The brickmaking behemoth

Grabbing exposure to the UK’s strong homes market is a great idea right now. And I think investing in building materials supplier Brickability Group (LSE: BRCK) is an excellent way for me to do this.

There’s a risk that homes demand will suffer when the Help to Buy equity loan scheme ends next spring. This has the potential to derail many first-time buyers getting on the property ladder.

But I’m not expecting government to stop supporting first-time buyers. Solving the housing crisis is a key issue with voters, after all. So Britain will need to keep building to solve the issue, meaning brick sales at Brickability should remain strong.

Hot homes demand

Indeed, cabinet minister Michael Gove this week touted introducing default protection insurance to help buyers without large deposits secure a mortgage. There are other levers that the government could pull to help first-time buyers from next spring too.

There simply aren’t enough homes to go around. Low interest rates, growing competition among mortgage providers, and (in all likelihood) ongoing government support should keep the industry well supported long into the future.

Expanding for growth

Pleasingly, Brickability remains active on the acquisition stage to make the most of what are likely to remain fertile trading conditions too. It bought timber specialist Taylor Maxwell and roofing giant Leadcraft last summer to boot its product ranges and geographic footprint.

And signalling more potential action on this front Brickability commented last month that its “acquisition pipeline remains strong”. The firm added that it is “assessing a number of potential opportunities”.

At 88p per share, Brickability today trades on a forward P/E ratio of just 11 times. Meanwhile, its dividend yield of 3.1% provides a bonus. I think this represents very good all-round value.

Another penny stock to buy

Copper consumption is also likely to balloon as global construction rates ramp up. In particular, demand for the red metal is tipped to soar as urbanisation rates in emerging regions accelerate.

This is why I’m thinking of investing in Phoenix Copper (LSE: PXC) right now. This penny stock (which trades at 48p) is developing the Empire mine in Idaho with a view to producing first material in H1 next year. The asset contains some 129,641 tonnes of copper.

There’s still some way to go before Empire is up and running. Any setbacks on this front could scupper analysts expectations that Phoenix will start making profits from 2023.

Still, I think the long-term outlook for copper demand still makes this penny stock a top buy today. Phoenix can expect soaring electric vehicle sales to bolster consumption of its product alongside booming construction activity.

Australia’s government also thinks refined copper demand will surge 31% between 2020 and 2030.

A blend of low growth and rocketing inflation (also known as ‘stagflation’) is the perfect scenario for bullion prices to rise. And last week economic data from the US and the eurozone added to fears that this is happening.

Latest news on this front came from Europe on Friday. It showed eurozone consumer price inflation hitting fresh record highs of 7.5% and GDP growth slowing to 0.2% in Q1. The outlook for gold (and by extension gold stocks) looks quite bright, in my opinion.

BIG dividends

I like gold mining stock Centamin thanks to its decent value for money. At 92p per share the penny stock trades on a price-to-earnings (P/E) ratio of just 12.4 times.

This isn’t eye-poppingly cheap on paper. But I consider this to be an attractive figure given the encouraging forecasts for gold prices and the steps Centamin’s taking to supercharge production rates.

What’s more, at today’s prices Centamin carries a fat 5.1% dividend yield. If I bought physical gold or a gold-backed financial product (like an ETF) I’d receive no dividends at all.

Like any share Centamin exposes investors to some measure of risk. For example, profits forecasts could disappoint if gold prices fail to explode. Still, it’s my opinion that the outlook for this particular stock is skewed to the upside.

Brickability Group

I’d also buy Brickability Group (LSE: BRCK) shares for my portfolio in May. This is because it offers the sort of value that’s hard for me to ignore.

At 93p per share the building products provider trades on a forward price-to-earnings (PEG) ratio of just 0.3. Any reading below 1 suggests a share is undervalued.

Like Centamin, Brickability presents some danger to equity investors. Insolvency specialist Begbies Traynor said last week that the number of construction companies “in critical financial distress” leapt 52% year-on-year in the first quarter.

