Vertu Motors

Sellers of luxury goods face significant uncertainty as the cost of living crisis worsens. But its my belief that car retailers like Vertu Motors (LSE VTU) will profit enormously from soaring demand for electric vehicles (EVs). And this makes the UK share a top buy for me for the near term and beyond.

It’s not just environmental concerns that are driving sales of low-carbon cars. Rocketing petrol and diesel prices — and their impact on customer wallets — are also boosting consumer interest.

A study by motoring consultancy New AutoMotive shows that the cost of running an EV is now 80% cheaper than a car with an internal combustion engine. The news comes as the cost of filling the tank of an average family car has passed £100 for the first time.

Data from the Society of Motor Manufacturers and Traders (SMMT) reveals how solid demand for EVs remains despite soaring inflation. Sales of new battery EVs jumped 17.7% year-on-year in May, latest data shows.

I worry that Vertu Motors faces the prospect of empty showrooms as the car industry faces ongoing production issues. However, the business is enjoying better margins on its new and used vehicles due to tighter supply, reducing a lot of the danger to profits.

Besides, I think that Vertu’s ultra-cheap share price reflects the risks it faces today. At 57.9p per share, the retailer trades on a forward price-to-earnings (P/E) ratio of just 7.7 times.

Vertu’s dividend yield also clocks in at a handy 3.2% at current prices, providing an added bonus.

The Berkeley Group

I already own a couple of FTSE 100 housebuilders in my portfolio. And I’m considering adding The Berkeley Group (LSE: BKG) to the set as the housing market keeps steaming ahead.

Rising interest rates pose a dangers to buyer affordability — and thus newbuild demand — looking ahead. So does the deteriorating UK economy which threatens to damage market confidence.

At the moment though, house prices continue to rise at breakneck speed. And it encourages me to believe that Berkeley and its peers should continue to enjoy handsome earnings growth. Latest data from Halifax shows the average property price in the UK rose 10.5% in May.

I like Berkeley in particular because of its focus on the more economically-stable regions of London and the South East. Official data this week showed that the capital’s economy (along with Northern Ireland) is now back above pre-pandemic levels while other regions struggle.

Finally, Berkeley offers excellent value for money right now. The housebuilder trades on a forward P/E ratio of 10.7 times. It also offers a 5.6% dividend yield at current prices of £42.30 per share. I think this is a top FTSE 100 share for me to buy today.

Vertu Motors

What it does: Sells new and used vehicles (and provides after-sales services) through its 160 showrooms.

Friday’s closing price: 58.4p per share

I believe revenues at motor retailer Vertu Motors (LSE: VTU) could rocket as demand for electric vehicles (EVs) increases.

According to Uswitch, the number of EVs on British roads leapt tenfold between 2015 and 2020 (to 447,359 units). Uptake of these low-carbon vehicles has boomed all over the world as worries over the climate crisis have intensified. And EV sales have been boosted more recently by soaring petrol and diesel prices.

I’m concerned about how supply chain issues could damage profits at businesses like Vertu. This threatens to keep nudging vehicle prices higher — a dangerous scenario as the cost of living crisis worsens — and could also result in stock shortages.

However, Vertu Motors has so far been able to navigate these problems effectively. And this fills me with encouragement. Adjusted pre-tax profits soared to a record level of £80.7m in the 12 months to February. This was helped by gross margins rising to a fatty 12% as unit shortages boosted prices.

Today Vertu Motors trades on a forward price-to-earnings (P/E) ratio of just 7.7 times. I think this fails to reflect the penny stock’s excellent growth opportunities during the EV explosion.

Kingspan Group

What it does: A supplier of construction products with a focus on the ‘green’ economy.
Friday’s closing price: 75.9 euro cents per share

I believe Kingspan Group (LSE: KGP) could thrive over the next decade too as the drive for energy efficiency picks up.

Kingspan sells a huge range of building materials but is perhaps best known as a titan in the field of insulation products. Sales of these products are rising as companies and consumers try to reduce their carbon footprints and cut power bills.

