3 penny stocks to buy in July

These penny stocks look pretty promising right now to Harshil Patel. Here, he looks at why he’d consider this promising trio of shares for his ISA.

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Penny stocks can offer great rewards to nimble investors like me. That said, with higher potential rewards comes greater risks. Even so, I’d consider these three penny stocks as a part of my diversified Stocks and Shares ISA.

In the driving seat

The first penny stock I’d buy in July is Vertu Motors (LSE: VTU). It’s the fifth largest car retailer in the UK with a network of 149 sales outlets across the country. It operates several dealership brands, but the one that most stands out to me is Bristol Street Motors.

It provided an update recently where it highlighted continued strong trading, driven particularly by the used cars segment. Its pleasing to see that it expects current trends to continue. This should bode well for the Vertu Motors share price, in my opinion.

That said, Vertu highlighted an industry issue at the moment where global chip shortages are causing supply problems for new vehicles. Although it’s a concern for new car sales, it’s also a key reason for robust used car sales. And it’s keeping used car prices elevated, helping Vertu further.

Risks also remain regarding Covid-19 disruption. There’s still much uncertainty around how consumers will behave once furlough payments come to an end.

Overall, this is a cheap penny stock, in my opinion. It trades on a price-to-earnings ratio of just 7 times forecast earnings. I like that it offers growing earnings in addition to a dividend yield of 3.6%.

Another car sector penny stock

For many of the same reasons as Vertu, I’d also consider Pendragon (LSE: PDG). It’s another car retailer. Differing from Vertu’s offering, Pendragon focuses on specialist and luxury franchises. It’s experiencing strong trading conditions too.

In its recent update, it highlighted a favourable environment in the used vehicle market. In particular, “supply constraints and pent-up demand have increased vehicle pricing, driving higher margins.” This sounds great to me.

A word of warning, however. As with Vertu, there continues to be uncertainty from Covid-19 restrictions and vehicle supply constraints. In addition, Pendragon makes the point that there could be some restriction of supply later in the year, with “vehicle order times already being extended”.

But I think broker upgrades are likely and there could be further upside to this penny stock.

Copper play

A riskier penny stock I’d consider buying for my ISA in July is Jubilee Metals (LSE: JLP). It’s supported by growing platinum group metal (PGM) prices. In particular it has substantial exposure to copper prices.

The outlook for copper looks promising, in my opinion. The global drive to green energy and the electrification of vehicles will require significant investment in renewable energy infrastructure. Much more copper is used in an electric car compared to an internal combustion engine.

In addition, copper prices could be supported by post-pandemic economic stimulus and infrastructure spending.

It’s worth noting that while the longer-term demand factors for copper look promising, penny stocks in the mining industry can be high-risk. Metal prices are volatile, and can fluctuate for a number of reasons. This is a significant potential risk for Jubilee’s earnings.

Overall, I’d consider buying Jubilee Metals for a small part of my ISA.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Pendragon and 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.

More on Investing Articles

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

Investing Articles

Down 15% today, is this FTSE 100 share too cheap for me to miss?

JD Sports' share price has tanked after the FTSE 100 share released another profit warning. Is this the opportunity I've…

Read more »

Investing Articles

Up 8% today, is this FTSE 100 growth stock a slam-dunk buy for me?

Halma's share price is soaring thanks to another headline-grabbing trading update. Is the FTSE 100 stock now too good for…

Read more »

Investing Articles

With a P/E ratio of just 10.5 is now a brilliant time to buy a cut-price FTSE 250 tracker?

Harvey Jones says a recent dip in the FTSE 250 leaves the index trading at bargain levels. One stock in…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

To build a passive income flow, I’d follow this Warren Buffett approach

Warren Buffett has set up passive income streams most people can only dream about. Our writer sees some practical lessons…

Read more »

Growth Shares

As the boohoo share price falls, could it become a penny stock in 2025?

Jon Smith outlines some of the recent problems involving the boohoo share price and considers if things could get even…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Here are the worst-performing FTSE 100 shares over the last 5 years

These five FTSE 100 shares have been complete duds over the last half decade. But is there potential for a…

Read more »

Investing Articles

Nvidia stock has tripled this year! Can it keep rising?

Nvidia's latest sales update showed strong growth and the stock's been on a tear so far in 2024. So is…

Read more »