I’m searching for the best cheap UK shares to buy as the stock market begins to crash. Here are two top penny stocks near the top of my shopping list.
A penny stock for the EV revolution
It’s obvious by now that electric vehicle (or EV) sales are set to explode over the next decade. Major carmakers are doubling down on the production of low-emission vehicles, a trend that bodes well for suppliers of key EV materials. This is why I’d buy Rainbow Rare Earths (LSE: RBW) for my shares portfolio.
This stock owns the high-grade Gakara neodymium and praseodymium project in Burundi, East Africa. These elements are then used to make the magnets that propel EVs along. To give an indication of the size of the market, the International Energy Agency (IEA) thinks electric car sales will surge to 15m in 2025 and 25m in 2030. This compares with the 3m low-carbon vehicles that rolled out of showrooms last year.
Buying mining shares like Rainbow Rare Earths can be risky business. Unexpected production problems can be commonplace, driving costs higher and hitting revenues hard. Still, it’s my opinion that the potential rewards on offer at this particular miner offset the dangers.
Golden oldie
The Old Mutual (LSE: OMU) share price fared particularly badly in November. It’s fallen a meaty 18% in just a fortnight as a direct result of the ongoing public health emergency. Investors first raced for the exits when the insurer warned it had taken a hit of ZAR6.6bn in the nine months to September due to excessive Covid-19 deaths.
The news worsened the sense of panic around Old Mutual when it subsequently emerged that the Omicron virus variant was spreading rapidly in Old Mutual’s key territory of South Africa. As I type, the financial services provider is now trading well inside penny stock territory blow 57p.
I think this recent drop could provide a decent dip-buying opportunity for me, however. The ongoing pandemic is something that shouldn’t be underestimated. But as a long-term investor there’s a lot I like about Old Mutual. First, I like its position as one of Africa’s most trusted brands, a critical quality when it comes to looking after people’s money.
8% dividend yield!
I also think profits here could jump because of rising wealth levels and historically-low financial product penetration in its emerging markets. Financial institutions in Africa now hold a whopping $1.41trn worth of assets, according to Statista.
Old Mutual now trades on a price-to-earnings (P/E) ratio of just 7.6 times for 2022. This is the sort of value for money that warrants serious attention in my book. Meanwhile the financial giant also sports a dividend yield just under 8%. Like Rainbow Earth Minerals, this is a penny stock I’m seriously considering loading up on today.