With the UK economy stalling, it’s possible that Brickability’s earnings forecasts could be downgraded. Still, it’s my opinion that its ultra-low valuation reflects this possibility.

A mega-cheap penny stock

Besides, over the long-term I think Brickability could be in great shape to deliver terrific profits growth.

Nationwide data last week showed that average home values continue to soar by double-digit percentages. This reflects the country’s huge housing shortage, which the government is aiming to solve by creating 300,000 new homes a year.

Firms like Brickability will play a massive role in this housebuilding revolution. I think I could make some excellent returns on the back of this.

The Works said on Tuesday that “unauthorised access to its computer systems” had caused trading and operating chaos. Some of its stores were forced to close and shop deliveries halted.

The problem of cyber attacks worsened considerably during Covid-19 lockdowns. And it’s expected to keep growing strongly as the world becomes more digitalised.

Soaring sales

With a market cap of just £63m Corero Network Security doesn’t have the clout of the industry’s major players. It will have to work extremely hard then to succeed in this ultra-competitive sector.

But I’m impressed by the rate at which Corero is winning business. The tech giant added 44 new customers in 2021 and saw revenues soar 24% year-on-year. It said in January that its “strong momentum” has continued into 2022 too and that it is investing additional resources this year to bolster growth.

Worth the price

It’s important to know that Corero shares look expensive today. At around 12.75p the penny stock trades on a forward price-to-earnings (P/E) ratio of 141 times.

This is the kind of sky-high rating that might prompt a share price correction if company news flow begins to disappoint. For example if those competitive pressures start to hit revenues growth.

Still, it’s my opinion that Corero’s solid momentum — tied with the rate at which the cyber security market is tipped to keep growing — means that a premium share price is warranted.

Another great penny stock

Getting exposure to the housebuilding sector is another good investment idea today. Property prices continue to soar and Brickability Group (LSE: BRCK) could be a good way to exploit this phenomenon.

As you can probably gather Brickability makes the products that are essential in home construction. Many housebuilders are supercharging build rates as demand continues to exceed supply. A steady stream of positive industry data leads me to think that they’ll remain super busy on the construction front too.

Halifax data today shows average house prices up 11% year-on-year in March. A new record high of £282,753 was also up 1.4% from February, the largest on-month increase for six months.

A dirt-cheap UK share

Of course firms like Brickability could be hit by incoming interest rate rises in 2022. The Bank of England is tipped to step up rate hikes in what could be a blow to buyer affordability.

But so far rate rises and the increasing cost of living is failing to cool the British housing market. And besides, I think Brickability’s dirt-cheap share price reflects this threat.

At 93.5p per share the brickmaker carries a forward price-to-earnings growth (PEG) ratio of 0.3. This is well below the widely-regarded bargain watermark of 1. I’d happily buy Brickability alongside Corero Network Security right now.

Playing the gold price boom

Many gold-producing stocks have risen strongly as prices of their precious metals have ballooned. Shanta Gold (LSE: SHG) hasn’t recorded strong gains, however. Yet a look at the company’s share price suggests that it remains massively undervalued. Today its shares trade on a forward price-to-earnings (P/E) ratio of 7 times. I think this makes it a brilliant buy.

Demand for precious metals is rising spectacularly right now. Latest data from the World Gold Council showed holdings in gold-backed exchange-traded funds (or ETFs) rose 35.3 tonnes (or 1%) in February. The organisation thinks safe-haven demand for bullion could continue climbing too.

It says that “the risk of economic slowdown amid high inflation could complicate monetary policy decisions, further supporting investment demand for gold.” Central banks may have to maintain a landscape ultra-low rates following the Russian invasion of Ukraine. This would help gold prices and by extension Shanta Gold’s revenues.

Intensifying safe-haven demand has today driven gold to its most expensive since summer 2020, above $2,000 per ounce. Yet the tragic events in Eastern Europe aren’t the only reason why gold could keep climbing. Growing Covid-19 cases in China (which have just hit two-year peaks), for example, could also drive the yellow metal northwards.

