Penny stocks are not for everyone. These investments can produce high returns, but they can also lead to losses as well.
Despite their risks, I am happy to invest in these investments and here are five such stocks I would buy for my portfolio today.
Penny stocks to buy
There are two types of companies I am currently focusing on in my portfolio. These are recovery stocks and growth stocks.
In the second bucket, two penny stocks I would buy today are Assura and Record.
These two firms have very different business models. Record provides currency hedging and trading services. Meanwhile, Assura is a real estate investment trust that specialises in healthcare properties.
As healthcare spending in the UK rises, I expect Assura’s portfolio to expand. As these properties are usually let on long-term leases, with inflation-linked annual rent increases, I think the stock has enormous growth potential. The stock also offers a dividend yield of 3.8%.
At the same time, Record is seeing rising demand for its currency hedging services. Geopolitical uncertainty and central bank money printing have increased the demand for hedging products, and Record is taking advantage of this market environment.
Considering its position in the market and economies of scale, I expect this growth to continue. The stock supports a dividend yield of 5% at present.
As well as their growth potential, both of these penny stocks will face challenges as we advance. These include rising costs and additional regulations, which could depress profit margins and hold back expansion plans.
Recovery stocks
In my recovery stocks basket, I would buy The Fulham Shore, Hostelworld Group, and Everyman Media.
Technically, Everyman is not a penny share. However, I have decided to include it in my basket of penny stocks because this company, which has a market capitalisation of just £113m, is still a small cap.
Each of these three companies operates in a different industry. Fulham Shore managers the Real Greek and Franco Manca pizza business. Hostelworld owns and operates travellers’ hostels, while Everyman operates upscale cinemas.
I believe owning a basket of these stocks provides me exposure to all sections of the hospitality industry. As the economy reopens, I think one or all of these sectors will experience a recovery.
That said, I am all too aware that the government could re-introduce pandemic restrictions, which would stop all three companies’ recoveries dead. That is why I would own all three in my portfolio of penny stocks to spread the risk.
Still, all three firms have already reported robust trading since reopening. I think that could be a sign of things to come. Estimates suggest UK consumers have put away £150bn over the past 12 months. The hospitality sector could reap windfall profits as consumers return and start to splash this cash.
