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2 cheap penny stocks I’d buy for my Stocks and Shares ISA

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I’m on the hunt for low-cost UK shares to add to my Stocks and Shares ISA. Here are two cheap penny stocks that have grabbed my attention today.

One for the clean freaks!

I’d be very happy to buy UK fast-moving consumer goods (FMCG) share McBride (LSE: MCB) in my ISA. This penny stock manufactures a broad range of cleaning products, allowing it to ride a growing need for high standards of cleanliness among consumers. Latest results from the recently-rebranded Reckitt reveal how rapidly this market is growing.

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Like-for-like sales of its hygiene products rocketed 28.5% year-on-year between January and March, it said. This was led by “very strong, volume-led growth” across its Lysol, Finish and Air Wick ranges.

As Hargreaves Lansdown analyst Laura Hoy notes: “While vaccine rollouts are making a return to normalcy look possible, some pandemic-related trends look here to stay and the public’s new obsession with hygiene is one of them.

And so the likes of McBride can expect strong and sustained demand for its goods going forward. This explains why City analysts think this UK share’s annual earnings will rise 16% and 8% in the financial years to June 2021 and 2022 respectively.

Bur be aware that McBride operates in a hugely-competitive arena. And it doesn’t have the colossal brand power of industry heavyweights like Reckitt, Unilever and PZ Cussons to build a large and loyal customer base either.

However, I believe his penny stock’s low valuation merits serious attention today. At 93p per share, McBride’s shares command a forward price-to-earnings growth (PEG) ratio of 0.6. A reading below 1 tends to suggest a UK share is being undervalued by the market.

Another cheap penny stock

Cairn Homes (LSE: CRN) is another cheap penny stock on my radar today. City brokers think earnings at the Irish housebuilder will soar 19% year-on-year in 2021. This leaves the company — which changes hands at 93p per share — trading on a forward PEG multiple of 0.7.

As in the UK, there is a colossal shortage of affordable homes in Ireland. This presents enormous profit-making opportunities for Cairn Homes in the years ahead. The business plans to build 2,500 new homes over the next two years alone to help the Emerald Isle meet this shortfall.

The latest house price report from illustrates the impact of this shortage on property values. It shows the average home price soared 7.6% year-on-year in March, thanks to what the organisation puts down to “strong demand and very weak supply.” says there were less than 12,000 properties available to buy as of 1 March, down 40% from the same point in 2020.

I own FTSE 100 housebuilders Barratt and Taylor Wimpey in my ISA to play the favourable housing market in the UK. And I’m thinking of adding penny stock Cairn Homes to play the positive trading conditions in Ireland too.

But I have to bear in mind that Ireland has been hit hard by the Covid crisis and any economic downturn could hit house-buyer demand. 

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Royston Wild owns shares of Barratt Developments, Taylor Wimpey, and Unilever. The Motley Fool UK has recommended Hargreaves Lansdown, PZ Cussons, and Unilever. 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.

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