My main concern for Shanta Gold is the highly-complex nature of its operations. Profits-sapping production problems can be common for miners. And this can have a significant impact on shareholder returns. In my opinion, though, this threat is reflected in the company’s ultra-low share price.

Another unloved penny stock I’d buy

Like Shanta Gold, the Brickability Group (LSE: BRCK) share price also offers terrific value right now. Today the building products manufacturer trades on a forward price-to-earnings growth (PEG) ratio of 0.3. This is well inside the benchmark of 1 and below that suggests a stock could be undervalued.

Brickability’s share price has been edging steadily lower since the end of 2021. And today it’s slumped to its cheapest for almost a year. This to my mind represents a great dip-buying opportunity. I think the rewards of owning this stock outweigh the potential risks that rising interest rates create for the housing market. Higher rates are bad for buyer affordability.

I’m encouraged by a steady stream of positive data showing how strongly UK homes demand continues to grow. Just today Nationwide said that homes prices rose at their fastest rate since 2007 as demand continued to outstrip supply. Average property values have now grown for eight months on the spin, according to the building society.

Britain’s major housebuilders are planning to exploit this fertile trading landscape by building their land banks and upping their production targets. This all bodes well for Brickability and its profits column. This is a penny stock that could thrive over the next decade as the building boom continues.   

A top contrarian share to buy

Recruitment and training business Staffline Group (LSE: STAF) has fallen to its cheapest for a year in recent sessions. As I type, it remains 9% lower than it was 12 months ago too. Investors have been selling because of fears that soaring inflation will derail the economic recovery and, by extension, the labour market.

This is a risk investors like me need to take seriously, though encouraging news surrounding the jobs market is helping to soothe my fears. And so I’m considering buying Staffline shares following the recent dip.

Last month the penny stock lauded its “strong new business pipeline” and said that important sectors like automotive, manufacturing, aerospace and travel are expected to continue recovering in 2022.

Since then, the Recruitment and Employment Confederation (REC) has echoed the positive outlook for the jobs market too. This week, it said hiring intentions for both permanent and temporary staff have continued to improve in recent months.

It might not all be plain sailing for Staffline however. The recruiter could suffer if labour shortages leave it with a lack of candidates to market. However, I still believe the possible rewards of me owning this particular penny stock outweigh the risks.

At current prices of 52p per share Staffline trades on a forward price-to-earnings (P/E) ratio of just 11 times. This offers serious value for money, in my book.

Another dirt-cheap penny stock

Building products manufacturer Brickability Group (LSE: BRCK) has also fallen sharply in recent days. And, like Staffline, it also offers attractive value for money today. At 93p, the business trades on a forward price-to-earnings growth (PEG) ratio of 0.3. This is well below the benchmark of 1 that suggests a stock could be undervalued.

Brickability’s share price has dropped 7% in value in just the past seven days. It’s slumped amid broader risk aversion on financial markets and fears that central bank action in the months ahead could hit demand for its product. Higher interest rates usually translate to a slowing of the housing market.

It’s still important to remember that Brickability’s shares are still more than a third more expensive than they were a year ago. This is because the outlook for UK house prices remains rock solid despite the risk created by higher interest rates. Indeed, Brickability said last month that its order book reflects the sense of optimism in the housebuilding industry.

I’m confident that lending conditions for first-time buyers will remain ultra supportive for years to come. And as a consequence, I think home construction levels will need to pick up to accommodate them.

Against this backdrop, I think brickmaker Brickability could deliver terrific profits for its shareholders.

Low-cost UK shares like these are often traded in large volumes because of their cheapness. This can result in huge share price volatility and an investor can see the value of their holdings vanish in the blink of an eye. The lion’s share of penny stocks are also pretty small — at least compared with most other listed companies — so the chances of failure can be higher when trading conditions worsen.

Why I like low-cost UK shares

Investors such as me need to be aware of these dangers. But, in my view, they don’t make penny stocks a sub-asset class to avoid. Like all UK shares they expose you and I to a higher level of risk than, say, investing in a bog-standard savings account. With some decent research though it’s possible to minimise the risk and separate the truly great stocks from the dangerous duds.

