Penny stocks have been badly hit as concerns over the global economy have ratcheted up in 2022. Fears that smaller companies like these don’t have the financial strength of larger-cap stocks — and thus the means to survive the impact of rocketing inflation on broader conditions — mean that many low-cost UK shares have sunk even further.
I think this represents an opportunity for long-term investors like me to nip in and grab some bargains. Here are two top penny stocks I think could deliver exceptional returns in the years ahead.
Steppe one for big returns
The tragic events unfolding in Eastern Europe has prompted some heavy selling of Steppe Cement (LSE: STCM) shares recently. The building product manufacturer operates neither out of Russia nor Ukraine. But the Kazakhstan-focused business could still be affected by economic and political spillover stemming from the war.
Steppe Cement’s share price recently ducked to its cheapest since autumn 2020. And this leaves the business trading on a forward P/E ratio of 3.9 times. It’s true that Kazakhstan’s economy could be indirectly hit by the sanctions that are being slapped on neighbour Russia. But as a long-term investor I believe the outlook for this penny stock remains compelling. And at current prices I think it’s a steal.
You see, I expect demand for Steppe Cement’s product to increase as levels of urbanisation rise sharply in Kazakhstan. Currently around 58% of the country’s population lives in cities, a number that its government aims to lift to 70% by 2050. Massive investment in building homes, infrastructure and utilities will be needed in the coming decades to make this target a reality.
Should I buy before a possible rebound?
A shortage of news on its MED3000 erectile dysfunction gel hasn’t helped the Futura Medical (LSE: FUM) share price. 2021 was a big year for the company as it received approval to begin clinically trialling its product in the gigantic US marketplace. It also received a CE mark from European regulators that could fast-track the gel’s rollout internationally. And Futura inked a series of agreements with licensing partners too.
It’s perhaps understandable that investor interest in Futura Medical has waned in the absence of fresh news. As a long-term investor, though, I’m thinking of using recent weakness as an opportunity to buy. Its fast-acting gel — which can be sold without the need for a doctor’s prescription — could be a game-changer in the rapidly-growing erectile dysfunction market.
Futura’s latest market update in December announced the commencement of six-month trials of MED3000 in the US. Obviously disappointing results during the trials could have a disastrous impact on the company’s share price. But this is a risk I might be willing to take given the scale of recent share price weakness (Futura has fallen more than a third in value since the start of 2022).