Raising the roof

A colossal shortage of new homes is sending property prices through the roof (no pun intended!). This isn’t just a British phenomenon either. It’s why I’m considering buying housebuilder Cairn Homes (LSE: CRN).

Irish property prices are rising faster than they are in the UK due to a supply crunch. Latest government data showed the average home price in Ireland rocket 15.3% year-on-year in February. This was also the biggest jump for seven years.

A steady stream of positive market updates from Dublin-based Cairn Homes echo these supreme trading conditions. In March, the penny stock said that revenues leapt 62% year-on-year in 2021, to €424m, while gross margins leapt 350 basis points to 19.8%.

Cairn’s pre-tax profit soared 240% from 2021 levels as a result to €50.2m. And the business is seeking to supercharge build rates to between 5,000 and 5,500 homes by 2024 to capitalise on the fertile trading environment. The firm sold 1,120 homes last year.

A mega-cheap penny stock

I believe the future is extremely bright for Cairn Homes. Yet I don’t believe this is reflected in the company’s current valuation. At 93p per share, the builder trades on a price-to-earnings (P/E) ratio of just 8.5 times for 2022. This is a valuation that reflects the possible impact rising interest rates will have on Cairn’s sales, in my opinion.

One final thing: Cairn Homes carries a large 5.4% dividend yield at today’s prices too.

Good as gold!

News of rampant inflation continues to rattle investor nerves. The stock market sell-offs of recent days illustrate the scale of investor concerns right now. However this is an environment that I think plays into the hands of gold stocks like Centamin (LSE: CEY).

During periods of high inflation, gold prices tend to rise as the true value of paper currencies comes into question. And the current landscape is particularly promising for gold mining stocks too as elevated inflation accompanies low growth (also known as stagflation).

Latest gold investment data from the World Gold Council reveals how strong interest in safe-haven bullion remains. It says that global gold exchange-traded funds (ETFs) enjoyed inflows of 43 tonnes in April. This was the fourth successive month of inflows.

5.2% dividend yields

Buying Centamin shares is more risky than investing in physical gold itself. This is because profits-sapping operational problems can be a common problem for mining stocks.

Still, this is a risk I’d be prepared to take to get hold of Centamin’s big dividend yield. This sits at a mammoth 5.2% for 2022.

At 90.8p per share, Centamin also trades on an undemanding forward P/E ratio of 11.9 times. I think the gold stock’s excellent all-round value makes it, like Cairn Homes, a top penny stock to buy today.

Cairn recently reported that its revenues rocketed 61% in the six months to June, while its order book leapt to €655m from €214m at the start of 2021. Encouragingly, evidence shows that buyer demand has remained electrifying since then too. Average property prices in Ireland soared 12.4% in the 12 months to September, according to the country’s Central Statistics Office. This was also up from 10.9% in the previous month.

Big margins at Cairn Homes are also helping to drive profits right now (it expects a gross margin of 19% in 2021). However, I am aware that margins could start to recede if supply chain issues mean building material costs keep surging, hitting shareholder returns in the process.

Another housing hero

I think investing in Triple Point Social Housing REIT (LSE: SOHO) could be a good way to insulate myself against the danger posed by Omicron. After all, demand for the accommodation it provides (to people with special needs) remains stable during good times and bad. The business collected 100% of rents even as the Covid-19 crisis savaged the British economy.

Security isn’t the only reason I like Triple Point Social Housing. I also like the steps it’s taking to boost its property portfolio, the company adding a raft of new assets to its books for a shade under £30m last month. Such action will allow it to capitalise on the fast-growing specialised supported housing (SSH) sector to full effect.

Finally, I like Triple Point’s classification as a real estate investment trust (REIT). This ensures it has to pay a minimum of 90% annual profits out by way of shareholder dividends.  I’d buy the business despite the danger of overpaying for acquired assets which fail to deliver the desired rewards.

An electric vehicle penny stock

TI Fluid Systems is a UK share I bought last year to latch onto the electric vehicle revolution. And I’m thinking of investing in European Metals Holdings (LSE: EMH), which operates the massive Cinovec lithium project in Czechia. Most plug-in hybrid and battery-powered cars contain lithium-ion batteries, meaning European Metals can expect sales of its product to soar.

I’m also a fan of this company because it’s located slap bang in the middle of Europe’s carbuilding belt, making it simpler to sell its product to major manufacturers. Pleasingly, sales of low-carbon vehicles are booming in Europe. According to ING Bank, new registrations leapt 41% in the five years to 2020, beating the US and its figure of 28% by a wide margin.

