The Motley Fool

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

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

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.

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...

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 Daft.ie 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.” Daft.ie 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. 

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

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.

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.