Penny stocks have an undeniable appeal. I get to buy a large number of shares in a company at dirt cheap prices. That however, cannot be the only criterion in selecting penny stocks. They should offer either capital gains or a solid passive income or both. The good news is, that right now I can spot at least three penny stocks that promise me at least capital gains for now.
Lloyds Bank: in tandem with the economy
The first one is Lloyds Bank, one of the most traded FTSE 100 stocks. It has a share price of 45p as of today. Its share price trajectory in the past two months has been disappointing, but over the past year its share price has still made strong gains.
I am bullish on the stock as economic growth kicks off. In the last quarter, the UK economy grew by more than 22% from the year before. This is a positive for banks that rely on loans’ demand for their business. Rising interest rates and high inflation can be a downer, but if growth is even faster, they need not be a threat.
Cineworld: entertainment returns
Cineworld is another stock I like, and have even bought. The FTSE 250 cinema chain had an awful last year. Its operations were limited and its debt levels increased, resulting in investor diffidence. At its present share price of 62p, the stock is back down to its December 2020 levels. Though, compared to the same time last year it is still ahead. And it is still significantly higher than the share price lows seen just before the stock market rally started last November.
I think it can perform better over the rest of the year as the improvements in its business become more evident. With the lockdowns now lifted, its cinemas back to almost full operations, a slew of potential blockbuster movies ready for release and audiences going back to cinemas in strong numbers, I think it is a matter of time before its share price lifts again.
Mitie Group: considerable confidence
The third stock I like is the facilities management and cleaning services provider, Mitie Group. Its share price is at 70p as I write, an impressive near double of what it was at this time last year. This implies that it may well be on its path to the pre-rights issue share price trajectory in July 2020, that resulted in a sharp drop in share price. That of course, was more a technicality than anything else.
Its share price can continue to rise over the rest of the year as well, going by its latest trading update. It says that it has “considerable confidence” for the next six months, which should bode well for it especially when the markets are buoyant. Unlike Lloyds Bank and Cineworld, I reckon that it is somewhat less dependent on the state of the economy, but a booming economy is still good for stocks across sectors.