Tharisa (6% dividend yield)

Platinum group metals (PGM) producer Tharisa (LSE: THS) offers very attractive value for money in my opinion. On top of that huge dividend yield, this penny stock trades on a forward price-to-earnings (P/E) ratio of 4.8 times. This is comfortably inside the widely-regarded bargain watermark of 10 times and below.

I think Tharisa’s profits could soar in the short-to-medium term because of rising inflationary pressure. Safe-haven metals like platinum tend to increase in price when inflation reduces the intrinsic value of paper money. But this isn’t the chief reason I’d buy Tharisa stock. I think it’s a great company to own as demand for environmentally-friendly technologies rapidly grows.

PGMs are used in increasingly vast quantities inside catalytic converters to clean up exhaust emissions. They’re also a critical component in the electrolysis process that produces green hydrogen. This carries plenty of potential for Tharisa as the world moves gradually away from fossil fuels. I’d buy this dividend stock even though a fresh economic downturn could hit industrial demand for its product.

Central Asia Metals (6.5% dividend yield)

Investing in mining stocks can be a dangerous business. The process of metals excavation is highly complex and a variety of problems can occur to stop production. Exploration and development work isn’t an exact science either, and issues on either front can also hit earnings forecasts hard. Mining shares can therefore experience times of extreme share price turbulence.

I still believe, though, that Central Asia Metals (LSE: CAML) — like Tharisa — looks attractive from a risk-to-reward perspective. Today the copper, zinc and lead producer trades on a forward P/E ratio of just 6.5 times. I like this particular commodities stock because it produces metal in Kazakhstan, a region where the number of people living in urban areas is rising rapidly and therefore so is demand for construction materials.

I’d also buy this stock because the metals it produces are essential in the manufacture of electric cars. This UK mining share then could see profits soar as demand for these low-emissions vehicles grow. KPMG reckons electric cars will account for around half of all auto sales by 2030.

Direct Line Insurance Group (7.6% dividend yield)

I think Direct Line Insurance Group’s (LSE: DLG) one of the most dependable dividend stocks out there. It’s been proven that spending on general insurance products remains strong even during economic downturns. This is especially the case when it comes to motor insurance, of course, given that it’s a legal requirement for drivers.

The defensive nature of its operations provides Direct Line with excellent earnings visibility and consequently the means to pay big dividends year after year. But what’s so special about this particular insurance business? Well I like the excellent customer loyalty that its heavyweight brands like Direct Line, Churchill and Privilege command. They give the company a distinct advantage. That said, they don’t remove the threat posed by competitors and this is a risk I need to take into account. 

But Direct Line’s excellent cash generation makes it one of the best dividend stocks to buy right now in my view. Not only is this enabling the insurer to pay above-average yields and to engage in share buybacks. It is also helping it to invest in its core operations and in technology to deliver growth.

ContourGlobal (7.7% dividend yield)

Power generator ContourGlobal (LSE: GLO) has the wind in its sails at the moment. In December it upgraded its profits guidance for 2021 thanks to better-than-expected performance from one of its Spanish natural gas plants. I don’t think this dividend stock’s just a great buy for today, though. I reckon it’s a good way to make money from soaring energy consumption around the globe.

ContourGlobal builds and operates power stations across Europe, Africa and Latin America. Demand for its services should hopefully grow as population levels increase and economic output in emerging markets takes off. I also like this particular energy producer because of its growing focus on renewable energy. This could help its share price rise over the long term as the theme of responsible investing takes off. 

But I’m aware that today ContourGlobal trades on a high forward P/E ratio of around 29 times. A premium share price always leaves a company in danger of sinking if earnings forecasts start to look a bit flaky. A project delay is one danger that could send ContourGlobal’s share price reversing sharply.

Bank of Georgia Group (8.3% dividend yield)

Rising interest rates mean that it might be a good time for me to think about buying some banking stocks. A higher interest rate means that banks can generate greater profits from their lending activities. But I’m not thinking about buying Lloyds, Barclays or any other UK-focused bank. I’d much rather invest in Bank of Georgia Group (LSE: BGEO).

