I’d buy these cheap penny stocks before the Stocks and Shares ISA deadline!

I’m on the hunt for cheap penny stocks to add to my shares portfolio before the ISA deadline. Here are two that are on my watchlist today.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The deadline by which Stocks and Shares ISA investors can max out their allowances for 2020/21 is fast approaching. It’s why I’m looking for some of the best penny stocks to buy for my own shares portfolio today.

As we here at The Motley Fool have explained: “If an equity’s share price sits under £1, it can be deemed a penny share”. And like any UK share, these companies can enjoy significant price gains over the long term. However, their cheapness also means that they can be prone to significant price volatility.

2 cheap penny stocks on my radar

That said, here are two British penny stocks I think could help ISA investors like me make big profits in the coming years:

#1: Bakkavor Group

At 98p per share, UK food producing firm Bakkavor Group (LSE: BAKK) falls just inside penny stock territory. I’d buy this British stock because the long-term outlook for the ‘food to go’ (or FTG) sector remains extremely bright.

Covid-19 lockdowns caused sales in this food segment to fall sharply in 2020 following a decade of strong growth. But analysts at Lumina Intelligence think that demand will bounce back strongly as the world comes out of hibernation. They think the British FTG market will be worth £22.3bn by 2023, up more than a billion pounds from 2019 levels.

Arrowings ascending on a chalkboard

Bear in mind that the rise of homeworking could hamper long-term FTG growth rates. A sharp uptick in unemployment could derail food-on-the-move demand too, and profits growth at Bakkavor in turn. But there’s plenty more that I like about this penny stock. Along with its commanding position in the soaring FTG market (Bakkavor supplies the top four food retailers in the country) the company is also accelerating its drive into the huge US and Chinese marketplaces.

On top of this, I think Bakkavor looks like a mighty attractive buy at current prices. City analysts think annual earnings will rise 15% in 2021 and by another 11% in 2022. Consequently the company trades on a forward price-to-earnings growth (PEG) ratio of 0.8. It sports enormous dividend yields of 5% and 5.6% for 2021 and 2022 respectively.

#2: Alliance Pharma

Alliance Pharma (LSE: APH) is another cheap UK penny stock I think deserves a close look right now. At current prices of 82p per share, the company trades on a forward PEG ratio of 0.9, also below the benchmark of 1 that can suggest a share is undervalued. City brokers think earnings here will rise 16% in 2021 and 12% next year.

I like Alliance Pharma because the outlook for global healthcare investment is extremely encouraging. And this particular UK share doesn’t carry as much risk as other drug manufacturers, as it acquires and sells products that have already passed the unpredictable initial development stage and been on the market for some time. Remember, though, that problems with its products can always be recognised further down the line. And this can have repercussions on the bottom line if regulators decide to pull their approval for the sale of its drugs.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Alliance Pharma. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

5 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he…

Read more »

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »