Penny stocks are typically small companies, and as the name suggests, trade in pennies and not in pounds. Although some huge companies like Lloyds and Rolls-Royce trade in pennies, they are not typically considered penny stocks.
Penny stocks are thinly traded and often have sizeable spreads between the buying and selling price. They are also more volatile than larger stocks, owing partially to their smaller market cap.
So, here are two penny stock that I’m looking to buy for my portfolio.
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Steppe Cement
Steppe Cement (LSE:STCM) is a Kazakh cement maker that is listed on the London Stock Exchange.
It’s certainly not well known, but those who do know it are probably aware of its sizeable dividend yield. At today’s price, the yield is 9.46%. That’s double the FTSE average.
The group also announced impressive growth earlier this week.
For 2021, pre-tax profits rose 63% to $21.4m, up from $13.1m the year before. Revenue grew 13% year-on-year to $84.6m from $74.8m in 2020. Higher prices were partially responsible for the revenue growth. Production increased 3% to 1.69m tonnes from 1.65m tonnes.
Steppe said that the Kazakh cement market grew by 23% in 2021 and they 2022 growth to be at a similar level.
The firm said that it “wishes” to recommend a 5p dividend for the year, but were waiting on developments in Malaysia.
Long-term prospects look positive. The Prime Minister’s office has forecast strong demand for housing due to the outdated nature of existing dwellings, as well as an increase in the birth rate in the past two decades.
One thing that concerns me is the spread. I can currently buy for 38p but sell for 36p, meaning I’d need to see at least a 4% increase to get my money back.
Inland Homes
I’m also interested in Inland Homes (LSE:INL) despite the concerns about the UK property market.
In the year to September 2021, the company made £21m in profit, marking strong growth from 2020 when it made £12m. However, this is still below 2019, when the firm achieved £30.5m in profit.
The property market has gone from strength to strength since its last full year report. So, I anticipate results for 2022 to be particularly impressive.
Earlier this month, fellow housebuilder Crest Nicholson actually increased its forecast for the year. Likewise, Bellway noted that “ongoing positive price momentum continues to offset build cost inflation” too.
However, things might get a bit tougher for housebuilders in the near term as interest rates rise. The Bank of England raised rates by 25 basis points today, but more rate rises are expected. On top of this, there’s also a cost-of-living crisis and some fairly negative outlooks on economic growth.
But in the long run, I think demand for homes will remain strong. Numerous governments have failed to address the UK’s housing shortages. That’s why I’d buy shares in Inland Homes and hold it for the long run.