The European Metals share price could suffer if development of Cinovec hits trouble, of course. However, all things considered, I think the reward-to-risk profile of this penny stock is highly attractive.

Housing hero

Cairn Homes (LSE: CRN) is a great way to play the chronic homes shortage in Ireland, in my opinion. Sure, profits at the business are in danger from strong and sustained cost inflation as supply chain issues persist. But to my mind, the probability that Irish house prices will continue to soar makes this penny stock a brilliant buy. I think low interest rates will continue to turbocharge buyer demand and by extension property values.

Latest financials showed Cairn’s sales soar 61% in the six months to June. Meanwhile its order book leapt from €214m at the start of 2021 to €655m by the midpoint. Pleasingly the business is hiking construction rates to capitalise on this fertile landscape, too. It aims to sell 1,450 home completions in 2022, up from a predicted 1,100 for this year. Cairn Homes trades just below the penny stock limit around 98p per share.

A top electric vehicle stock!

Encouraging operational updates from European Metals Holdings (LSE: EMH) is prompting me to give the penny stock serious consideration. This mining business operates the Cinovec lithium and tin project in north-west Czech Republic. It’s therefore in one of the prime places to capitalise on soaring demand for lithium-ion batteries as European electric vehicle sales grow.

As I say, news coming from European Metals has been extremely bright of late. In October’s most recent update the penny stock upgraded its resource estimate for Cinovec to 7.39m tonnes of lithium carbonate equivalent following fresh drilling work. That’s up from a prior prediction of 7.2m tonnes. European Metals has plenty of potential, then, though problems with the development of Cinovec could significantly hit profits projections and cause the share price to slide. Today European Metals trades at 80p per share.

A penny stock for the online shopping boom

I bought Tritax Big Box REIT and Clipper Logistics last year to make money from the e-commerce explosion during and after the Covid-19 crisis. These UK shares provide logistics and warehousing services to help businesses get their product direct to their customers. I also think DX Group (LSE: DX.) could be a great way to ride this theme.

Okay, DX might be a little fish compared to those other two. But it is expanding rapidly to exploit the fast-growing online shopping market, and has opened new depots in Dewsbury, Luton, Verwood, and Burnley in the last three months alone. I’m confident that the company’s solid cash generation should pave the way for sustained expansion too. DX Group trades at 29p per share, and I think it’s a top buy despite the threat posed by HGV driver shortages to its operations.

Legislative changes across developed and emerging markets require higher loadings of these metals in car exhaust systems. The escalating climate emergency means that regulations could become even tighter too.

PGM production at Jubilee is soaring (up 23% year-on-year in the first six months of 2021). And the company’s investing heavily in its operations like expansion of the Inyoni PGM facility to boost long-term output.

It’s important to remember that raw materials production is highly complex business. Costs can balloon and output levels can disappoint, dealing a huge blow to profits. Still, in my opinion, this South African mining giant’s risk-to-reward profile is highly attractive.

A model penny stock

The surging number of hobbyists during recent Covid-19 lockdowns makes Hornby (LSE: HRN) an attractive penny stock to buy today. In fact, soaring demand of its miniature railways and model kits from people in lockdown gave the company’s recovery from the travails of previous years a serious boost.

Indeed, Hornby’s latest financial statement last month indicated that “our outstanding order book is very strong and substantially higher than a year ago.” Okay, the company’s rebound might be blown off course by supply chain problems and a weakening of consumer confidence.

However, I find the thumping brand strength of products such as Corgi die-cast miniature cars, Scalextric slot car racing packs and its own-brand railway kits extremely reassuring, a quality that should help it to ride the worst of these problems. I expect them to remain hugely popular with hobbyists for decades to come.

Making money with the housing market

The shortage of new homes entering the market in Britain represents plenty of opportunity for UK share investors. I own stakes in Barratt Developments and Taylor Wimpey. They’ve made me solid returns as supply and demand imbalances have pushed property prices through the roof (no pun intended). But I also have an opportunity to play the favourable Irish residential property market with London-listed stocks. Cairn Homes (LSE: CRN) is one such share I’d buy today.

This Dublin-based business said last month that “demand for new Cairn homes, across all price points from entry level starter homes to trade-up/down, has never been stronger.” Cairn Homes, which is taking steps to build 2,500 new homes a year by 2022 to exploit this trend, saw revenues rocket 61% in the first six months of this year.

While the penny stock’s profits could be hit by soaring building products costs, I’m encouraged by news that house price inflation continues to outstrip the rate at which raw materials are rising in price. I’d happily buy Cairn alongside Hornby and Jubilee Metals in November.