Indeed, emergency callout specialist Homeserve has witnessed “early signs of a shift of emphasis” towards green home improvements. It said last week that people are beginning to switch away from kitchen and bathroom upgrades, for example, towards cost-saving improvements like insulation and fitting solar panels.

Penny stock Kingspan is about more than just insulation, however. It supplies products that improve the amount of natural light entering a building, reducing the need for lighting. Other solutions include the management of water and wastewater and boosting a structure’s ventilation.

Sales at Kingspan would take a hit if inflation keeps soaring and the construction industry slows. However, I think this threat is more than reflected by the company’s recent share price slump. As a long-term investor I think Kingspan could be a brilliant dip buy for me right now.

A shortage of semiconductor chips and essential parts of new vehicles, coupled with the global supply chain crisis, has led to a shortage of new vehicles being manufactured. Used car sales in the UK rose 5.1% between January and March this year, compared to the same period last year.

UK shares have a competitive advantage

Motorpoint (LSE:MOTR) is the UK’s largest independent vehicle retailer. It specialises in selling used “nearly new” cars that are usually two to three years old. Motorpoint has large retail outlets strategically located throughout the country.

As I write, Motorpoint shares are trading for 243p. At this time last year, the shares were trading for 286p, which is a 15% drop over a 12-month period.

I like Motorpoint shares for three reasons. Firstly, many UK shares have seen prices dip due to a market correction in recent months. At current levels, Motorpoint shares look good value for money on a price-to-earnings ratio of 20. The industry average is closer to 30.

Next, Motorpoint possesses a competitive advantage due to its profile, reputation, and position as the largest vehicle retailer in the UK. With its extensive presence and an online arm for online sales, the business could be primed to secure sales and boost performance.

I do understand that past performance is not a guarantee of the future. However, looking at Motorpoint’s recent year-end update release last month, it said it expects to report a revenue increase of 82% for the year ended 31 March 2022 compared to 2021. It also noted its market share increased too.

Motorpoint shares could come under pressure if macroeconomic headwinds are curbed and the supply chain issue and semiconductor issue are resolved. This could mean newer cars are more readily available.

Pick #2

Vertu Motors (LSE:VTU) operates a chain of franchised motor dealerships across the country selling vehicles on behalf of well-known brands such as Audi, BMW, and Land Rover.

The company sells new and used cars. Its used car arm should be more lucrative until the current macroeconomic issues ease.

Vertu shares are currently trading as a penny stock, for 52p. At this time last year, the shares were trading for 46p, which is a 13% increase over a 12-month period. Vertu, like many other UK shares, saw its share price drop in recent months due to the stock market correction.

I think Vertu shares look cheap on a price-to-earnings ratio of just 3. In addition to this, the shares could help boost my passive income stream. Vertu shares’ dividend yield is just less than 1.5%. Of course, dividends are never guaranteed.

Looking back, I can see Vertu grew revenue and profit for three years between 2018 and 2020. 2021 levels dipped due to the pandemic. Results for the year ended 28 February 2022 were released today. Record trading resulted in an increase in revenue, profit before tax, and net cash. A dividend of 1.7p per share was also declared.

Vertu’s biggest issue could be competition in the saturated market as it continues to jostle for market share.

I’d add both of these UK shares to my holdings and believe they could provide me with lucrative returns in the longer term.

I think Vertu Motors (LSE: VTU) could be one of the best ways for me to execute this plan. And at current prices below £1 per share, I think it could be too cheap to miss.

A growing market

Britain is the fifth largest European market for electric passenger vehicles. Yet according to researchers at Statista battery- and hybrid-powered vehicles command a market share of below 20%.

This gives car retailers like Vertu Motors plenty of upside to exploit as interest in EVs takes off. According to the Office for National Statistics, 44% of Britons say they are likely, or very likely, to switch to an all-EV from one that uses fossil fuels over the next decade.