I like penny stocks because they often tend to be smaller companies that have plenty of room to grow. Sure, their business models and the markets in which they operate can often be highly untested. But if these companies get it right they can soar in value over a number of years and make their shareholders a fortune in the process.

US tech giant Apple is perhaps one of the most famous ex-penny stocks which has now taken on legendary status. As recently as 2009, the iPhone maker’s shares traded inside penny stock territory of below $5. Today, they change hands for $171.70 apiece.

3 penny stocks I’d buy right now

In this first of two articles I will reveal eight of what I consider to be the best British penny stocks to buy right now. Here are the first three low-cost stocks I’m considering snapping up for my own shares portfolio (look out for Part 2 of this analysis tomorrow).

Brickability Group

One way I’d seek to make money from the UK’s colossal homes shortage is to buy shares in Brickability Group (LSE: BRCK). The government will have to ramp up housebuilding activity over the next decade to meet strong and enduring buyer demand. I therefore expect profits at this brick-making penny stock to rise sharply.

Brickability is already making waves as housebuilders steadily ramp up their construction activity. Last month, the building materials supplier actually said trading was ahead of forecast for the year to March 2022. This follows news of “strong” order books across the business in December, and news that orders stood at record highs at Brickability’s roofing division.

Brickability doesn’t just make bricks. It also supplies doors, windows, flooring, and various other products that give it extra opportunities to capitalise on the homebuilding boom. And it has plenty of liquidity with which to boost its product ranges through acquisitions, a stage on which it has been active in recent times.

I like Brickability a lot, even though a downturn in the housing market is an ever-present threat. This could happen for example if the Bank of England raises interest rates sharply over the next couple of years.

Pendragon

Auto retailer Pendragon (LSE: PDG) could face revenue problems in the short-to-medium term if inflation continues to soar. Latest data from Barclaycard showed consumer card spending rose 7.4% in January versus the same month in 2020. This was the slowest rate of growth since April 2021.

Sellers of big-ticket items like new cars are particularly vulnerable when shopping budgets come under pressure. But I feel Pendragon’s used-car operations will help take the sting out of things. Cars remain essential commodities for many people and they will switch down to cheaper, pre-owned vehicles in tough times.

I like Pendragon because I think the number of electric vehicles (EVs) it sells will soar over the next decade. People are rapidly switching to these low-emissions vehicles on a combination of rising environmental concerns and increasing fuel costs. They’re tipped to keep rising in popularity too as they become cheaper to produce and, by extension, to buy as well.

The Climate Change Committee, an independent advisory body to the government, predicts there could be 18m EVs on British roads by 2030. That compares with the 400,000 or so right now. I think Pendragon’s one of the best-value penny stocks to capitalise on this booming industry. Today, the retailer trades on a forward price-to-earnings (P/E) ratio of below 7 times.

Atlantic Lithium

Metals miner Atlantic Lithium (LSE: ALL) is another penny stock whose profits could soar as EV sales balloon. The raw material it plans to pull from the ground in Ghana is widely used in the batteries that power these next-generation vehicles.

Mining for any natural resource is highly risky business. And it could be argued that Atlantic Lithium carries more risk than many others in the industry. Exploration work at its Ewoyya lithium project remains highly encouraging.

Indeed, progress on this front has lifted the share price 70% higher over the past year. But the business hasn’t actually pulled any of the material out of the ground yet. In the absence of any revenues it could be forced to take on more debt. It may even tap shareholders to continue its operations.

Still, it’s my opinion that Atlantic Lithium is worth the risk, given the rate at which lithium demand is tipped to boom. Analysts at Statista think annual worldwide lithium consumption will hit 1.79m tonnes by 2030. That’s up considerably from the 497,000 tonnes predicted for this year. The final figure could be even higher if lawmakers — many of which are straining to hit their climate targets — introduce fresh incentives to boost EV sales.

