Today, I’m looking at three of the best ultra-cheap penny stocks to buy next month.
Gold star
2020’s Covid-19 outbreak proved that having exposure to gold as insurance against unforeseen catastrophes is a good idea. While stock markets crashed as investor confidence sank, demand for safe-haven assets like precious metals rocketed. Consequently, gold prices soared to record highs and investors in UK gold mining shares watched the value of their stock balloon.
Gold prices have slipped back from those peaks, but I think another charge higher could be around the corner. I expect prolonged US dollar weakness and inflationary fears to keep bullion prices bubbling nicely. Signs of renewed trade hostilities and setbacks in the pandemic battle could also spook people into buying gold.
Should you invest £1,000 in N Brown Group Plc right now?
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I’d buy penny stock Serabi Gold (LSE: SRB) to play this theme. Despite the risky nature of metals excavation that can hit profits, I think at 62.5p the company could be too cheap to miss. It trades on a forward price-to-earnings growth (PEG) reading of 0.6.
The plus-size penny stock
I also think N Brown Group (LSE: BWNG) could be one of the best stocks to buy for the next 10 years. This isn’t just because value retail continues to go from strength to strength, as I mentioned again recently. It’s because its brands such as Jacamo and Simply Be give the penny stock a leading position in the fast-growing plus-size clothing market. According to Allied Market Research, this market will be worth $696.7bn by 2027. That compares with $481bn in 2019.
It’s certainly true that retailers like N Brown face a colossal challenge as stock shortages worsen. According to the CBI, stock levels in relation to predicted sales are at their lowest since 1983. The body’s latest survey suggests stock levels will remain low in August as well. Still, at current prices, I think the UK retail share still looks mighty attractive. It trades on a forward price-to-earnings (P/E) ratio of just 7 times at current prices of 50.1p.
Growth + dividends
Cairn Homes (LSE: CRN) is another top penny stock that offers plenty of bang for a investor’s buck. City analysts think annual earnings at the Irish housebuilder will double in 2021. This means the company trades on a PEG 0.2. What’s more, at current prices of 92p, Cairn Homes carries a meaty 3.7% dividend yield, one that beats the 3% FTSE 100 average by a decent margin.
Just like in the UK, Ireland is suffering from an extreme shortage of new properties as homebuyer demand soars. Official data just showed average home prices on the Emerald Isles rise at their fastest pace for two-and-a-half years. And I expect sales to remain strong as interest rates in the country will likely remain at rock-bottom levels for some time. I’d buy Cairn Homes despite the damage an economic downturn could cause to the penny stock’s profits.
