate further Covid-19-rellated turbulence in the short-to-medium term. There’s also the possibility that drinkers and diners will return to its establishments en masse once lockdowns are lifted for good. Don’t forget that consumer behaviour changed significantly in the years before the pandemic as spending on leisure activities ballooned.
It’s quite possible that the Marston’s share price will soar during the new bull market. It might soar sooner rather than later though if a new takeover approach comes down the pipe. But at the moment I won’t be buying this UK share just yet. Those overhanging Covid-19 fears, allied with a steady rise in operating costs, encourage me to look at other stocks for my ISA.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Marstons. 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.