The threat of global stagflation is rising. And so I’m looking for top gold stocks to buy to capitalise on this. Egypt-focused penny stock Centamin (LSE: CEY) is one such share on my watchlist right now.
A blend of low growth and rocketing inflation (also known as ‘stagflation’) is the perfect scenario for bullion prices to rise. And last week economic data from the US and the eurozone added to fears that this is happening.
Latest news on this front came from Europe on Friday. It showed eurozone consumer price inflation hitting fresh record highs of 7.5% and GDP growth slowing to 0.2% in Q1. The outlook for gold (and by extension gold stocks) looks quite bright, in my opinion.
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BIG dividends
I like gold mining stock Centamin thanks to its decent value for money. At 92p per share the penny stock trades on a price-to-earnings (P/E) ratio of just 12.4 times.
This isn’t eye-poppingly cheap on paper. But I consider this to be an attractive figure given the encouraging forecasts for gold prices and the steps Centamin’s taking to supercharge production rates.
What’s more, at today’s prices Centamin carries a fat 5.1% dividend yield. If I bought physical gold or a gold-backed financial product (like an ETF) I’d receive no dividends at all.
Like any share Centamin exposes investors to some measure of risk. For example, profits forecasts could disappoint if gold prices fail to explode. Still, it’s my opinion that the outlook for this particular stock is skewed to the upside.
Brickability Group
I’d also buy Brickability Group (LSE: BRCK) shares for my portfolio in May. This is because it offers the sort of value that’s hard for me to ignore.
At 93p per share the building products provider trades on a forward price-to-earnings (PEG) ratio of just 0.3. Any reading below 1 suggests a share is undervalued.
Like Centamin, Brickability presents some danger to equity investors. Insolvency specialist Begbies Traynor said last week that the number of construction companies “in critical financial distress” leapt 52% year-on-year in the first quarter.
With the UK economy stalling, it’s possible that Brickability’s earnings forecasts could be downgraded. Still, it’s my opinion that its ultra-low valuation reflects this possibility.
A mega-cheap penny stock
Besides, over the long-term I think Brickability could be in great shape to deliver terrific profits growth.
Nationwide data last week showed that average home values continue to soar by double-digit percentages. This reflects the country’s huge housing shortage, which the government is aiming to solve by creating 300,000 new homes a year.
Firms like Brickability will play a massive role in this housebuilding revolution. I think I could make some excellent returns on the back of this.