And I’d be happy to snap up penny stock Cairn Homes (LSE: CRN) as the housing market in Ireland, just like in the UK, is suffering from severe property shortages that are sending newbuild prices through the roof.

Cairn Homes said in July’s most recent update that “demand for new homes has never been stronger and the lack of supply has never been more acute.” This explains why the penny stock’s closed and forward pipeline rose to 1,530 units as of June, up 65% in just four months.

I’m expecting another positive trading statement when half-year results come out on 9 September, given the steady slew of encouraging news on the Irish housing market.

City brokers think Cairn Homes’ annual earnings will double in 2021. This leaves the company trading on a rock-bottom price-to-earnings growth (PEG) ratio of 0.3 at current prices of 95p. This makes it too cheap for me to miss, in my view, despite the threat posed by soaring building materials prices.

The FTSE 100 fashion star

I believe JD Sports Fashion (LSE: JD) could be a top FTSE 100 stock for me to buy before its next financials come out on 14 September.

The retailer’s results have remained mightily impressive recently as the growth of flexible working has turbocharged the already-impressive rise of the athleisure clothing segment. The strength of JD Sports’ online proposition has also helped the Footsie firm’s profits remain solid, despite the closure of its stores during Covid-19 lockdowns.

I’m also encouraged by the FTSE 100 firm’s expansion into foreign territories and, in particular, its push into the US.

Analysts think JD Sports’ earnings will rise by 20% and 17% in the fiscal years to January 2022 and 2023 respectively. But be aware that the UK retail share trades on a high forward P/E ratio of around 24 times. This leaves it in danger of a share price correction if news flow surrounding the company disappoints.

Another great penny stock

I also believe Safestyle UK (LSE: SFE) could be a top UK penny stock to buy before next month. Recent trading at the window and door supplier has been extremely strong. And I expect another excellent market update on 23 September. Safestyle upgraded its profits expectations at its last investor announcement a few weeks ago.

It’s true that supply chain issues could hit Safestyle’s sales in the months ahead. Still, I believe the outlook for this penny stock over the longer term remains robust. The home improvement market remains solid as broader consumer spending steadily improves. And, as I said earlier, the housing market in the UK is extremely bubbly right now.

So Safestyle could continue to benefit from solid spending on pre- and post-sale renovations. Today, this UK share trades at 54p.

Gold star

2020’s Covid-19 outbreak proved that having exposure to gold as insurance against unforeseen catastrophes is a good idea. While stock markets crashed as investor confidence sank, demand for safe-haven assets like precious metals rocketed. Consequently, gold prices soared to record highs and investors in UK gold mining shares watched the value of their stock balloon.

Gold prices have slipped back from those peaks, but I think another charge higher could be around the corner. I expect prolonged US dollar weakness and inflationary fears to keep bullion prices bubbling nicely. Signs of renewed trade hostilities and setbacks in the pandemic battle could also spook people into buying gold.

I’d buy penny stock Serabi Gold (LSE: SRB) to play this theme. Despite the risky nature of metals excavation that can hit profits, I think at 62.5p the company could be too cheap to miss. It trades on a forward price-to-earnings growth (PEG) reading of 0.6.

The plus-size penny stock

I also think N Brown Group (LSE: BWNG) could be one of the best stocks to buy for the next 10 years. This isn’t just because value retail continues to go from strength to strength, as I mentioned again recently. It’s because its brands such as Jacamo and Simply Be give the penny stock a leading position in the fast-growing plus-size clothing market. According to Allied Market Research, this market will be worth $696.7bn by 2027. That compares with $481bn in 2019.

It’s certainly true that retailers like N Brown face a colossal challenge as stock shortages worsen. According to the CBI, stock levels in relation to predicted sales are at their lowest since 1983. The body’s latest survey suggests stock levels will remain low in August as well. Still, at current prices, I think the UK retail share still looks mighty attractive. It trades on a forward price-to-earnings (P/E) ratio of just 7 times at current prices of 50.1p.

Growth + dividends

Cairn Homes (LSE: CRN) is another top penny stock that offers plenty of bang for a investor’s buck. City analysts think annual earnings at the Irish housebuilder will double in 2021. This means the company trades on a PEG 0.2. What’s more, at current prices of 92p, Cairn Homes carries a meaty 3.7% dividend yield, one that beats the 3% FTSE 100 average by a decent margin.

Just like in the UK, Ireland is suffering from an extreme shortage of new properties as homebuyer demand soars. Official data just showed average home prices on the Emerald Isles rise at their fastest pace for two-and-a-half years. And I expect sales to remain strong as interest rates in the country will likely remain at rock-bottom levels for some time. I’d buy Cairn Homes despite the damage an economic downturn could cause to the penny stock’s profits.

