Shock price fall

The housing market is really starting to creak as interest rate rises accelerate. Today, Nationwide announced that house prices actually fell 0.9% month on month in October.

Last month’s drop was the first since the height of the Covid-19 crisis in summer 2020.

The London Stock Exchange’s listed housebuilders face significant turbulence in the short-to-medium term. And so do suppliers of key materials, like brickmaker Forterra (LSE: FORT).

Indeed, City analysts now expect this materials supplier to record zero earnings growth in 2023. This follows an anticipated 25% rise this year.

6.4% dividend yield

The near-term outlook is looking grimmer, then. But the long-term picture remains quite exciting in my opinion. And following recent share price falls I think Forterra shares look too cheap to miss.

Today, the brick manufacturer trades on a forward price-to-earnings (P/E) ratio of just 8.8 times. It also carries an enormous 6.2% dividend yield through to the end of 2023.

Investing for the future

Make no mistake: Britain faces a colossal shortage of homes. It reflects inadequate housing policy by successive governments. And when interest rates start to come down again (probably in the second half of 2023), demand for homes is likely to leap again.

This is why the government this week affirmed plans to build 300,000 new homes a year by the middle of this decade.

As a potential investor in Forterra I’m encouraged by the steps it’s taking to meet a possible demand boom, too. Refurbishment of its Wilnecote centre will increase capacity, boost its product range, and improve efficiency. Meanwhile its new Desford brick factory remains on schedule to be commissioned later this year.

Another top UK value share

Lookers (LSE: LOOK) is another top UK share offering brilliant all-round value this November.

The car retailer trades on a forward P/E ratio of 5.3 times. It also carries a decent 4% dividend yield for 2022, and an even-better 4.2% one for next year. And predicted dividends for the next two years are well covered by expected earnings.

Unfortunately, Lookers is expected to suffer some considerable discomfort in the near term. Earnings are expected to decline 27% and 19% in 2022 and 2023, respectively, due to supply chain issues and weak customer demand.

The EV revolution

However, given Lookers’ dirt-cheap valuation, allied with its recent ability to beat expectations, I think it’s a great value stock to buy. Just last month it hiked its full-year profit forecasts to at least £75m.

Besides, as a long-term investor I think it could be a great way to capitalise on soaring electric vehicle (EV) demand.

Britain is the second-largest market for non-petrol and diesel cars in Europe, according to Statista. And it thinks sales of EVs will soar at a compound annual growth rate of around 14.7% during the next five years. Lookers should be well placed to exploit this demand boom.

Choppiness on the London Stock Exchange has pushed dividend yields at many UK shares through the roof. Should I buy these dividend-paying companies on account of their big yields?

Lloyds Banking Group

On paper, Lloyds Banking Group (LSE: LLOY) appears to be a highly attractive dividend stock. Its yield for 2022 clocks in at a handsome 5.7%. The predicted payout is also covered 2.7 times by anticipated earnings, well above the security benchmark of 2 times.

This FTSE 100 share however carries an unacceptable amount of risk, in my opinion. In recent days, Lloyds has said 30% of its customers sought debt services in the first half of 2022. That number could rise significantly too, in my opinion, as the cost-of-living crisis worsens.

Higher interest rates are helping boost Lloyds’ margins. Bank of England action has increased the difference that the bank charges borrowers and provides to savers. Still, I think the possibility of soaring bad-loan levels and slumping revenues at the bank more than offsets this benefit.

Lookers

Motor retailers like Lookers (LSE: LOOK) face near-term uncertainty as well as supply shortages hammer global car production. Latest data from the Society of Motor Manufacturers and Traders (SMMT) showed new car sales in the UK tanked 24.3% year-on-year in June due to disappointing vehicle output.

The ongoing war in Ukraine and resurgent Covid-19 rates in some regions means part shortages could continue to curb motor production too. Yet despite this risk, I’d still buy car dealership Lookers today.

I think profits here could soar as drivers swap out their petrol and diesel vehicles for ones that run on battery or hybrid power. Indeed, sales of these sorts of vehicles soared 56% and 26.3% respectively last month, according to the SMMT. That’s in spite of the growing cost-of-living crisis.

Lookers’ dividend yield sits at 4.1% right now. And its predicted dividend is covered 4.7 times by estimated earnings. I think it’s a top dip buy at current prices.

Tritax Big Box REIT

I’d also happily invest more of my cash in Tritax Big Box REIT (LSE: BBOX). I think this UK share is a perfect pick for dividend investors. Its designation as a real estate investment trust (REIT) obliges it to pay at least 90% of yearly profits to its shareholders by way of dividends.

