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5 top penny stocks to buy

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A pile of British one penny coins on a white background.
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Investing in penny stocks can be incredibly risky. However, I’ve recently been looking for penny shares to add to my portfolio to ride the UK economic recovery.

I’m focusing on these investments because I think smaller businesses are easier to understand. They’re also usually much more UK-focused, although I’m aware this strategy may not suit all investors. 

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Penny stocks to buy

The first enterprise on my list of stocks to buy is aircraft broker Air Partner. Specialising in private jets and cargo transport, the company has seen a boom in demand for its services over the past 12 months.

I think the firm can capitalise on the growing wealth of the exclusive 1% over the next few years, and that’s why I’d buy the stock today. That said, the air travel market is highly cyclical. Therefore, the company’s growth is far from guaranteed. 

I’d also buy Vertu Motors for my portfolio of penny stocks. This company, which owns a string of car and motorbike dealerships across the country, has benefited from higher consumer savings. Many stuck-at-home consumers have spent their savings on new vehicles.

According to analysts, this demand could help the company return to pre-pandemic levels of profitability by 2023. Once again, this market is highly cyclical. Another coronavirus wave or an economic downturn could delay the firm’s return to growth. 

Currency management 

Currency management business Record is also expected to report a surge in earnings this year. The company has won several new mandates over the past year, and thanks to this new deals, it’s expected to report a near-80% increase in earnings per share for the current financial period.

Coupled with this growth, the stock offers a dividend yield of 3.8% and has a cash-rich balance sheet. I’d buy the company for my portfolio of penny stocks based on these qualities. 

Nonetheless, despite the company’s recent success, this is a highly competitive market, and profit margins are under pressure. Record is also a small business that may not be able to compete with large Wall Street giants. 

Commercial property 

Commercial property values have taken a hit over the past 14 months. This has thrown up some attractive opportunities in the commercial property sector, including Aew Uk Reit.

At the time of writing, the stock is trading just below its book value per share, which could present an opportunity for risk-tolerant investors. It also supports the dividend yield of 8%. I think these qualities more than offset the risk of investing in commercial property, which is why I’d buy the stock. Of course, if property prices continue to decline, Aew may have to make some tough choices. 

Finally, Id also buy Mcbride for my portfolio of penny stocks today. The consumer goods company is a recovery play, as it’s been struggling for the past few years. Earnings could remain under pressure, but analysts are forecasting growth. With a price-to-earnings (P/E) ratio of 9.5, I think the organisation is a cheap recovery play.

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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Vertu Motors. 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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