I believe that now’s a great time for Stocks and Shares ISA investors to buy UK shares. Stock markets soared last week as hopes concerning the economic recovery improved. And I think demand for ‘reopening stocks’ could surge again as the world slowly recovers from the Covid-19 crisis. Here are several top UK penny stocks whose profits might boom as the world opens back up again.
I’d buy them for big share price gains in the near term but hold them for years into the future. Give me a few minutes to explain why.
Full steam ahead
The reopening of the UK economy means Hornby (LSE: HRN) can expect demand for its train sets and model cars to pick up considerably. At least that’s my view as shops steadily reopen and consumers feel confident enough to start spending again. Signs of improvement are already beginning to emerge, with Hornby noting “very encouraging” sales in the three months to March.
No doubt the company is also benefiting from the emergence of new ‘hobbyists’ during Covid-19 lockdowns. Beware though, the penny stock markets are notoriously competitive and it will have to work hard to keep revenues rolling in. Demand for its miniatures might also waver if alternative hobbies soar in popularity.
Another penny stock for the hobbies boom
TheWorks.co.uk (LSE: WRKS) is another UK penny stock that’ll benefit from non-essential retailers reopening their doors. This particular retailer sells a wide variety of goods, from arts and crafts products and books to stationery, toys and games. And, critically, the company sells its wares at low price points, putting it bang in the middle of the fast-growing value retail segment.
There are other reasons I like TheWorks.co.uk too. It stands to gain from the resurgence in arts and crafts following the Covid-19 pandemic. It has also relaunched its web platform and boosted fulfilment capacity to keep online sales booming (these grew 70% in the 11 weeks to 10 January). That said, the business still sources huge amounts of its sales through the traditional bricks-and-mortar channel. So it could lose out near-term as the e-commerce boom continues.
A recovery in consumer spending isn’t the only reason why Coats Group (LSE: COA) is, in my opinion, another great reopening stock. With people returning to their workplaces, the pub, the park and everywhere in between en masse, clothing sales in particular look set to take off again. Thus, this penny stock can expect demand for its threads, yarns and trims to fly. Coats describes itself as “world’s leading industrial thread company” while it’s also at the top table of zip manufacturers too. This puts it in the box seat to enjoy the broad recovery in fashion sales.
A word of warning, though. The company faces increasing competition from China (such as SBS in the zips market) which threatens to derail long-term profits growth.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Coats Group. 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.