2 British penny stocks to buy

Rupert Hargreaves explains why he’d buy these two British penny stocks for his portfolio to profit from the UK’s economic recovery.

| 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.

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. 

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.

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

Investing Articles

Fools wouldn’t touch these 5 FTSE 350 flops with a bargepole – how come I own 3 of them?

Harvey Jones took a chance on three struggling FTSE 350 stocks in the hope that they'd stage a dramatic recovery.…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

How I’m trying to make a million from passive income

Invest as much as possible, regularly, and use the passive income to plough back into more shares. Here's how millionaires…

Read more »

Investing Articles

I’d buy 30,434 shares of this UK dividend stock to target £175 a month in passive income

A top insider has spent over £1m buying this 9%-yielding passive income share over the last year. Roland Head explains…

Read more »

Growth Shares

Should I buy Rolls-Royce shares for 2025?

Edward Sheldon’s missed out on the huge gains that Rolls-Royce shares have generated this year. But should he buy the…

Read more »

Investing Articles

30,000 shares in this FTSE 250 REIT could earn me £559 a month in passive income

Real estate investment trusts can be great passive income investments. And Stephen Wright likes one from the FTSE 250 with…

Read more »

Investing Articles

Down 24% and yielding 9.18! Is L&G the best passive income stock on the FTSE?

Harvey Jones is the first to admit that the Legal & General share price has had a poor year. But…

Read more »

Investing Articles

Warren Buffett just bought these 2 stocks!

Warren Buffett just invested $700m in these stocks! What’s the strategy behind them, and should investors think about following in…

Read more »

Investing Articles

£10 a day invested in UK stocks could create a second income of £40,000 a year!

Investing even a small amount of money regularly can generate a substantial second income stream in the long run. Zaven…

Read more »