This isn’t just because Bank of Georgia’s yield smashes those of the FTSE 100 banks either. Banking product penetration in the Eurasian country remains quite low compared with the West. At the same time the Georgian economy is tipped to grow strongly along with personal wealth levels. It’s a blend that is already supercharging earnings growth at Bank of Georgia (profits have risen 67% during the past three years, for example).

Of course, growing political instability in former Soviet territories could damage Georgia’s economic growth. But it’s my opinion that this threat is largely reflected in Bank of Georgia’s super-low share price. Today it trades on a forward P/E ratio of just 4.3 times.

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A renewable energy stock on my radar

Things are looking extremely sunny for renewable energy stock US Solar Fund (LSE: USFP) as we move into 2022. Industry analysts are expecting demand for green electricity to pick up the pace as the battle against climate change steps up.

In a recent report, Deloitte, for example, said that it expects growth in the US renewable sector to accelerate next year. It reckons the industry will grow as “concern for climate change and support for environmental, sustainability, and governance (ESG) considerations grow and demand for cleaner energy sources from most market segments accelerates”.

Government support for green energy specialists is particularly helpful in the States. This is another reason why I like US Solar Fund specifically — the assets it’s invested in are located in California, North Carolina, Utah and Oregon. I’d buy this penny stock even though the intermittent nature of solar power generation can often cause profits turbulence.

A great inflationary hedge

I’m also thinking of buying Solgold (LSE: SOL) to protect my portfolio from the ravages of inflation. This is because the precious metal the penny stock produces attracts greater buyer interest when fears over paper currencies rise, in turn pushing prices higher.

Latest data from the World Gold Council shows how investment in gold-backed ETFs is hotting up. But it’s not just individual investors who are ramping up their exposure to the safe-haven metal. Developed central banks have added to their gold reserves for the first time since 2013, the WGC notes, with Ireland and Singapore making their first purchases since 2008 and 2000 respectively.

The World Gold Council recently suggested that gold purchases from central banks could hit 450 tonnes in 2021. That’s up considerably from the 255 tonnes they collectively snapped up last year. I think there’s a good chance bank policymakers will keep bulking up their assets in 2022 and beyond too.

Another dirt-cheap UK share

Tharisa (LSE: THS) is another precious metals producer I think stands to gain from the inflation boom. Like gold, platinum group metals (PGMs) also rise in value when inflation increases. They could also keep moving northwards if the Covid-19 crisis continues to roll on. 

Conversely, though, values of the PGMs Tharisa produces could rise if the economic outlook brightens. This is because industrial demand for the dual-role metals would likely improve. In this way I think Tharisa’s a great way for me to hedge my bets.

Of course there’s no guarantee that gold or PGM prices will rise. They could reverse for a variety of reasons, spelling trouble for Tharisa and Solgold’s top lines. What’s more, profits could take a hit if production problems occur. This is an ever-present threat to companies like these. As things stand today, though, I think both are highly attractive from a reward-to-risk perspective.

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Despite their positive updates, their shares are still trading at discounts to their 52-week highs. Here’s what I like about these three businesses and their current valuations.

Cleaner energy future

I see platinum group metals (PGMs) miner Tharisa (LSE: THS) as a good play on a cleaner energy future. The automotive industry relies on the metals to control polluting emissions. Fuel cells and hydrogen purification are two of many other areas of demand.

Last week, the company reported record fourth-quarter production for its financial year ended 30 September. And it said it expects to further increase production in fiscal 2022.

Negatives and positives

Currently, a global semiconductor shortage has produced a drop in auto manufacturing. Due to this, PGM prices — and Tharisa’s shares — are off their highs of earlier this year.

Metals prices and operational risk can have a negative impact on the profitability of a miner like Tharisa. However, the company’s net cash balance sheet, increasing output, and the long-term cleaner energy future are all positives.

With the stock trading at a modest 10 times forecast 2022 earnings, I think now could be a good time for me to invest.

A recovery share to buy

I like that transport firm National Express (LSE: NEX) was growing strongly before Covid-19 struck. And that it’s won new contracts during the pandemic. I also think its proposed acquisition of Stagecoach is compelling.

Last week, it reported a continuing recovery in passengers and revenues. Other positives in the update included fully-hedged fuel through 2022 and into 2023, and wage agreements across the business.