This income stock operates a broad portfolio of large warehouses and distribution centres. It therefore has colossal potential as e-commerce continues to accelerate .

This week, DHL announced it would build and expand dozens of collection and delivery depots in the UK. The news perfectly illustrates the bright outlook for companies which help the online shopping sector function like Tritax Big Box.

The dividend yield here currently sits at 4%. I’d increase my holding even though its acquisition-led growth plan could throw up unexpected surprises. These include worse-than-expected tenant demand or high costs.

Car dealer

As a quick reminder, Lookers is a car dealership group that operates multiple franchise sites and has agreements with over 30 car manufacturers. The business has roots stretching back to the early 1900’s and has been trading on the London Stock Exchange for nearly 50 years.

So what’s happening with the Lookers share price? Well, as I write, the shares are trading for 76p. At this time last year, the shares were trading for 70p, which is an 8% increase over a 12-month period.

It is worth noting that Lookers shares have fallen since the stock market correction in March. This was caused by macroeconomic headwinds and the tragic events in Ukraine.

The best stocks to buy have risks too

Current well-documented macroeconomic headwinds such as soaring inflation and the rising cost of materials are factors that could hinder sales, performance, and investor returns.

Another macroeconomic factor at play that is having a material impact on the automobile industry is the supply chain crisis. A shortage of semiconductors, which are vital components in newer cars, is causing longer lead times for new cars. This will also affect Lookers. It is worth noting the used car market has offset some of the woes experienced by new car sales figures in recent months.

The bull case and what I’m doing now

So let’s look at the positives. At current levels, Lookers shares look dirt-cheap to me on a price-to-earnings ratio of just 5! Buying the shares now could be a shrewd move as I expect them to continue on an upward trajectory.

What about performance? Although I understand past performance is not a guarantee of the future, I review this for investment viability. Looking back I can see that before the pandemic struck, revenue and profit was increasing for two consecutive years. 2020 results were subdued in comparison but for the period ending 2021, Lookers bounced back. I believe pre-pandemic performance could be on the cards for this fiscal year. Coming up to date, a H1 trading update released today noted supply chain issues and logistical problems. On a positive note, Lookers brands performed in-line with expectations.

My best stocks to buy now boost my passive income stream through dividend payments. Lookers current dividend yield is 3.5%. This is closer to the FTSE 100 average of 3%-4%. I am aware that dividends can be cancelled at any time, however.

Overall, I’ve decided now is the time to add Lookers shares to my holdings. I am buoyed by Lookers’ position in the market. This is despite shorter-term challenges it faces due to factors out of its control. The passive income stream is a nice bonus. I also expect performance to continue on an upward trajectory after a Covid-disrupted past two years.

On Tuesday, the Society of Motor Manufacturers and Traders (SMMT) said that new vehicle registrations slumped 20.6% last month to 124,394 units. This was the second-biggest May decline since 1992.

According to the SMMT: “Supply shortages continued to hamper new purchases and the fulfilment of existing orders”.

But weak car production rates right now wouldn’t discourage me from buying Lookers shares. That’s even though supply problems aren’t the only threat to earnings either!

A risky penny stock to buy?

Revenues at car retailers also threaten to be struck in the near term by the cost of living crisis. Also on Tuesday, the British Retail Consortium (BRC) said that UK retail sales shrunk 1.1% in May. This was well below 12-month average growth of 4.1%.

The BRC suggested the numbers were worse than how they appear at first glance too. It said that “[with] inflation running at historically high levels, the small drop in sales masked a much larger drop in volumes once inflation is accounted for.”

May’s data was particularly chilling for sellers of expensive goods like Lookers too. BRC chief executive Helen Dickinson noted that “higher value items, such as furniture and electronics, took the biggest hit as shoppers reconsidered major purchases during this difficult time.”

3 reasons I’d buy Lookers shares

You might think then that Lookers is a penny stock I’ll be avoiding like the plague. This actually couldn’t be further from the truth.

There are several good reasons I think Lookers remains an attractive UK share to buy. These include:

• Improving margins. Those supply shortages are currently helping to push margins at the business higher. Gross profit margins rose to 12.8% in 2021 versus 11.1% previously. They could remain strong as semiconductor shortages drag on car-build rates.
• A strong used car operation. Lookers sources just over half of revenues from the sale of pre-owned vehicles. While new car demand could suffer as the cost of living crisis worsens, this could feed through to better sales of cheaper used models.
• Exciting electric vehicle projections. As a long-term investor I’m tempted to buy Lookers to exploit soaring demand for electric vehicles. Sales of low-carbon vehicles are tipped to explode over the next decade and a half as concerns over the climate crisis worsen.

