I’ve recently been looking for British penny stocks to buy for my portfolio to capitalise on the country’s economic recovery during the next few years. Here are two I’d snap up today.
Top penny stocks
The first company on my list is the home collected credit lender Morses Club (LSE: MCL). The business provides small loans of between £200 to £1,500 with interest rates of up to 498.34%.
Due to the ethical considerations of short-term, high-interest loans, some investors might not be interested in this enterprise. I fully understand this point of view. The sector has also faced significant regulatory headwinds in recent years, which have forced some of Morses Club’s peers out of business.
These risks aside, I’d buy the company for my portfolio of penny stocks considering its growth potential. According to its latest trading update, customer numbers at its digital division for both short- and long-term lending products increased to 40% in the three months ended 31 May. The total loan book balance increased 99%.
Based on these numbers, it seems to me Morses Club is on track to report a solid financial performance in its current financial year. This is why I’d buy the company for my portfolio of penny stocks despite the regulatory and ethical issues outlined above. It seems there remains a demand for these products, which the business is more than happy to meet.
Consumers also appear to rate Morses Club quite highly, with an average rating of 4.5 stars on Trustpilot.
Recovery play
The other company I’d buy for my portfolio of penny stocks is the waste-to-product group Renewi (LSE: RWI). This is a recovery investment, having reported losses in five out of the past six years.
It produced a small net profit of €11m for its 2021 financial year, although between 2016 and 2020, losses exceeded €300m. Unsurprisingly, group net debt has doubled during this period. There’s a risk that Renewi will never exit this cycle of losses and rising debt.
However, analysts reckon it will continue to earn a profit for the next two years. Current forecasts suggest net earnings will hit €58m by fiscal 2023.
These are just forecasts at this stage, and there’s no guarantee the company will hit the targets. Nevertheless, I’d add the shares to my portfolio of penny stocks, considering the firm’s recovery potential.
If Renewi can hit City growth targets, the stock looks cheap. It’s currently trading at a 2023 forecast P/E of just 9.
And even if the company struggles in the next few years, I am optimistic about its potential. The world is trying to move away from the throwaway culture, which means waste-to-product facilities could become more sought-after. This could work in Renewi’s favour. However, if the group fails to make the most of its facilities, a competitor with deeper pockets may step in and take over the enterprise.
