Okay, the economic outlook remains pretty muddy as the Covid-19 crisis rolls on. But I’ve already started thinking about which stocks to buy for the new bull market. I’ve already zoned in on a number of penny stocks (UK shares that costs less than £1 each) to buy for the inevitable economic upturn.
There’s pretty good incentive for me to start planning for the eventual bull market. The FTSE 100 doubled in value in less than a decade after the 2008 financial crisis. The value of the broader FTSE 250 more than trebled too. As a consequence many investors that bought cyclical shares in the depths of the financial crisis made fortunes as profits at many UK shares recovered strongly.
Of course, investors like me need to remain extremely careful as the pandemic continues. However, with the right amount of research I think it’s possible to find top stocks that should ride out the public health emergency and deliver excellent shareholder returns over the longer term.
Here are three penny stocks I’m considering buying in my Stocks and Shares ISA today for a new bull market:
#1: Ready for take off
The risks to UK airline shares like Ryanair have grown recently as Covid-19 cases spike in mainland Europe. This threatens to derail a profits bounceback as travel restrictions are extended and, in some cases, expanded. That said, Ryanair has one of the strongest balance sheets in the business to help it ride out this fresh turbulence. And the long-term outlook for the budget travel segment remains robust. Indeed, analysts at GlobalData reckon that “the low-cost airline model will lead post-Covid recovery and help revitalize demand.”
#2: Beauty queen
I think Creightons is another top penny stock to buy for the new bull market. History shows us that spending on discretionary goods usually recovers strongly during the early parts of an economic recovery. So I expect trading at this UK share — a manufacturer of beauty and personal care products — to pick up strongly in the near future. What’s more, I think the company’s ‘cruelty free’ goods and wide range of vegan products will fly as the importance of ethical shopping grows. Be warned though, Creightons operates in a highly-competitive environment and strong sales growth cannot be guaranteed.
#3: Home comforts
I’m also considering buying Topps Tiles in my ISA for the economic recovery. This isn’t just because of the likely uplift in broader consumer confidence once the Covid-19 crisis passes. A strong housing market in Britain should boost sales growth at the company too. UK home sales were 48.5% higher in February and I think ongoing government support and favourable lending conditions should keep the property market well supported. That said, Topps Tiles trades on a slightly-toppy forward price-to-earnings (P/E) ratio of 21 times. This could cause its share price to slump if sales disappoint for whatever reason.