A brilliant bargain

Indeed, heavy share price weakness in recent months means I think Lookers could be a great dip buy for me. At 77.8p per share, the retailer trades on a forward price-to-earnings (P/E) ratio of 7 times.

At current prices, Lookers carries a meaty 3.8% dividend yield too, providing a nice bonus. And the predicted annual dividend for 2022 is covered 3.8 times by expected earnings, meaning there’s a good chance this target will be met even if profits fall short of forecasts.

I think Lookers is a top bargain stock for me to buy today.

Penny stock #1: Centrica

Centrica (LSE:CNA) is an energy and utilities solutions provider. It owns a number of instantly recognisable brands, including British Gas. It currently trades at 89p. 

The company has rebounded strongly from the difficulties that came with the pandemic in 2020.

In 2021, pre-tax profit grew to £767m. This was an increase from a pre-tax loss of £577m the previous year.

In addition, for the four months to 30 April, the business reported rising volumes in its gas and nuclear segments. 

This positive momentum led the company to announce that full-year profit and earnings per share (EPS) were expected to be at the top end of previous forecasts.

Investment bank RBC responded positively to this news, raising its price target from 90p to 125p.

However, there are risks that inflation and rising commodity prices will eat into future profit margins.

Penny stock #2: Rolls-Royce

Rolls-Royce (LSE:RR) is a FTSE 100 engine and power systems manufacturer. It currently trades at 84p.

This month, the firm announced that civil aircraft flying hours were up 42%. 

This was good news, given that Rolls-Royce is paid by the flying hour by airlines using its engines. 

It’s very likely this figure will increase further over the summer. Both International Consolidated Airlines Group and easyJet have been recruiting at pace in anticipation of strong travel demand in the coming months.  

There’s also a backlog in Rolls-Royce’s defence contracts, meaning that revenue should be consistent over the long term. 

This is bolstered by lucrative contracts, including the $2.6bn deal with the US Air Force to service B-52 aircraft.

However, there’s always the risk that the company’s operations are halted in the event of another pandemic variant.

Penny stock #3: Lookers

Lookers (LSE:LOOK) is a retailer of new and used cars, and also provides automobile aftercare solutions. It’s trading at 70p.

The firm’s profits increased massively between 2020 and 2021, rising from £1.5m to £90m. Meanwhile, revenue grew slightly from £3.7bn to £4bn.

Additionally, EPS rose from 14.57p to 20.07p between 2017 and 2021. By my calculations, this results in a compound annual EPS growth rate of 6.6%. This is both strong and consistent.

It also had net funds of £3m at the end of 2021, swinging from net debt of £40.7m the previous year. This places the company in a stronger position going forward.

It should be noted, however, that there’s a supply chain risk from the global shortage of semiconductors that are used in cars. This could negatively affect the share price of this penny stock.

Overall, each of these penny stocks could be an exciting opportunity for long-term growth. I already own Rolls-Royce shares, so I will add to my current holding. Meanwhile, I will buy shares in Centrica and Lookers next month.  

What are car stocks?

Car shares can be defined as those companies operating in the automotive industry in some capacity. These include manufacturers, those supplying parts or technology such as seats, tyres and batteries, auto dealer groups and parts retailers. There really is a lot of choice for the nimble private investor.

What makes this sector particularly interesting is the differing levels of competition companies face. Some firms have a commanding presence in a niche part of the car market; others are forced to battle it out to attract consumers to their products and services.

Some businesses operate exclusively online; others adopt a more hybrid approach. Some have brands that are household names; others have no direct contact with the consumer and are only known by the most committed of car aficionados.

To really get a handle on just how diverse this space is, let’s look at a selection of five car shares listed on the London Stock Exchange by descending market capitalisation.

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Top car stocks in the UK

Auto Trader

Online marketplace Auto Trader has arguably become the go-to destination for anyone interested in buying a vehicle in the UK. This popularity has driven many investors to take position, pushing the company into the FTSE 100.

According to Auto Trader, consumers spend 7 times more minutes on its site compared to its nearest rival and over 75% of all time spent looking at classified advertisements of vehicles for sale.

The boom seen in car sales since the Covid-19 pandemic has only served to reassert this dominance. Back in November 2021, the company announced its highest ever six-monthly revenue and profits.

