I’m searching for the best cheap UK shares to buy for next year. Here are two penny stocks I think could be brilliant buys.
Gold star
I believe the stars could be aligning for gold to have a strong 2022. So buying producers of the precious metal like Pure Gold Mining (LSE: PUR) could be a good idea for me.
A worsening Covid-19 crisis could fuel strong gold price rises next year (the yellow metal struck record peaks above $2,000 an ounce in summer 2020 during the height of the pandemic). Runaway inflation as we enter the new year also bodes well for the safe-haven asset (US consumer price inflation just hit its highest since 1982).
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I’d also be encouraged to buy Pure Gold, given the progress it’s making at its flagship asset at Red Lake, Ontario. Production at the Canadian asset — which Pure Gold describes as “one of the highest-grade gold mines on the planet” — jumped 54% in quarter three versus the previous three months, thanks to improved grades and greater tonnage, to 9,260 tonnes. The gold miner is seeking throughput of 1,000 tonnes per day by mid-2022, versus 685 in the third quarter, as upgrades at the site kick in.
At current prices of 42p per share, Pure Gold Mining trades on a P/E ratio of 8.9 times for 2022. This sits inside the widely-regarded value benchmark of 10 times and below. Even though development and production problems are an ever-present threat, this low valuation makes the penny stock highly attractive to me right now.
A top renewable energy stock
Electricity generator Greencoat Renewables (LSE: GRP) is another top penny stock for me to buy for a potentially-volatile 2022. Our demand for electricity remains broadly constant, despite the onset of economic, political and/or social crises. So I’m not expecting profits here to fall off a cliff if inflation keep surging and/or the Covid-19 crisis worsens.
In fact, I’m expecting earnings at Greencoat to take off as green energy grows in popularity. So do City analysts who expect this UK renewable energy stock’s profits to soar 42% in 2022. BloombergNEF has suggested wind and solar combined could account for 15% of primary energy supply by 2030, and 47% by 2040. That compares with just 1.3% today, suggesting Greencoat could be a hot growth stock for the coming years.
Greencoat’s also a great income share, in my opinion. The defensive nature of its operations provide the stability to regularly pay big annual dividends. For 2022, its yield sits at a mighty 5.6%.
Shares like Greencoat Renewables aren’t without their risks, of course. Revenues can take a smack if the wind stops blowing and energy generation grinds to a halt. It can also cost a packet to keep wind turbines spinning and expenses can balloon following extreme weather events.
Still, it’s my opinion that — all things considered — this green UK share could prove a lucrative investment over the long term.
