The FTSE 100 and FTSE 250 are back on the front foot in early July as investor appetite for UK shares improves. I’m looking for some of the best stocks to buy as the global economy steadily recovers. And I’ve my eye on a number of penny stocks in particular.
Now a lot of people don’t like to trade in penny stocks. This is because their low cost can lead to severe price swings. However, as a long-term UK share investor, the prospect of extreme choppiness doesn’t discourage me from investing. I buy companies with a view to holding them for a decade, perhaps longer. Over this sort of time horizon, I can be confident the quality stocks I choose will rise in price, regardless of whether or not they trade below £1 when I buy in.
Besides, by seeking out penny stocks specifically, I can dig out some top-quality companies that the broader market has overlooked.
Should you invest £1,000 in N Brown Group Plc right now?
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2 penny stocks on my radar today
Here’s what I consider to be two of the best penny stocks to buy now. I expect them to soar in value in the years ahead:
#1: A top UK retail share
It’s true that competition in the clothing retail arena’s intense. But N Brown Group has a number of cards up its sleeve I think will lead to handsome profits growth over the long term.
Its online-only model will allow it to exploit the e-commerce explosion and keep down costs. The cheapness of its apparel will enable it to ride the fast-fashion wave to the full. And its focus on selling garments for plus-size and older consumers gives it the edge in two fast-growing ends of the market.
At current prices of 55.5p per share, this penny stock trades on a forward price-to-earnings (P/E) ratio of 8 times. I think this makes it too cheap to miss.
#2: Another tasty stock to buy now
Finsbury Food Group could face pressure in the short-to-medium term as Covid-19 rates rise sharply again. Profits at the breadmaker have suffered in recent times due to the closure of the hospitality sector. But, over a longer time horizon, I’m confident this penny stock will deliver great returns.
The opening of a new gluten-free bakery in Poland last year, for example, illustrates the company’s commitment to continental expansion. It also demonstrates Finsbury’s responsiveness to changing consumer diets (in line with rising environmental and health awareness) which also includes new product launches like its BOSH! range of vegan cakes.
Today, this UK share trades at 93.5p. This means Finsbury trades on a forward P/E ratio of 10.5 times, broadly in line with the widely-accepted bargain territory of 10 times and below.
This adds an extra layer of appeal in my book.