• Market Cap: £5.11bn (as of 12 May 2022)
• Average Daily Volume: 2,610,444
• HQ: Manchester

Aston Martin Lagonda Global Holdings

Aston Martin doesn’t need much in the way of an introduction. Regularly featured in the James Bond movies, the firm designs and produces some of the most luxurious cars in the world including the Vantage, DB11, DBX, DBS and Valkyrie. It then exports and sells these highly coveted vehicles in 55 countries around the world.

Unfortunately, this quality hasn’t been reflected in the performance of Aston Martin shares. Since listing in October 2018, the company has lost over 90% of its value due to concerns over its finances and pandemic-related headwinds.

Whether Aston Martin can recover remains to be seen. On an optimistic note, the recruitment of former Ferrari CEO Amedeo Felisa could prove to be a masterstroke. The latter’s share price has been on a tear in recent years.

• Market Cap: £803m (as of 12 May 2022)
• Average Daily Volume: 479,699
• HQ: Warwick

Halfords

As any car owner will know, regular maintenance of one’s vehicle is essential. This is where Halfords comes in.

From fluffy dice to child seats to engine oil, the company sells every conceivable product a driver might need for keeping their car in top condition and passengers safe.

In addition to this, the mid-cap also runs a huge estate of Autocentres, delivering services that every owner needs to factor into their running costs every year.

Halfords recently reported that this part of the business had grown like-for-like revenues by a little over 33% in the three months to the end of 2021. Following some recent acquisitions, it now expects to carry out 7.5 million motoring services jobs a year.

• Market Cap: £497m (as of 12 May 2022)
• Average Daily Volume: 636,969
• HQ: Redditch

Seeing Machines

The vast majority of UK investors are unlikely to know about Australia-based minnow Seeing Machines. However, this could be set to change as it rapidly becomes the biggest player in software and systems designed to monitor driver distraction and fatigue and, in doing so, reduce accidents on the road.

Although only currently available on the premium models, this tech is likely to become standard over time in accordance with legislation. Seeing Machines also makes money from having its Guardian tech fitted retrospectively to fleets.

But Seeing’s eye-tracking tech isn’t just limited to cars and trucks. The company also has its fingers in multiple pies including aviation and rail. This could further turbocharge growth in the years ahead.

• Market Cap: £276m (as of 12 May 2022)
• Average Daily Volume: 5,038,603
• HQ: Canberra, Australia

Lookers

Lookers is yet another way for UK investors to tap into car stocks. It is one of the largest automotive retailers around, selling 173,000 new and used vehicles in 2021 from 144 franchise dealerships. The small-cap also boasts an aftersales division, offering parts, servicing, MOT and accident repair.

Like some of the other stocks mentioned here, Lookers saw its share price soar since the pandemic as supply chain shortages held back production and increased demand for those cars already in existence. Revenue breached the £4bn mark and pre-tax profit hit £90m.

• Market Cap: £m (as of 12 May 2022)
• Average Daily Volume: 1,002,378
• HQ: Altrincham

Are car shares right for you?

The five car stocks mentioned above go some way to demonstrating the variety of opportunities available to UK investors in this space. This is not to say that they are necessarily right for everyone.

Depending on the time period used, there have certainly been some winners. Those investing in Auto Trader between March 2020 and the end of 2021 will have doubled their money. The share price of Seeing Machines also climbed from under 2p to 12p from March 2020 to August 2021. In sharp contrast, anyone holding Aston Martin will probably be nursing significant losses on paper.

One also needs to remember that demand for vehicles can depend on a huge range of factors that are beyond the control of these businesses. Tricky economic times can force people to postpone a new purchase, especially if there is nothing wrong with their existing vehicle. High fuel prices can also impact demand.

On a more positive note, some UK car stocks generate income for those holding them, which may help to take the sting out of any temporary fall in a company’s value. Naturally, these can never be guaranteed.

In summary, car shares certainly have the potential to generate great returns for those who are willing to take more risk with their cash. The gradual switch away from internal combustion engines to more environmentally friendly solutions, combined with lowering production costs and rising levels of affluence, could see even more investors pile into the space over the next few years.

However, the potential for significant volatility can’t be overstated. As such, a portfolio that also has exposure to other sectors makes Foolish sense.

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Although the two shares are penny stocks, that is not why I see them as cheap. Instead, I like their long-term commercial outlook. I reckon their current share price could make them attractive and good value additions to my portfolio.

