UK share markets continue to struggle for traction as we move into June. Concerns over rising inflation, and what action central banks might take to tame the beast, continue to dampen investor appetite. Demand for plenty of penny stocks has also been hit hard as the perception of risk rises across stock markets.
Such low-cost companies are already loaded with peril, according to many investors. This is because information and research can often be harder to come by for them than for larger-cap companies. This can limit the amount of detail one has to make an informed investment decision, or so it’s said.
Penny stocks are also considered high risk because their prices can shake wildly. Sure, they can balloon in price if good news surrounding a particularly company comes in. But they can also fall suddenly and sharply, and not necessarily upon the release (or indeed rumour) of bad news.
Why I like penny stocks
I personally don’t feel uncomfortable buying penny stocks for my own investment portfolio. This is because, like in life, the cream always rises to the top, as the saying goes. So while small caps like these might be prone to price volatility, over a long-term basis (say a decade or more) I can still be confident that they will have increased in price. Let’s not forget that US tech giant Apple traded inside penny stock territory below $5 well into the 2000s.
Provided that I can get hold of plenty of information on a particular UK share I’ll be interested in buying it if it looks good enough. In fact, with large swathes of the market happy to give penny stocks the brush off, those who are happy to load up on such low-cost shares can often pick up overlooked small-cap stars at great value.
2 cheap UK shares on my radar
With this in mind here are two top UK penny stocks I’d buy for my Stocks and Shares ISA in June. They both trade below £1 per share:
- Ryanair isn’t a share for the faint of heart. A worsening of the coronavirus crisis could keep its planes grounded for longer. However, I like the company’s considerable might in the fast-growing budget travel segment, a market which will be much less competitive when the coronavirus crisis passes. Besides, I think this UK share should have the balance sheet strength to survive more travel restrictions.
- Cairn Homes is another penny stock I’d buy for my ISA in June. As we are seeing in Britain, property prices in Ireland are rocketing thanks to a significant shortage of new homes coming to market. It’s a phenomenon I think should fuel profits at this Dublin-based housebuilder for years to come. Beware, though, that soaring building material prices could take a huge bite out of the company’s profits.