Four out of 10 of these people said that they plan to make the switch over the next five years too.

BIG business

I think it’s particularly well-placed to capitalise on the EV boom. The internet is becoming an increasingly important channel for car retailers in the post-pandemic landscape. But customers who are looking to buy an EV are more likely to visit a showroom for face-to-face advice on these new technologies.

It has a huge network of almost 160 dealerships on its books. This broad geographic wingspan could give it the edge when it comes to winning EV customers.

I also like Vertu because of the huge range of EVs it stocks. The business has dealerships representing 32 of the world’s largest car manufacturers. This means it sells most of the country’s most popular EVs like the Kia e-Niro, Volkswagen ID.3 and Nissan’s Leaf.

Supply strains

The long-term outlook for Vertu is pretty bright, in my opinion. However, I am concerned that profits could suffer if problems with car production continue and stock levels are squeezed.

Latest Society of Motor Manufacturers and Traders (SMMT) data shows new car registrations fall 15.8% in April. Just 119,167 units rolled out of UK showrooms last month, it said on Thursday, with “global supply chain shortages” hampering new vehicle deliveries. Vertu has warned of the uncertainties that these supply issues pose to its business.

A cheap penny stock I’d buy

Still, I think the returns I can expect to make from owning this one over the next decade make the penny stock a great buy today. And at current prices of 51.2p per share, I think Vertu is particularly attractive. This means that it trades on a forward price-to-earnings (P/E) ratio of just 7 times.

What’s more, Vertu also offers great value in terms of dividends. Its forward yield sits at 4.1%, ahead of the 3.7% average for UK shares.

I think Vertu’s a great way for me to make money from the green revolution.

I’m searching for the best penny stocks to buy for my portfolio in April. Here are just a couple that have attracted my attention today. I’d happily spend several grand on each in the coming days.

Investing for the EV boom

Investing in retail stocks is particularly risky today as the cost of living crisis worsens. The immediate outlook is particularly dicey for sellers of big-ticket items like car retailer Lookers (LSE: LOOK) too.

Still, at current prices of 67.2p I’m considering adding the penny stock to my portfolio. This is because Lookers currently trades on a forward price-to-earnings (P/E) ratio of just 8.7 times. This is comfortably below the bargain benchmark of 10 times and below. I think profits here could surge over the long term as the electric vehicle (EV) revolution rolls on.

EV sales are soaring as concerns over the environment and rising petrol and diesel prices grow. Experts believe this momentum is set to click through the gears as the decade rolls on too. Electricity regulator Ofgem believes that almost one in four British households will have bought one of these low-carbon vehicles by 2030.

Government and businesses are spending huge amounts on infrastructure to make this a reality too. Today, eEnergy announced plans with EO Charging to install 50,000 charging points in office locations by the end of the decade.

Lookers has a network of 150 locations across the country. And it sells cars from dozens of the world’s leading motor manufacturers like Ford, Toyota, Volkswagen and BMW. It’s therefore well placed to exploit the blooming popularity of EVs.

Going for gold

I believe that buying gold stocks remains a good idea today. Bullion prices have retreated from the near-record highs struck earlier in March. But at $1,930 per ounce, they remain in range of another attack on those peaks.

It’s my opinion that gold could surge higher again before too long, too, on account of soaring inflation. Prices are rising at an alarming rate and above what economists were predicting, too. This gives plenty of scope for precious metals to surge again.

Today, for example, it was announced that German consumer price inflation hit 41-year highs of 7.3% in March. This beat market predictions by around a full percentage point. Prices increases are set to get even more intense across the globe too as energy prices increase and supply chain problems continue.

I can buy gold or gold-backed financial instruments like exchange-traded funds (ETFs) to benefit from rising metal prices. However, I’d much rather buy a gold-producing stock like Centamin (LSE: CEY). This way I can play the gold price boom while also receiving dividends.