Bricakability’s stock is on the rise

Because of this, property and related stocks did well, like Brickability (LSE: BRCK), the concrete blocks and bricks manufacturer. Its share price is 104p as I write, close to its highest ever levels. The stock, which was publicly listed on AIM in 2019, has been a penny stock all along, and it is only in August this year that it rose above that level. It has stayed above 100p ever since. Let me put it another way. The stock has moved way past its pre-pandemic levels, which I often use as a guiding point to understand a stock’s progress since the pandemic. 

Solid results

And I reckon that there could be more growth in store for Brickability. Consider its latest results. The company reported a huge 197% increase in revenue for the six months ended 30 September 2021 compared to the same six months in 2020. Its pre-tax profits have also seen an impressive rise of 120%. 

These results have received a huge bump-up from its acquisition of Taylor Maxwell earlier this year, which adds to its portfolio of services that now include timber cladding. However, the company’s like-for-like revenue growth, which is adjusted for the impact of acquisitions, has also been robust at around 54% as well. I also like that it has made the acquisition without taking on a whole lot of debt. Its debt levels have barely budged from last year, because it was funded through an equity raise.

Positive outlook for the near-penny stock 

Brickability’s outlook is positive too. It expects that its full-year performance will be “at least” in line with what the market expects. I read that to mean that there is a good chance that it could actually be higher. It is also on an acquisition drive, which could see it expanding fast in the coming years. 

What I’d do now

With this strong showing, the stock does look somewhat pricey right now. Its price-to-earnings (P/E) ratio is 25 times, but it could well be the premium that investors are willing to pay for a high growth stock. I reckon that if the economy goes into a tailspin because of coronavirus or inflation or any other threat we can think of, a stock like Brickability could be impacted. And then buying at the present price might not seem like such a good idea. 

But going by both its profit-making capacity in the past and with a view to its future, I think it does look like a good stock for me to buy. Penny stock or not, this is one I like.  

Christopher Ruane:  Safestore

A quietly outstanding company I am eyeing for my portfolio is Safestore (LSE: SAFE). The self-storage operator continues to turn in strong financial results. Diluted earnings per share in its first half rose 75% and the dividend was increased 27%, compared to the equivalent prior period.

A simple business model, growing demand for storage space and its well-established brand mean that Safestore remains attractive to me. One risk is competitors pushing down profit margins in the industry. But I would be happy to tuck Safestore shares away in my portfolio in December and hold them for years.

Christopher Ruane does not own shares in Safestore.

Dan Appleby: Auto Trader

Auto Trader (LSE: AUTO) is the UK’s largest digital marketplace for vehicles. The share price has surged recently, and I expect this to continue in December.

The company has a wide economic moat (to steal a Warren Buffett phrase) from its extensive network effect across the UK. Looking ahead, recent successful price increases and new product launches should boost growth in the months ahead.

However, global supply chain issues may limit the stock of cars listed on Auto Trader’s website. The company has navigated this well until now, so for me, the stock is a buy.

Dan Appleby owns shares in Auto Trader.

Rupert Hargreaves: Restaurant Group

In December, I would buy shares in Wagamama owner Restaurant Group (LSE: RTN) for my portfolio as a recovery play. 

According to the company’s latest trading update, sales at its casual eateries are already outperforming the market. 

As we move into the critical Christmas trading period, I think the company should continue to see further growth. This should help support Restaurant Group shares. 

That is assuming there are no further coronavirus restrictions announced before the end of the year. This is probably the most significant risk hanging over the company right now. 

Rupert Hargreaves does not own shares in Restaurant Group.

Dylan Hood: HSBC

Amongst my best shares for December are HSBC (LSE: HSBA) — at the time of writing, HSBC shares are trading at 440p. This is over 25% less than its pre-pandemic level, offering great room for growth.

What’s more, the stock has generated 16% year-to-date returns. I believe this growth will continue regardless of the UK economy’s direction. If interest rates remain low, then increasing growth will help HSBC through increased lending. If rates rise, then the bank will be able to charge more on the loans it gives out.

