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2 penny stocks I’d buy

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A pile of British one penny coins on a white background.
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A lot of UK share investors don’t like to buy penny stocks, due to the risk of price volatility. I think this a great shame as a number of terrific companies are being overlooked as a result.

Here are two sub-£1 stocks I’d happily buy for my own shares portfolio today.

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Grab a pizza the action

Fast food demand is soaring across the world. And there are many UK shares investors can buy to exploit this growing market. One that’s on my radar is DP Eurasia (LSE: DPEU), on account of its role as “the exclusive master franchisee of the Domino’s Pizza brand in Turkey, Russia, Azerbaijan and Georgia.”

Financials released this week showed total system sales rose almost 50% in the four months to April. Corresponding, sales in the penny stock’s core Turkish marketplace rocketed 65% year-on-year too. Indeed, the company has experienced “unprecedented demand” in Turkey at the start of 2021, it said.

I think DP Eurasia’s focus on fast-growing emerging markets and mighty brand strength will deliver delicious long-term returns. But remember that the company’s shares don’t come cheap, and this could lead to a severe price correction if trading begins to deteriorate.

Today, the penny stock trades on a high forward price-to-earnings (P/E) ratio of 96 times. It’s worth bearing in mind that the company deals in an ultra-competitive industry too, which can lead to extreme margin pressure and declining revenues.

Another quality penny stock

I’m also tempted to load up on Sirius Real Estate (LSE: SRE) shares today. This property play describes itself as “a leading owner and operator of business parks, offices and industrial complexes in Germany.”

The strength of recent financials has reinforced my belief of this UK share as a rock-solid penny stock. The ongoing public health emergency has been particularly hard going in Central Europe. Yet this hasn’t derailed Sirius Real Estate’s performance. Like-for-like rents rose 5.2% in the year to March. And occupancy rates improved to 87%, from 85.3% a year earlier.

Germany has long been the beating economic heart of mainland Europe. I expect economic growth here to significantly strengthen again, once the Covid-19 crisis passes. And it’s my belief that buying Sirius Real Estate shares is a great way to exploit this theme.

A word of caution however. This property powerhouse has stepped up acquisition activity again in recent months. It’s a strategy that could well turbocharge long-term earnings growth. And Sirius Real Estate has a strong balance sheet (with cash of €65.5m as of March) to exploit emerging opportunities.

But M&A creates a layer of risk to companies as the difficult nature of valuing properties can mean the company might end up overpaying for certain assets. There’s also the risk an acquisition might fail to deliver on the company’s return expectations.

That said, I still think this penny stock is a terrific buy for those seeking to make money with little drama.

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Royston Wild 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.

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