And today Centamin’s dividend yield sits at a tasty 4.6%. I’d buy this penny stock despite the threat that a resurgent US dollar could pose to gold prices.

A top electric vehicle-themed stock

I think profits at Vertu Motors (LSE: VTU) could soar over the next decade as demand for electric vehicles (or EVs) takes off.

Sales of these low-carbon vehicles are certainly rocketing right now. Latest industry figures showed that battery and hybrid vehicle sales in the UK leapt more than 120% year-on-year in February. And last week the government announced plans for 300,000 charging points to be available by 2030 in encouraging news for the industry.

This would be 10 times the current level and could bolster EV sales still further. Concerns over range and ease of charging continue to influence the buying decisions of many people.

Vertu Motors operates more than 150 dealerships across the UK and sells product from most of the world’s leading carbuilders. It therefore has significant revenues potential as demand for low-emissions vehicles booms (today it sells nine out of 10 of the country’s most popular EVs).

Threats to Vertu Motors

My main concern with buying it today is the threat of sinking revenues in the near term. This penny stock is highly sensitive to broader economic conditions so the current cost of living casts a shadow over it. The company also faces the threat of prolonged stock shortages as weak semiconductor supplies persist.

Latest figures from the Society of Motor Manufacturers and Traders (SMMT) showed car production in Britain tanking 41% year-on-year last month. This was the biggest February fall for some 13 years.

Problems could get even worse too if Covid-19 cases in China keep rising and chip manufacturing is hit.

Why I’d still buy this penny stock

That being said, as someone who invests with a long-term view I’d still buy Vertu Motors today. The stock isn’t without risk. But this is the same with any UK share and I think the car retailer could deliver delicious shareholder returns over the next decade.

Besides, at current prices I think Vertu Motors could be too cheap to miss despite those aforementioned threats. The retailer’s share price has slumped around 15% from January’s multi-year highs. This leaves it trading on a forward price-to-earnings (P/E) ratio of 8.8 times for this fiscal year (to February 2023). This is well inside value territory of 10 times and below.

Vertu Motors also offers plenty of punch from a dividend perspective at recent prices of 64.4p. A predicted 2.3p per share full-year payout results in a chunky 3.3% dividend yield.

And what’s more, this anticipated dividend is covered 3.5 times by expected earnings, well above the widely-regarded security benchmark of two times. This gives me confidence that Vertu Motors should make this estimated dividend even if conditions in the UK car market worsen considerably in the near term.

As a long-term investor I don’t think I need to be overly concerned with current market volatility, anyway. Sure, the sharp falls in UK share prices more recently could take a bite out of my final returns. But I’m convinced that the value of my investments will rebound strongly. On a longer timescale I believe that history is on my side.

Investing like Warren Buffett

So I won’t be selling my shares in light of recent market volatility. In fact I’m looking for some top bargains to buy following the fresh share price falls today. I plan to follow the strategy of billionaire investor Warren Buffett when stock prices come crashing down. He famously claimed that one should “be fearful when others are greedy, and greedy when others are fearful.” This way I have the chance to make some robust returns when the market eventually rebounds.

Here is one top penny stock I’m thinking of buying following recent share price falls.

A top electric vehicle stock

Vertu Motors (LSE: VTU) doesn’t make low-carbon vehicles or the parts that help them run. But its role as a major auto retailer in the UK still makes it top electric vehicle stock to buy in my book.

Strong demand for these greener cars helped Vertu’s like-for-like sales rise 9.4% in the five months to January, latest financials show. And data from the Society of Motor Manufacturers and Traders (SMMT) today shows that the popularity of electric vehicles has continued to soar since then.

Sales of battery, hybrid and plug-in hybrid vehicles rocketed 123% year-on-year in February. This was higher than the 92.5% rise recorded in January, the SMMT said, a period when car showrooms were also affected by Covid-19 lockdowns.