Not on the open road yet

The company’s still being impacted to a degree by Covid-19 shutdowns. These have been localised and of short duration, but a winter resurgence of infections could be a drag on recovery. The company’s also having to work hard to mitigate the impact of an industry-wide driver shortage, and an ongoing tighter labour market in the US.

Still, for me, these risks to the pace of recovery are more than offset by National Express’ cheap rating. It’s another stock trading at an undemanding 10 times forecast 2022 earnings.

Attractive business

I think Avon Protection (LSE: AVON) also has an attractive business. It designs and manufactures life-critical respiratory mask systems, helmets and body armour for militaries and first responders.

The US Department of Defense (DoD) is an important customer. There’s some risk in this, but I reckon if you’re going to have a high exposure to any defence department, you couldn’t do much better than the US DoD.

It’s another share for me to buy

Avon issued a profit warning in August, due to order delays, supply-chain disruption, and the tight US labour market. It also reduced guidance for its financial year to September 2022.

But in an encouraging update last week, it said trading profitability for fiscal 2021 had been in line with the expectations set out in the August update. And that it goes into 2022 with a strong order book and commercial momentum.

I think this could be another good share for me to buy. It’s valued at around 20 times forecast 2022 earnings, but with growth of 25%+ pencilled in for fiscal 2023.

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One emerging market hero I’m considering buying in October is Russian retailer and penny stock X5 Retail Group (LSE: FIVE). A giant in Russia’s grocery sector, its brands include Perekrestok, the country’s biggest supermarket chain, and it has considerable exposure to the fast-growing convenience and online channels.

Revenues at the company jumped 10.7% between April and June. Particularly pleasing was news that e-commerce sales continued to soar. X5 is investing heavily in its digital operations, a drive that could pay off big time as Russia’s online retail industry is tipped for explosive growth.

I also like X5 because it operates in a more defensive area of the broader retail sector. This should leave it better protected than non-essential retailers if economic conditions deteriorate.

Though competition is intense and threatens future revenues, I think this penny stock’s a great share to buy as personal income levels in Russia rise. And particularly as we move into October.

At current share prices, X5 trades on a rock-bottom forward price-to-earnings growth (PEG) ratio of 0.3.

A penny stock for the green revolution

The Tharisa (LSE: THS) share price has declined sharply in recent weeks. And yesterday, it closed inside penny stock territory (97p) for the first time in 2021. I think this provides an attractive buying opportunity for long-term investors like me.

Mining giant Tharisa has slumped in value along with the prices of the platinum group metals (PGMs) it produces. Why? Well these elements are used in vast quantities to produce catalytic converters in cars and trucks.

Investors have sold out as the likely impact of semiconductor shortages on auto production — and consequently on demand for PGMs — could hit Tharisa’s profits hard.

It’s unclear at this stage how long these chip supply problems will persist for. But I still believe the earnings outlook for Tharisa remains very exciting.

The climate crisis means lawmakers are demanding higher quantities of PGMs be used in exhaust systems to better reduce emissions. Pollution regulations are set to tighten significantly in China in 2023, the world’s number-one car market. Fresh action by legislators in other parts of the world could be coming too as environmental concerns steadily grow.

Following that recent price decline, Tharisa’s share price offers great value, on paper. Today, the PGM producer trades on a forward price-to-earnings (P/E) ratio of just 4 times.

It’s a reading that more than reflects the threat of prolonged weakness in car production rates, as well as the complex nature of mining for metals which can damage earnings growth. So this is another penny stock I’d happily buy this October.

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A top penny stock

I think Shanta Gold (LSE: SHG) could be a great penny stock to ride to play the gold market. This isn’t just because the precious metals digger is taking steps to ambitiously bolster production levels. It’s also due to rising inflationary expectations which should steadily increase demand for non-paper currencies like bullion. Shanta Gold shares trade at 13p apiece.

Prices are soaring because of supply-side disruptions and labour market shortages. A survey by the New York Federal Reserve revealed how strongly inflationary concerns are growing on the back of this, its gauge of consumer expectations just hitting eight-year highs. It’s possible that central banks could keep this inflationary environment going for longer, too, if they maintain their ultra-loose policies to help the recovery.

