I’m looking ahead to May and thinking about the best UK stocks to buy. Here are three top penny stocks I’m considering investing in next month.
Latin fever
Companies that produce the key metals present in electric vehicle (EV) batteries look set to thrive this decade. One such penny stock on my watchlist for May is Horizonte Minerals (LSE: HZM).
This commodities business has plans to pull vast amounts of nickel and cobalt from Brazil’s Vermelho and Araguaia projects in the next few years. Horizonte still has a long way to go before first production and this creates risks to shareholders. Problems on this front could ruin earnings forecasts and force fresh fundraising efforts.
In my opinion though, the prospect of exploding EV sales still makes Horizonte Minerals an attractive stock to buy. The growing scramble for cobalt for instance was underlined by the multi-year supply agreement General Motors signed with FTSE 100 miner Glencore this week.
A top gold stock
Buying gold stocks is another investing idea I’m entertaining for May. In particular I’m looking at Centamin (LSE:CEY) owing to its massive 5.1% dividend yield for 2022.
Precious metals prices soared again this week on news of another shocking jump in US inflation. Prices are rising sharply all over the globe too, and look set to continue doing so as the ongoing Covid-19 and Ukraine crises disrupt supply chains.
It’s not guaranteed that gold prices will rally again and give Centamin a significant profits boost. The US dollar could rebound, for instance, if the Federal Reserve hikes central rates more sharply than the market expects. This would hit bullion demand by making the shiny commodity more expensive to buy.
Still, it’s my belief the outlook for gold prices lie on the upside rather than the downside. So do analysts at TD Securities who believe gold could be poised to touch 2020’s record highs around $2,070 per ounce. Besides, at current prices, I think Centamin’s monster dividend yield is too good to miss.
A great fit
Buying retail stocks could throw up some shocks for investors in the short-to-medium term. A combination of sinking consumer spending and rising costs threaten to hit profits at these firms hard.
N Brown Group (LSE: BWNG) could be considered particularly risky right now as well. For one, it does not operate in a downturn-proof market like food or household goods. And its clothing business could lose customers to cheaper chains like Primark and Bonmarche too.
Still, over the long term, I think N Brown could deliver mighty profits growth. And following recent share price weakness I reckon it could be too cheap to miss. The penny stock currently trades on a forward price-to-earnings (P/E) ratio of 5.4 times.
Put simply, N Brown is a specialist in producing clothes for plus-size and middle-aged-and-older customers. These are two demographic groups that are growing strongly. And N Brown serves these customers with its popular brands such as Simply Be and Jacamo.
