These are testing times for stock market confidence. The largest military campaign since the Second World War has sent UK share prices sinking in recent hours.
Market volatility has been particularly severe for penny stocks as traders sell smaller and more financially vulnerable companies.
The immediate outlook for penny stock prices is packed with uncertainty as the crisis in Eastern Europe worsens. But as I recently explained, I plan to continue investing in UK shares, despite this near-term risk.
I’ll keep taking a long-term view and search for quality companies on course to deliver great returns. With some decent research I’m confident of finding top stocks that will deliver strong eventual returns, despite the impact of near-term market volatility.
AFC Energy
Take AFC Energy (LSE: AFC) for instance. I expect profits here to balloon over the next decade as demand for low-carbon energy soars. This penny stock not only manufactures hydrogen fuel cells, but it uses renewable sources to produce the gas rather than fossil fuels.
It’s been estimated that hydrogen cells using the latter emit larger emissions than coal and gas compared with AFC’s ‘green’ hydrogen. As a consequence, it threatens to become more and more unfashionable.
I am worried that AFC Energy probably won’t generate profits for many years. In that time it might be forced to take on lots of debt, or even tap its investors for cash.
Still, as a long-term investor, I could be persuaded to accept this risk and buy it. Research house Facts and Factors think the ‘green’ hydrogen market will be worth $1.42bn by 2026. That’s almost double its valuation in 2020.
I believe AFC’s sinking share price provides an opportunity for me to grab the stock at a bargain price. The energy business fell to fresh 14-month lows in recent hours and has halved in value over the past 12 months.
Jubilee Metals Group
I also think Jubilee Metals Group’s (LSE: JLP) share price also looks mighty attractive at current levels. The platinum group metal (PGM) producer has fallen by a more modest 6% during the past year. It has also dipped fractionally following Russia’s invasion of Ukraine, the prices of the precious metals it produces rising on strong safe-haven demand. This has helped limit the fall.
However, at recent levels, I think Jubilee Metals still looks mighty cheap on paper. The penny stock now trades on a forward price-to-earnings (P/E) ratio of just 10.5 times. I don’t think this rating reflects the fact that, like AFC Energy, sales look set to soar as the battle against climate change heats up.
Platinum and palladium are critical materials in reducing pollution from catalytic converters in cars. On the one hand, Jubilee Metals is therefore exposed to the supply chain crisis hitting auto production right now.
But to my mind, this danger is outweighed by the possible long-term rewards the company could reap as legislators demand more and more of its metal be loaded into cars to cut carbon emissions. I think its a top stock for me to buy.