Though remember that commodities prices can do down as well as up. Signs of progress in the fight against Covid-19 could hit gold prices again like it did at the start of 2021. A more bearish tone by central banks (and especially the Federal Reserve) could hit bullion prices as well, and by extension the bottom line at cheap UK share Shanta Gold.

Another top cheap UK share I’d buy

Tharisa (LSE: THS) is another cheap UK precious metals share I’d buy today. This is because the same drivers that I think will support gold prices will help platinum group metals (PGMs) remain strong. Tharisa changes hands at 110p per share.

There’s the issue of runaway inflation that could prompt a fresh pile-on into safe-haven metals. In addition, concerns over runaway prices in the US — and its impact on the domestic currency — would be particularly positive for expensive metals. These commodities are primarily traded on a US dollar basis. It therefore costs less in foreign currencies to buy PGMs when the greenback drops in value than it would otherwise.

There’s a string of other frighteners that could boost prices of platinum, palladium et al. Direct worries over the direction of travel in the fight of Covid-19 is one. Signs of worsening relations between major economies (and in particular with regards to trade) is another.

But I also think PGM prices will rise as demand for them from the automotive sector grows. New emissions standards coming into effect in China and Europe look set to turbocharge off-take in the near-term (the commodities are used in catalytic converters to reduce emissions). Demand could receive a further boost if, as expected, additional legislation to reduce carbon discharge comes into effect. I’d buy cheap  UK share Tharisa despite the difficulties of mining for metals which can have a big impact on profits.

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What’s more, the PGM price outlook seems strong for some time yet as the economic recovery gets under way. The World Platinum Investment Council thinks that the platinum market will remain in deficit in 2021 to the tune of 158,000 ounces (which is a good thing as prices are stronger if there is less of a given commodity to go around). The deficit will be created by solid jewellery, investment and industrial demand (driven by the auto sector rebound), the body reckons.

Why I’d buy this ‘nearly’ penny stock

Drawing raw materials out of the earth is always risky business for companies. Exploration, development and production work can often disappoint. And this can cause share prices to fall off a cliff. However, on this front I’m encouraged by the progress Tharisa has made in recent times. Indeed, mining and processing rates hit all-time highs in the three months to June, with production rising 9% to 39m tonnes.

Besides this, I think the near-penny stock is hard for me to ignore at recent prices. City analysts think annual earnings will rise 3% in the financial year to September 2021. So Tharisa trades on an ultra-low forward price-to-earnings (P/E) ratio of 3.3 times. The digger packs a good 4.8% corresponding dividend yield too.

A FTSE 100 dividend stock

Telecoms titan Vodafone Group (LSE: VOD) also falls just outside penny stock territory today. At 119p per share the telecoms titan trades just above the £1 ceiling. And just like Tharisa its shares seem to offer spectacular value for money too.

The number crunchers expect Vodafone’s earnings will soar 25% year-on-year during the 12 months to March 2022. Consequently the FTSE 100 firm trades on a forward price-to-earnings growth (PEG) ratio of 0.5. Any reading below 1 suggests that a UK share could be undervalued by the investment community.

Meanwhile Vodafone is predicted to keep its reputation as a generous dividend payer rolling on. The yield for fiscal 2022 thus clocks in at a mighty 6.5%.

There’s a lot I like about Vodafone today. It is well placed to benefit from the 5G rollout and the rising popularity of flexible working. It has great exposure to fast-growing regions of Africa (revenues at its Vodacom unit soared 27% in the three months to June, to €1.46bn). And the FTSE 100 firm has terrific cash flows and a strong balance sheet (following the flotation of its towers business) which it can use to keep paying monster dividends. I think it’s a great UK share for me to buy, despite the threat posed by intense competition in its global markets.

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That said, I have my eye on several British stocks I think could soar in value during the economic upturn. Here are a couple on my Stocks and Shares ISA radar today.

Catalytic colossus

I’m tipping platinum group metal (or PGM) producer Tharisa’s (LSE: THS) profits to rise strongly as the economic recovery takes hold. Consumer spending should rise across the board when conditions improve. Spending on cars in particular tends to rocket during the early stages of the economic cycle. This naturally bodes well for PGM-packed autocatalyst demand.