Building huge profits

Cairn Homes (LSE: CRN) is a penny stock that I’ve had my eye on for a long time. I have exposure to the strong UK housing market through FTSE 100 stocks Barratt and Taylor Wimpey. And I’m thinking of riding the robust Irish market too by snapping up Cairn for my ISA.

“Demand for new homes has never been stronger and the lack of supply has never been more acute,” Cairn announced this month. And the Dublin-based company is turbocharging build rates to make the most of the country’s severe homes shortage. It aims to build 2,500 new homes by the end of next year. I think the UK share is a great buy despite the pressure that rising building product prices is placing on its bottom line.

A high-risk penny stock?

Will the solid economic recovery in Britain supercharge profits at Staffline Group (LSE: STAF)? A KPMG survey showed the rate of job hiring on these shores hit 23-year highs in June as Covid-19 lockdowns eased. This might be seen as a good omen for this UK share. Staffline provides blue-collar workers in a vast array of industries like farming, driving, retail, food production, logistics and manufacturing.

I’m not so sure that Staffline is the slam dunk that it might appear at first glance, though. This isn’t just because the rampant Delta variant is pushing Covid-19 infection numbers higher again, a rise that is casting huge doubt over the economic rebound. It’s also due to the number of available workers in the UK slumping at their fastest pace on record. This is a problem that could persist too following stricter immigration rules following Brexit.

A better ISA buy

For this reason I’d hold off buying Staffline shares today and use my money to snap up Serabi Gold (LSE: SRB) instead. Buying UK shares which dig metals or drill for oil is high risk as their complicated operations can be prone to profit-sapping setbacks. As well, natural resources stocks are also vulnerable to sharp falls in the prices of the commodities which they produce.

That said, I think Serabi could be a great penny stock to add to my Stocks and Shares ISA. This is because I expect gold prices to remain strong for a long time yet. I think concerns over high inflation will remain as central banks will likely keep their ultra-loose monetary policies in place. There’s also the threat of a long and lumpy economic recovery following the coronavirus crisis that could fuel demand for safe-haven assets too.

And finally, I’m encouraged by the string of positive exploration updates which Serabi has published since the turn of 2021 as well as the company’s impressive production levels. The UK mining share pulling 16% more gold out the ground that it had been expecting during quarter one.

Growth stocks on my radar

The first stock is homebuilder Cairn Homes (LSE: CRN). This Ireland-based construction company is expected to return to growth this year after earnings plunged in 2020. 

It looks as if the group is already making solid progress on this front. According to its latest trading update, Cairn generated €131m in revenue from 403 closed new home sales in the first half of its financial year. That compares to €81m from 207 closed sales in the prior-year period. 

Management believes this means the company is back on track to hit its 2023 growth target. It expects to generate €350m-€400m in operating cash flow by 2023. The organisation wants to return a large percentage of this cash flow to shareholders and invest for the future. 

Overall, City analysts expect the group to report net profits of €31m for 2021 and €60.1m for 2022, which will be the highest level in five years. 

Of course, there’s no guarantee the company will hit these growth targets. Nevertheless, they show its potential. 

Challenges the company might face in hitting these targets include a housing market slowdown, which could dent buyer demand for properties. An increase in interest rates may also reduce buyer demand. 

Despite these challenges, I think Cairn’s recovery is encouraging. That’s why I’d buy the company for my portfolio of growth stocks today. 

Gaming boom

While Cairn will provide exposure to the economic trend of rising home and property prices, I’d also buy Frontier Developments (LSE: FDEV) to gain exposure to the gaming industry. 

The online gaming industry is growing rapidly and you only need to look at the company’s results for confirmation of just how fast. For its 2020 financial year, Frontier reported revenues of £76m. And in a trading update published at the beginning of June, management noted that it expects revenue for its current financial year to range £130m to £150m. 

Further growth is expected in 2023. Management is projecting revenues of between £160m and £180m. 

These forecasts are based on several assumptions. The major ones are that the company can release its current pipeline of games on schedule and that consumers decide to buy the products. But if products are delayed, and demand is lower than expected, the firm may miss these forecasts. 

Still, I think they show its potential. That’s why I would buy Frontier for my portfolio of growth stocks. If the company can pull off its planned launches over the next few years, it’ll have a solid base from which to grow far into the future. 

With that in mind, here are two high-growth stocks I’d buy for my portfolio today. 

High-growth stocks to buy 

The first company on my list is Cairn Homes (LSE: CRN). This Irish-based home builder has reported impressive growth over the past five years. Total revenues have increased from just €4m in 2015 to €435m for 2019. 

