When it comes to penny stocks, there is an abundance of great companies to choose from. I’m not perturbed by threats like share price volatility, weak balance sheets and a lack of investor information.
These are problems that can affect even the most expensive and biggest UK businesses. Don’t forget that there are several penny stocks available to buy on the FTSE 100 today.
As a long-term investor, I don’t care what I’m asked to pay for a share provided that it offers decent value relative to its growth prospects. I’ll use the same investing principles to find attractive UK stocks whatever their price.
With this in mind, here are three great penny stocks on my watchlist today.
Record (trades at 80p)
Currency and derivatives manager Record is watching business boom at the moment. Latest financials showed pre-tax profits double in the six months to September as revenues soared 38% year-on-year. I’m backing the company to keep impressing as product launches continue and it bulks up its position in the fast-growing sustainable investing arena.
I think Record offers exceptional all-round value at current prices. As well as trading on a forward price-to-earnings growth (PEG) ratio of 0.3, it supplies a bumper 5.1% dividend yield. I think it’s a brilliant buy even though the massive competition posed by the finance industry’s big beasts is a threat that can’t be taken lightly.
Jubilee Metals Group (trades at 16p)
The business of exploring for metals and minerals, developing mines and finally producing those raw materials is exceptionally complex business. Problems are commonplace that can have a devastating impact on expected profits.
But I believe these dangers could be baked into Jubilee Metals’ share price right now. The platinum group metal (PGM) producer trades on a price-to-earnings (or P/E) multiple of just 8.6 times.
I actually think Jubilee Metals could be a great growth share to buy as PGM off-take increases. Primarily, I think it’s a great way to ride rising metal demand from the automotive industry. Larger and larger amounts of the stuff are needed in catalytic converters to filter out harmful emissions. Meanwhile, overall car production looks set to keep climbing as emerging markets become wealthier.
Severfield (trades at 69p)
Penny stock Severfield makes the fabricated steel that’s used to build bridges, stadiums, warehouses, airports, hospitals and everything in between. It currently produces 300,000 tonnes of the stuff per year from its sites in Britain and India.
And it’s well-placed, in my opinion, to ride the touted construction boom of the coming decades. Most recent financials showed pre-tax profit soared 20% between April and September.
Demand for Severfield’s product could suffer if the economy takes a bath. The company’s fortunes are tied closely to a strong construction industry, after all. But I think the company’s low forward P/E ratio of 9.3 times reflects this threat. Severfield also boasts a bulky 4.5% dividend yield today.