A lot of UK share investors don’t like to invest their hard-earned cash in penny stocks. And I can fully understand why. Low liquidity means that the prices of these cheap shares can be massively volatile. Huge price drops are common when bad news emerges. It can also be harder to properly research such small-cap stocks as they tend to attract less news coverage and analysis than larger London-quoted shares.
Personally speaking, I have no issue looking for penny stocks to buy for my Stocks and Shares ISA. I buy UK shares with a view to owning them for many years, usually for at least a decade. And so the prospect of temporary share price volatility doesn’t put me off. If I can conduct a decent amount of research on a particular penny stock, and am confident that it has the potential to rise in value over the long term, I see no reason not to give it careful consideration.
It’s important to remember that investors like me should never invest any money they cannot afford to lose. And this is particularly the case with penny stocks. Sure, I might not be planning to sell my holdings in ‘x plc’ for a number of years. But if unforeseen circumstances arise I might be forced to sell much sooner than I anticipated. The price I get for these small-cap stocks could be much, much lower than what I paid for them.
2 penny stocks on my radar
That being said, let me talk you through what I think are two of the best penny stocks I think could be great buys for my Stocks and Shares ISA this June:
#1: Residential Secure Income. While penny stocks are riskier than UK shares with larger market caps, Residential Secure Income balances this out by operating in an ultra-defensive sector. This investment company invests in shared ownership and rental homes, two of the most stable segments of the property market. Indeed, rent collections here stood at 99% in the three months to March despite the ongoing public health emergency. This company isn’t without risk, of course, and its active approach to acquisitions could deliver problems later down the line if they fail to deliver the desired returns.
#2: Creightons. I also think that beauty products manufacturer Creightons could be one of the best penny stocks to buy. Manufacturers of personal care products like this also operate in extremely stable markets, providing investors with supreme peace of mind. In fact spending on these sort of goods is tipped for steady growth over the next several years at least. Mordor Intelligence thinks the UK skincare sector will enjoy compound growth of 5.2% a year through to 2024, for example. Creightons has the financial might to make the most of this opportunity, too, either by expanding manufacturing capacity at its Peterborough site or engaging in acquisitions. But remember that this penny stock operates in a highly competitive market and that success is by no means assured.