Prices of Tharisa’s product might not just increase because of recovering industrial demand, however. Rising concerns over soaring inflation during the economic recovery could also push uptake of hard currencies like precious metals.

There’s also the possibility that the US Federal Reserve will keep stimulus measures rolling and interest rates locked around record lows. This would have a negative impact on the US dollar. And in turn this would make it more cost effective to buy dollar-denominated commodities like the PGMs. Incidentally, the greenback just struck a three-week low against a basket of other major currencies.

All that said, there’s a major threat to UK platinum-producing shares like Tharisa. Electric vehicle sales are soaring all over the globe and are predicted to keep rising. This threatens to put a dent in autocatalyst production in future years, an industry which accounts for around 40% of total platinum demand.

City analysts think Tharisa’s earnings will rise 98% in 2021 though. As a result the mining giant trades on a low forward price-to-earnings (P/E) ratio of 5 times. Like all forecasts, this estimate could change based on future developments. So I have to bear this in mind.

A top UK tech share

A bumpy economic recovery would have huge ramifications for business investment. And this could have a significant impact on providers of IT services. That said, I don’t think demand for Kape Technologies’ (LSE: KAPE) services will suffer in the short-to-medium term.

This is because this UK share is an expert in the field of cybersecurity, an area on which companies are obliged to spend increasing amounts. The rate of online crime is rising so rapidly, in fact, that the US Labour of Bureau Statistics reckons employment of information security analysts will balloon 31% between 2019 and 2029. This, unsurprisingly, makes it one of the fastest-growing industries in the States.

It’s not all perfect, of course. City brokers reckon Kape’s annual earnings will fall fractionally in 2021. This leaves the business trading on forward P/E multiple of 21 times. That’s not the highest valuation among UK tech shares. But it’s a lofty-ish reading and therefore is a risk. It means that I could see a share price correction if trading at the company deteriorates.

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The muddy economic outlook isn’t stopping me from continuing to build my Stocks and Shares ISA, though. This is because there are still plenty of UK shares that I think could record big profits growth in 2021 regardless of the wider economic landscape. It’s also due to the fact that I invest with a view to making returns over a long-term time horizon.

2 UK shares on my ISA radar

It’s a bonus if they can provide faster returns, of course. Here are a couple of shares I’d happily buy for my own Stocks and Shares ISA that I think could start to do well in 2021.

#1: Tharisa

I have just explained why respondents to a London Bullion Market Association (LBMA) survey reckon silver prices will fly in 2021. The same investor concerns and macroeconomic factors (like low interest rates and a weak US dollar) that are anticipated to push the grey metal higher this year are expected to drive the prices of the platinum group metals (PGM) suite too.

The LBMA reckons that average platinum and palladium prices will rise 28.2% and 11.2% respectively in 2021. This creates averages of $1,131.50 and $2,439.10 for the two chief PGMs. The precious commodities are expected to benefit from improved car making as the economic recovery kicks in. And this bodes well for UK shares like Tharisa (LSE: THS), which haul the metals out of the earth.

There are significant risks to Tharisa, of course. The threat of production problems and spiralling costs are two ever-present problems for UK mining shares. Indeed, rampant Covid-19 infection rates and safety issues forced the company to shutter its operations at times in 2020. Still, in my opinion, the company’s low valuation makes it an attractive buy today. Tharisa trades on a price-to-earnings (P/E) ratio of 10 times for the fiscal year to September 2021.

#2: 4Imprint Group

I believe that marketing products maker 4Imprint Group is another good UK value share for 2021. This business trades on a forward price-to-earnings growth (PEG) ratio of 0.2. Any reading below 1 suggests that a stock is being undervalued by market makers.

I can understand why investors might be reluctant to pile into 4Imprint today. The prospect of a bumpy economic recovery could spell havoc for product orders at the company. But for the moment, trading continues to recover and January’s update showed its order intake improved to 70% of 2019 levels in the fourth quarter. This compares with a weekly average of 60% it recorded at the end of October. Advertising budgets recover quickly when economic conditions improve. And this could result in a blockbuster year at this UK share.

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For instance, I’ve talked about the huge investment appeal of platinum group metals (or PGM) producers like Tharisa (LSE: THS) quite often.