Therefore, I think HSBC offers a good long-term addition to my portfolio.

Dylan Hood does not own shares in HSBC.

Nathan Marks: Unilever

Unilever (LSE:ULVR) is one of the few constituents of the FTSE 100 that looks likely to end 2021 in the red. Input cost inflation has strained profit margin expectations. However, I believe Unilever’s portfolio of household name brands have pricing power to pass inflationary costs on to customers.

The share price is down over 13% YTD at the time of writing, creating an attractive yield approaching 4%. 2021’s challenges will likely persist in 2022 but an astounding 2.5bn people use Unilever’s products daily. I see this as an excellent opportunity to buy a quality business at a discount.

Nathan Marks does not own shares in Unilever.

Edward Sheldon: JD Sports Fashion

My top stock for December is JD Sports Fashion (LSE: JD). It’s a leading retailer of athletic footwear and clothing.

There are a few reasons I’m bullish on JD right now. One is that in the US, major retailers are seeing strong growth at present. In November, both Macy’s and Kohl’s posted better-than-expected earnings and raised their full-year guidance. This is good news for JD, which has hundreds of stores across the US.

Another is that the company looks set to benefit from the shift to more casual clothing and footwear.

There are risks to consider, of course. One is the fact that major brands such as Nike are now going direct-to-consumer.

Overall, however, I think the risk/reward proposition here is attractive right now.

Edward Sheldon owns shares in JD Sports Fashion.

Kevin Godbold: Next

In November, retailer Next (LSE: NXT) posted cracking third-quarter results. However, the directors cautioned the fourth quarter would likely see lower sales.

Nevertheless, the guidance is for full-price sales to rise by 10% in the fourth quarter. And that’s despite pent-up demand likely declining. The directors said stock availability has “improved” but “remains challenging”. And the delays in the supply chain are being worsened by labour shortages. However, strong demand is offsetting stock limitations.

These are challenging times for Next. But the business looks fighting fit for a post-pandemic world and it’s one of my best shares to buy for December.

Kevin Godbold has no position in Next shares.

Paul Summers: Games Workshop

The relationship between fantasy figurine maker Games Workshop (LSE: GAW) and some of its followers has turned rather icy of late following the FTSE 250 member’s efforts to protect its intellectual property and stop fans from making animations featuring its settings and characters. The backlash, coupled with recent news of higher freight costs, means the shares have fallen almost 20% in 2021 at the time of writing.

I think this drop is overdone. Games Workshop remains a quality business with a dominant hold on a niche market. Considering the festive shopping season and the potential for colder weather/Covid-19 to keep people indoors, I reckon the stock could recover strongly in 2022. Half-year numbers are due mid-January.

Paul Summers has no position in Games Workshop

Royston Wild: Brickability Group 

I’d buy Brickability Group (LSE: BRCK) ahead of what could be an exceptional half-year trading update on Wednesday, 1 December. The former penny stock certainly impressed me in mid-October when it said like-for-like sales of its bricks between January and June were up 54% and 31% compared with the same periods in 2020 and 2019 respectively. 

I’m fully expecting demand for Brickability’s building materials to have remained strong in more recent months, too, thanks to the impact of low interest rates on new home demand. A word of warning, though: Brickability’s meaty forward P/E ratio of 22 times could prompt its share price to slump if trading conditions suddenly deteriorate. 

Royston Wild does not own shares in Brickability Group.

Investor appetite for low-cost UK shares like penny stocks has been particularly damaged by the worsening outlook. This is perhaps understandable as smaller-cap stocks (broadly speaking) don’t have the sort of financial strength as larger-cap ones.

That’s not always the case, of course. Indeed, I feel many economically-robust penny stocks have been unjustifiably sold off along with more vulnerable ones. The good news for me is that I’ve a chance to buy some brilliant shares at a knock-down price.

