Shopping for penny stocks allows me to dig up gems that other risk-averse investors have missed. Providing you’re willing to accept the possibility of some share price turbulence and do some extra research, I think buying low-cost stocks like this could be a good way to build a winning portfolio.
Here are three top-quality penny stocks on my radar today. With £1,000 in my pocket this is why I’d buy them for my investment portfolio.
Playing the property boom
Trading at OnTheMarket (LSE: OTMP) has exceeded analyst expectations in recent times. The business — which operates the OnTheMarket.com property listings website — is thriving as demand for residential properties soars in the UK. Revenues at the business rocketed 46% year-on-year in the six months to June.
A mix of favourable lending conditions and support for first-time buyers has persisted, and last month the average price rose above £250,000 for the first time, according to Nationwide. I expect homebuyer demand to remain strong in the short-to-medium term too, in spite of upcoming Bank of England interest rate hikes. I’d buy OnTheMarket to exploit this theme, even though listings giants Zoopla and Rightmove pose a significant competitive threat.
Turkish delight
Gold miner Ariana Resources (LSE: ARR) first came to my attention last year when it released a stream of positive exploration updates. Since then, news on its drilling programmes at its assets in Turkey, as well as from the assets of other Eastern Mediterranean mining companies in which it holds stakes, have remained extremely encouraging.
For example, latest drilling action from Venus Minerals in late October — in which Ariana’s stake could rise to 50% as part of an earn-in agreement — revealed that the Kokkinoyia sector at the Magellan gold and zinc project in Cyprus is “significantly more exciting deposit than initially thought.”
While a falling gold price could hit Ariana’s bottom line hard, I still think this penny stock is a great way to get exposure to the safe-haven precious metal.
A penny stock with ambitious plans
Budget greetings card retailer Card Factory (LSE: CARD) has ambitious plans to turbocharge revenues over the next five years. It plans to generate sales of £600m by financial 2026, up from the current peak of £451.5m recorded in 2020.
I think the business could make a decent fist of reaching this target for a couple of reasons. Firstly, it’s investing heavily in its digital operations to fully exploit the explosion in e-commerce. Secondly, value retail is tipped to be one of the megatrends of the decade as consumers demand more bang for their bucks.
Card Factory might not have things all its own way, of course. Online-only operators like Moonpig could provide a challenge to its growth target. So could fellow low-cost retailers like Cards Direct. But by offering the twin benefits of value and online I still think the penny stock could deliver impressive profits growth.