The Motley Fool

3 FTSE 250 penny stocks to buy

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.

A pile of British one penny coins on a white background.
Image source: Getty Images

Penny stocks have a bit of a bad reputation and for good reason. Many penny shares are small businesses, which may have weak balance sheets and uncertain outlooks.

However, not all penny stocks are bad investments. The definition of these investments is expansive, and even large businesses in the FTSE 250 can qualify as penny shares. With that in mind, here are three penny stocks I’d buy for my portfolio today. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Recovery investment 

The first company I’d buy is Tullow Oil (LSE: TLW). This is a high-risk recovery play. The oil price has recovered from its lows of the last year as the global economy has started to move on from the pandemic. This should translate into higher profits for the oil producer. 

That said, it could be some time before Tullow’s revenues recover to a level that would stabilise the enterprise. Over the past few years, it has accrued a tremendous amount of debt, and paying this off could be a struggle. If the price of oil slumps again, it may not even be possible.

That’s why this is such a high-risk FTSE 250 recovery play. It’s certainly not suitable for all investors. 

Penny stocks on offer 

As well as Tullow, I’d buy Centria (LSE: CNA) for my portfolio. This is another company that’s really struggled over the past few years. The British Gas owner has seen its share price dwindle as profits and revenues have declined, and customers have gone elsewhere. 

However, I think the group’s prospects could be about to change. Management has been focusing on paying down debt and selling non-core assets recently.

The rising oil price could also help the firm shift its North Sea oil and gas business, which has been on the block for some time. Selling this division would provide more capital for reinvestment and reducing debt. 

However, the enterprise’s main challenges haven’t gone away. It’s still facing fierce competition from newer upstarts, and volatile commodity prices mean its income is unpredictable. 

Despite these risks, I’d buy the company for my portfolio of penny stocks today. 

Booming profits

Premier Foods (LSE: PFD) has been one of the pandemic’s biggest winners. Profits jumped to £47m in 2020 from a loss of £34m in 2019. Analysts believe profits could nearly double again this year, although that’s just a forecast at this stage. 

The company was able to use its bumper profits last year to pay down debt and reduce its pension deficit. This should free up more cash in the years ahead to invest in the business. I think this could help the firm build on the progress over the last 12 months and drive earnings growth for many years to come. 

That’s why I’d buy the FTSE 250 business for my portfolio of penny stocks today. 

Having said all of the above, Premier is still loaded with debt. It’s also facing increasing competition from new brands. It needs to keep investing in its offering to keep consumers interested, or these brands may steal market share. That could hurt profits and the group’s ability to pay down debt. 

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Rupert Hargreaves 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.