Photo-Me has vending expertise

The vending machine expert Photo-Me (LSE: PHTM) does a lot more than just operate photo booths. With a range of business lines stretching from children’s rides to fresh juice machines, Photo-Me has learnt how to profit from its experience of running all sorts of vending machines.

That allows it to make attractive profits. From a spur-of-the-moment orange juice on a hot day to an urgently needed identification photo, the company’s customers tend to focus on satisfying an immediate need, not necessarily on how much it costs.

The pandemic hurt revenues and one risk I see is that ongoing lockdowns in Asian markets could continue to dampen revenues and profits. But the business is performing strongly overall and has brought back its dividend. I see its self-service laundry machines as a source of potential growth in coming years.

The shares currently yield 4% even with the dividend still far beneath its pre-pandemic level. The price-to-earnings ratio of 13 looks cheap to me given that I expect further earnings recovery this year. The stock trades for less than the chief executive recently offered in an unsuccessful takeover bid. I would consider these to be cheap shares to buy now for my portfolio.

More cheap shares

Another company that I think looks like good value for my portfolio right now is Lookers (LSE: LOOK). That may come as a surprise. After all, the Lookers share price is already up 24% this year. It has climbed 20% in 12 months.

But despite the share price rise, a price-to-earnings ratio of five looks like a bargain to me. Earnings per share came in at 15.7p last year. As Lookers sits among the ranks of UK penny shares, those earnings relative to the share price make me think it could be a cheap addition to my portfolio. Admittedly earnings were far stronger than the prior year, when the company had reported a loss. But that reflected an accounting scandal that I think has now been fully resolved.

Lookers looking ahead

2022 is ahead of 2021 so far on an underlying profit basis. The company said in its annual results last week that it is seeing robust consumer demand. There are still clouds on the horizon. For example, Lookers noted that inflation was a possible risk to its profitability. But for now at least, demand for vehicles from customers is high. Supply constraints mean profit margins are strong.

Like Photo-Me, Lookers restored its dividend recently and currently yields 3%. I reckon the company could increase its dividend in coming years, although that is not guaranteed. From both a growth and income perspective, I would consider adding Photo-Me to my portfolio now.

The full economic consequences of the tragic events in Ukraine will take some time to become apparent. And so the impact of the conflict on UK shares is difficult to accurately ascertain. But here are two top penny stocks whose recent share price falls could make them too cheap to miss.

Taking a close look

It’s quite possible that Lookers (LSE: LOOK) will find the going tough as the cost-of-living crisis worsens. Sellers of big-ticket items like cars are particularly vulnerable to falling consumer spending power, of course. So the company’s share price has slumped recently and it now trades on a forward price-to-earnings (P/E) ratio of 7.7 times.

I believe that this recent weakness represents a great dip buying opportunity. Sales of electric vehicles in the UK continue to rise strongly as concerns over the climate crisis intensify and people switch their old polluting vehicles for greener alternatives. That’s in spite of consumer price inflation currently rising at its fastest rate for three decades. Sales of battery-powered vehicles leapt almost 200% year-on-year in February, latest data shows.

Lookers sells vehicles across more than 30 brands, giving it solid exposure to the electric car revolution. And I think sales of its low-emissions vehicles could receive a further boost from soaring petrol and diesel prices. Average unleaded prices have just hit fresh record highs of 155p per share. They look set to keep climbing too as the war in Eastern Europe hits oil supplies, boosting demand for electric vehicles still further.

A tasty penny stock

When consumer spending comes under pressure, brand power is worth its weight in gold. This is why I think Premier Foods (LSE: PFD) could be one of the best penny stocks to buy today. The food manufacturer owns brands like Mr Kipling Cakes, Bisto gravy, and Homepride cooking sauces. Shoppers stay loyal to these decades-old brands even when economic conditions worsen.

The Premier Foods share price has plummeted, though, following the awful events in Ukraine. This is in large part due to fears of rising ingredients costs and what this could do to margins. For example, wheat — a critical ingredient in Premier Foods’ cakes — has soared to record highs in recent days. And they could of course keep climbing. Russia and Ukraine collectively account for more than 25% of global wheat exports.

Still, Premier Foods’ mega-popular brands should leave it better placed than most food producers to pass these increased costs on to its customers. I think this is something that recent heavy share price falls don’t reflect. Today Premier Foods changes hands on a forward P/E ratio of just 8.9 times. This looks like a bargain in my book.

There are a couple of companies that stand out to me as being deeply undervalued after the recent sell-off. I would be happy to buy all of the stocks outlined below for my portfolio right now.