I’m excited about investment demand staying strong in a world of ultra-loose central bank policy undermining the perceived value of paper currencies. The Covid-19 crisis has also exacerbated huge economic and geopolitical uncertainty. And it means safe-haven demand for precious metals should stay robust too.

Car sales to snap back?

I’m also encouraged by the rate at which PGM demand is likely to rocket during the global economic upturn. You see, cars are among the best-selling big-ticket items during early stages of a recovery. This means demand for Tharisa’s product (which is used to reduce harmful emissions in exhaust systems) should surge. And increasing environmental legislation also means more and more metal is required in catalytic converters to drive down pollution.

On top of this, the use of platinum et al for other industrial uses like electronics and dentistry should also rise as the economy improves.

Platinum demand soars

My bullish take on UK shares like Tharisa has been reinforced by fresh research released by the World Platinum Investment Council (WPIC).The latest Platinum Quarterly report showed demand for the white metal rocketed 75% in Q3 from the previous three-month period. This compares with a 40% quarter-on-quarter rise in combined recycled and mined supply.

This means the WPIC expects a colossal 1.2m-ounce deficit in 2020. The body expects the material shortfall to persist in 2021 too, albeit by a reduced 224,000 ounces. The organisation expects bar and coin investment “to remain high by historical standards.” It reckons platinum demand from the auto sector will rise by a quarter year-on-year in 2021. And it says Chinese demand for platinum jewellery will rise for the first time in seven years as well.

A low-cost UK share with BIG dividends

Clearly, Tharisa’s earnings picture remains quite robust for the medium term at least. And this is reflected in the City’s earnings forecasts for the UK share. They predict a 96% earnings rise for the financial year ending September 2021. And this leaves the mining giant trading on a forward price-to-earnings (P/E) ratio of a very small four times.

A rock-bottom earnings multiple isn’t the only reason this UK share is a great buy for value, I feel. Today Tharisa carries a mighty 5% dividend yield as well. This is one top stock I reckon could be too cheap for growth and income investors like me to resist.

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The key to successful investing is to buy shares you think will be winners, not just today or tomorrow, but several years from now. That said, timing your buys in the hope of a share price spike is a shrewd way to give your returns an extra little bump. And, following the stock market crash, there are many undervalued UK shares which have plenty of scope for big share price rises in August.

A top-value UK share to buy now

I believe Tharisa (LSE: THS) is one of the best UK shares to buy right now. The PGM (platinum group metal) producer’s share price is down 15% since the start of the year. And, as a consequence, it trades on a forward price-to-earnings (P/E) ratio of just 8 times. It’s a reading that fails to reflect the possibility of booming precious metals prices in August (and beyond).

Investors in UK shares haven’t given Tharisa the time of day because of plummeting metal demand from the auto sector (platinum and palladium are used to reduce emissions in catalytic converters). I reckon these individuals have failed to reckon with both metals’ robust appeal as safe haven investments in uncertain economic times.

Gold and silver’s march to new multi-year highs grabbed the headlines last week. The PGMs have also gone on a tear though. Platinum barged through the $900 per ounce marker for the first time since late February last week. Palladium also soared to multi-month highs above $2,000. Rhodium also stomped to its highest since March above $6,800 per ounce.

The precious metals suite has boomed again on a cocktail of social, macroeconomic, and geopolitical worries. And they threaten to spill into August too, a scenario that would boost the prices of many UK shares like Tharisa. 

5% dividend yields!

As I say though, you should buy UK shares today with a long-term view. Buying them on the back of how they’ll perform in the short term is a recipe for disaster.

But this isn’t the case with Tharisa. The PGM giant can expect a long economic hangover from Covid-19 alone to keep demand for its metal in rude health. It can also expect low interest rates and subsequent inflationary concerns to boost the prices of hard currencies like the PGMs. A recovery in the auto sector will give demand for its product a shot in the arm too.

However, Tharisa doesn’t offer the biggest near-term dividend yields. For 2020, it sits at 1.4%. But the rate at which City analysts predict dividends to boom thereafter makes it one of the most exciting dividend-paying UK shares out there. This means the yield for 2021 sits at an enormous 5%.

I expect dividends to keep ripping higher further out too, as Tharisa’s bottom line explodes.

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