2 penny stocks on my radar

I think these UK shares are some of the best penny stocks to buy following recent selloffs:

#1: Cash rich

I can fully understand why Surface Transforms’ (LSE: SCT) share price has fallen 10% over the past month. The automotive industry has been particularly affected by supply chain disruptions and, more specifically, by a shortage of semiconductors. As a long-term investor though, I think this weakness represents an attractive dip-buying opportunity.

The number of high-wealth individuals is expected to rocket over the next decade. This means that sports car sales are also tipped to rise strongly, something which bodes well for Surface Transforms. The ceramic brakes it manufactures are widely used in the production of high-performance vehicles.

Surface Transforms had a reassuring £17.2m worth of cash on the balance sheet as of June. This should assuage any fears over the company’s flexibility should the car industry remain under the cosh. The penny stock’s healthy balance sheet should also help it to make good on its revamped manufacturing strategy.

It also plans to accelerate the development of its Knowsley factory to delivery £50m worth of annual sales by 2023. That compares with £35m today.

#2: Building materials

The Brickability Group (LSE: BRCK) share price recently fell below the £1 penny stock limit. Indeed, it’s down around 5% over the past month as concerns over rocketing inflation have fed concerns that the Bank of England could raise rates.

Increasing interest rates would certainly have an adverse impact on broader homes affordability, something that could filter through to affect construction rates. While the risks have risen I still believe that the brick manufacturer’s profits outlook remains extremely attractive.

Interest rates should remain ultra low compared to historical standards, after all. So I expect new homes demand to remain pretty robust. And support from government from first-time buyers remains in play of course.

Don’t forget that the government plans to create 300,000 new residential properties a year by the middle of the decade. And it’s taking steps to reduce red tape to make this a reality. So I expect Brickability to deliver excellent shareholder profits in the coming years.

Low-cost UK shares like these can be prone to bouts of extreme price volatility. But as a long-term investor this doesn’t put me off. The cream usually rises to the top, as they say. And by doing some decent research I can identify great stocks that should rise in value in the years ahead.

Here are two top ‘nearly’ penny stocks I’d buy for my Stocks and Shares ISA. They trade just above the penny stock limit of £1.

Block party

As an owner of Ibstock shares I think Brickability Group (LSE: BRCK) could be a great former penny stock to buy right now. As the name suggests this UK share generates profits by making bricks, though it also manufactures roofing, heating and plumbing products.

So, like Ibstock, I think it’s in great shape to make investors lots of money as the housebuilding sector booms. The housing ministry is aiming for 300,000 new homes to be created by the middle of the decade.

I also like this operator because of its aggressive approach to M&A. The business has snapped up timber and cladding specialist Taylor Maxwell and roofing expert Leadcraft in the last few months. And it recently embarked on fresh fundraising to keep its acquisition-led growth strategy moving.

A word of warning, though. At current prices Brickability trades on a high forward price-to-earnings (P/E) ratio of 23 times. This sort of valuation could cause the share price to plummet if trading begins to slow. A worsening economic landscape and rising interest rates could, for instance, damage housebuilding in the UK and consequently demand for Brickability’s building products.

Another ‘nearly’ penny stock on my ISA shopping list

Calnex Solutions (LSE: CLX) is another low-cost UK share I’d buy despite its premium rating. At 28 times, in fact, this stock’s P/E ratio sits even higher than that of Brickability’s. Still, I think the company’s improving position in a fast-growing market merits such a chunky premium.

Calnex makes specialised testing and measuring technology that allow telecoms companies to gauge the speed and reliability of their networks. It therefore has a huge opportunity for growth as these businesses invest heavily in areas like high-speed broadband and 5G. I’m also encouraged by the work Calnex has undertaken to enhance and develop its product ranges. Speaking of which, its new Paragon-neo platform is already attracting promising levels of pre-orders as the cloud computing and 5G spheres take off.

Profits at Calnex could take a hit if the global semiconductor crunch persists. Still, on a long-term basis I think the tech business still provides plenty to get excited about. I’d buy both this and Brickability in my Stocks and Shares ISA today.