These cheap UK shares change hands just above the penny stock limit of £1. Here’s why I’d buy them for my own shares portfolio right now.
Safe as houses
I consider Residential Secure Income REIT to be one of the safest UK property shares out there. It works with local authorities and housing associations to put up shared ownership and buy-to-let homes. And so, unlike providers of retail, office, or industrial space, earnings tend to be mostly stable during economic upturns and downturns.
This former penny stock isn’t completely without risk as mass shortages of building products threaten to disrupt construction and drive up costs. Still, at a current price of 109p, I think it could be a share that’s too cheap to miss. It trades on a forward price-to-earnings growth (PEG) of 0.5 and carries a chunky 4.7% dividend yield.
Property powerhouse
Tritax Eurobox is another white-hot UK property share I’d buy right now. I already own this ‘nearly’ penny stock’s British cousin, Tritax Big Box REIT, in my shares portfolio. This is because its role as a provider of ‘big box’ logistics and warehouse spaces should allow it to generate big profits as e-commerce in the UK accelerates.
I think Tritax Eurobox (which trades at 119p) will prove a success too as online shopping in its core markets of Germany and Belgium is taking off too. Furthermore, this particular property stock’s entry into Poland also gives investors exposure to fast-growing emerging markets.
I’d snap up Tritax Eurobox despite the threat that changing trading rules following Brexit could pose to some or all of its tenants. This could have an impact on future rents.
Housebuilding hero
I own shares in a couple of the FTSE 100 housebuilders (Barratt and Taylor Wimpey, if you’re asking). And I think ‘almost’ penny stock Springfield Properties — which trades at 155p — is another great way to play the strong British housing market.
Construction rates in the UK are failing to get anywhere close to matching demand, sending property prices higher and higher. It’s true the withdrawal of the stamp duty holiday could come back to haunt this low-cost UK share.
Data already shows that property values are starting to cool. But I think the intensifying mortgage wars among Britain’s lenders could offset the loss of this and keep house buying affordable. As should ongoing government support via Help to Buy and rock-bottom Bank of England interest rates.
A former penny stock I’d buy
Convenience food manufacturers like Bakkavor Group have been hit hard by Covid-19 lockdowns during the past year. But with people beginning to get out and about again it can look forward to the ‘food-to-go’ industry resuming its breakneck growth of recent years.
Analysts at Lumina think the market will be worth £22.6bn by 2024, versus £15.3bn this year. Bear in mind though, a long battle against Covid-19 could derail these forecasts (and with it Bakkavor’s profits rebound) if lockdowns return. This ‘nearly’ penny stock trades at 118p.