Revenues dropped in 2020, but they are expected to return to growth in 2021. Analysts reckon the company could print revenues of €529m in 2022, a multi-year high. 

At the same time, group profits could surge to €59m, outpacing 2019’s high. While these are just forecasts and, as a result, subject to change, I think they show the company’s potential. 

However, despite its growth outlook, the stock is currently changing hands at a 2022 price-to-earnings (P/E) multiple of just 12.9. I think that is far too cheap. 

Of course, these projections are all based on forecast numbers, so there’s no guarantee the company will meet these projections. If it doesn’t, the current valuation might look expensive, especially if earnings fall. That’s probably the most considerable risk hanging over the stock right now. 

Despite this, I would still buy the company for my portfolio of high-growth stocks considering its potential. 

Growth market 

Designer, manufacturer, and distributor of eyewear frames Inspecs (LSE: SPEC) is, in my opinion, a desirable growth investment. According to reports, the number of people requiring glasses is increasing as we spend an ever-growing amount of time stuck in front of screens. 

I think this suggests companies like Inspecs could be set for an extended period of growth as spending in the eyecare market expands. 

The company’s revenue fell last year as the pandemic ravaged businesses around the world.

However, management used the opportunity to increase the company’s diversification and vertical integration. It acquired two other firms, Norville and Eschenbach. The enlarged group is now a “well-balanced vertically integrated business serving both global retail chains and the independent optical market.“

Revenue is already picking up. The group reported sales of $67m in the first quarter of 2021, compared to $47.4m in the fourth quarter of 2020. 

Based on this expansion, City analysts are already expecting a record year for the group. They’ve pencilled in a record net profit of $11.2m for the year. 

Based on these projections, I would buy the company for my portfolio of growth stocks.

Key risks and challenges the company might face include making a poor acquisition, which could lump the business with unwanted debt and eat into profit margins. Competition in the sector could also hurt profit margins and sales growth.

Indeed, this is only a relatively small business compared to its multi-billion dollar peers. All of these have bigger marketing budgets and more substantial balance sheets. 

One for the clean freaks!

I’d be very happy to buy UK fast-moving consumer goods (FMCG) share McBride (LSE: MCB) in my ISA. This penny stock manufactures a broad range of cleaning products, allowing it to ride a growing need for high standards of cleanliness among consumers. Latest results from the recently-rebranded Reckitt reveal how rapidly this market is growing.

Like-for-like sales of its hygiene products rocketed 28.5% year-on-year between January and March, it said. This was led by “very strong, volume-led growth” across its Lysol, Finish and Air Wick ranges.

As Hargreaves Lansdown analyst Laura Hoy notes: “While vaccine rollouts are making a return to normalcy look possible, some pandemic-related trends look here to stay and the public’s new obsession with hygiene is one of them.”

And so the likes of McBride can expect strong and sustained demand for its goods going forward. This explains why City analysts think this UK share’s annual earnings will rise 16% and 8% in the financial years to June 2021 and 2022 respectively.

Bur be aware that McBride operates in a hugely-competitive arena. And it doesn’t have the colossal brand power of industry heavyweights like Reckitt, Unilever and PZ Cussons to build a large and loyal customer base either.

However, I believe his penny stock’s low valuation merits serious attention today. At 93p per share, McBride’s shares command a forward price-to-earnings growth (PEG) ratio of 0.6. A reading below 1 tends to suggest a UK share is being undervalued by the market.

Another cheap penny stock

Cairn Homes (LSE: CRN) is another cheap penny stock on my radar today. City brokers think earnings at the Irish housebuilder will soar 19% year-on-year in 2021. This leaves the company — which changes hands at 93p per share — trading on a forward PEG multiple of 0.7.

As in the UK, there is a colossal shortage of affordable homes in Ireland. This presents enormous profit-making opportunities for Cairn Homes in the years ahead. The business plans to build 2,500 new homes over the next two years alone to help the Emerald Isle meet this shortfall.

The latest house price report from Daft.ie illustrates the impact of this shortage on property values. It shows the average home price soared 7.6% year-on-year in March, thanks to what the organisation puts down to “strong demand and very weak supply.” Daft.ie says there were less than 12,000 properties available to buy as of 1 March, down 40% from the same point in 2020.

I own FTSE 100 housebuilders Barratt and Taylor Wimpey in my ISA to play the favourable housing market in the UK. And I’m thinking of adding penny stock Cairn Homes to play the positive trading conditions in Ireland too.

But I have to bear in mind that Ireland has been hit hard by the Covid crisis and any economic downturn could hit house-buyer demand.