Long-term cash flows

The first stock on my list is insurance giant Legal & General (LSE: LGEN). After the recent sell-off, the stock is trading at a forward price-to-earnings (P/E) multiple of just 7.5.

I think this significantly undervalues the company’s growth potential over the next few years. In addition, the stock is also trading with a dividend yield of 7.6%.

While the current geopolitical crisis will almost certainly have an impact on a company. It could hurt investor sentiment and reduce the demand for its insurance products, I think the business is well-placed to expand over the next decade.

Rising demand for financial services, and an ageing population, will increase the demand for pension and life insurance products. As one of the largest providers in the country of these products, Legal should benefit. 

One of the best shares to buy now

The second-hand car market is booming, and this is fantastic news for dealers like Lookers (LSE: LOOK). Based on current City estimates, the stock is trading at a forward P/E multiple of 4.9. However, these numbers are based on windfall profits in 2021, which are unlikely to last.

Analysts are expecting profits to fall back in 2022. They are projecting a 40% decline. Even based on this number, the stock is still only trading at a forward 2022 P/E of just 7.9. 

That said, there is no guarantee the company will meet City projections. If the economy starts to struggle over the next few months, the group will as well. This is the biggest challenge it will face in the near term.

Still, management is planning to reinvest the company’s windfall profits. This could help support its growth during the next few years, especially in the aftermarket service space. Even if new and second-hand car sales fall, customers will still need to maintain their vehicles. 

That is why I think this is one of the best UK shares to buy now. 

Leading UK shares

I think one of the best ways to build exposure to the UK economy as a whole, without having to buy a range of different stocks, is to acquire a lender such as NatWest (LSE: NWG).

Shares in this bank have fallen heavily due to the Russian crisis, but the stock is now trading at just 50% of book value. It is expected to report bumper profits over the next two years thanks to higher interest rates and a more robust UK economy. Analysts have also pencilled in a dividend yield of 5.7% for the year ahead. 

Unfortunately, this growth is not guaranteed. If there is an economic crisis in the UK, the company could suffer a significant decline in profitability. This is the biggest risk facing its growth today. 

Even after taking this headwind into account, I think NatWest remains one of the best UK shares to buy now, considering its exposure to the economy and low valuation. 

Automobile dealer

Lookers is a multi-franchise car dealer group with relationships with over 30 car manufacturers throughout the UK and Ireland. It has roots stretching back to 1908, when it was founded by John Looker, and it has been listed on the London Stock Exchange since the 1970s.

Penny stocks are those trading for less than £1. As I write, Lookers shares are trading for 96p. At this time last year, the shares were trading for 37p, which is a 159% return over a 12-month period.

Despite semiconductor supply issues halting the supply of new cars, as well as supply chain issues, Lookers has performed well. I believe this is because many consumers have turned to buying used and nearly new cars here in the UK. In fact, the used car market is booming. Dealerships like Lookers, who sell new and nearly new cars, have benefitted.

Penny stocks have risks

Lookers’ progress is at the risk of factors out of its control as well as competition. Competition in the automobile sector is intense and there are many players in the market. As well as this, there are now lots of avenues for consumers to buy cars as well, such as private sales. 

Next, Lookers could see performance affected by macroeconomic issues. The semiconductor shortage shows no signs of easing. These parts are vital components in new cars. Supply of new cars has been hit massively in the past six months or so. In addition to this, inflation, rising costs, and supply chain issues could also affect Lookers and its progress.

A penny stock I’d buy

Lookers has a unique business model that I quite like. It owns the property its dealerships operate from, giving it a property portfolio that it can leverage into further revenue. So as well as an excellent automobile business, it has a property arm too. I like stocks with diversified interests.

Next, at current levels, Lookers shares look dirt-cheap with a price-to-earnings of just 5! This looks like really good value to me. There is also talk of dividends returning which would make me a passive income.

Lookers has a good track record of performance too. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see revenue between 2017 and 2019 was consistently over £4.7bn. The 2020 levels were slightly lower due to the pandemic.

Coming up to date, a post-close FY trading update released last month made for good reading. Lookers reported trading and performance has returned to pre-pandemic levels. Full details will be available in the coming months. I wouldn’t be surprised to see the Lookers share price surpass the £1 penny stock barrier after these results are released.

Overall, I think Lookers could be a good addition to my holdings. It seems to have a solid, lucrative business model. It is also fighting off new car manufacturing issues and performing well in the currently burgeoning used car market. I am excited for full-year results coming soon. I would buy Lookers shares and hold them for a long time.