A dirt-cheap penny stock I’d buy

As concerns over the environment grow, people are switching from their old petrol and diesel vehicles to battery- and hybrid-powered vehicles in huge numbers. And lawmakers are aggressively acting to speed up adoption of these greener cars too. The Mayor of London, for example, is reported to be planning to turn the whole of London into an ultra-low emissions zone. This all bodes well for Vertu Motors and its industry rivals.

My main concern with Vertu Motors is how soaring inflation could hit profits in the nearer term. Demand for its big-ticket items could come under severe pressure as consumer spending power crumbles.

Still, this is a risk I’d be prepared to take given the cheapness of the shares. The penny stock has fallen 17% in value since the start of 2022. This leaves the business trading on a forward price-to-earnings (P/E) ratio of just 9.6 times, below the bargain benchmark of 10 times. I think this is a great UK share to buy to capitalise on the green revolution.

Although it is not an easy task, I tend to look at the sector a business operates in, competition, and recent financials when I am trying to pick cheap UK shares to invest in. And right now, Vertu Motors (LSE:VTU) and Big Yellow Group (LSE:BYG) look like bargains for my portfolio. Both companies operate in untapped niches within booming sectors, and I think they have massive potential.

Automobile stock that grew 126% last year

The pandemic forced many households to cut down on extra expenses, and global used car sales saw a huge boost in 2020. I think this represents a broader need in the market. A brand new car is an expensive purchase for most, given rising prices, taxes, and running costs. I think the used car market will grow in tandem with the automobile industry over the next decade.

And the Vertu Motors stock is on a great run. Its share price is up 81% in the last six months and a whopping 126% in the last 12 months. And despite this incredible run, it is trading at a forward price-to-earnings (P/E) ratio of 5.5 times, which tells me that there is still a lot of room for growth.

But analysts expect Vertu Motor’s revenue to drop after consumer habits normalise in 2022. And the car dealership operates on a razor-thin margin of about 1.5%. Coupled with expansion efforts, this could wreak havoc on its share price if sales drop in the coming months. But I still remain optimistic about the potential of the industry, which is why I am watching this UK share closely to capitalise on any price drop.

Passive income real estate stock

Big Yellow Group offers self-storage solutions in the UK, a business that has seen a growth in popularity thanks to the e-commerce boom. BYG offers online vendors a cheap space to store and ship products from, as well as a personal space to store goods for people moving house. Storage spaces are very popular in the US and are seeing wider adoption in the UK as well.

At its current share price of 1,556p, the Big Yellow Group share price is up a healthy 39.8% in the last 12 months. It is trading at a forward P/E ratio of six times, making it very undervalued right now. Its 2.3% dividend yield is backed up by a year-on-year increase in revenue for the last four years. 

But there have been reports of prominent board members selling holdings in the last 12 months. Chairman Nicholas Vetch’s wife recently sold £2.9m worth of BYG stock at a price of 1,670p per share and CEO James Gibson sold £5.2m of his holdings at a price of 1,487p per share. The share price has fallen nearly 10% since the start of 2022.

But, this could just be investors taking profits after a solid run last year. And I am optimistic that the company can deliver strong financials this year. Given its passive income potential, Big Yellow Group is on top of my list of UK shares to buy right now.

Dirt-cheap penny stocks

Vertu Motors (LSE: VTU) is a share I sold out of towards the end of last year after a strong share price run. The shares though are still cheap, trading on a P/E of 13.

Continuing shortages of chips leading to fewer new cars and higher second-hand car prices have been very positive for Vertu’s shareholders in recent times. That fortuitous set of circumstances won’t last forever though. But if the new car market remains constrained for much of this year, the company could do well.

What’s not clear right now is how much of the share price gains will fall away as and when market conditions normalise. That’s the biggest risk I see when it comes to investing in Vertu – or indeed any – of the car dealers right now.

I think Vertu is a very good penny stock and is potentially a bargain, but I won’t be re-adding it to my portfolio, simply because of the market uncertainty.

South African miner Sylvania Platinum (LSE: SLP) is a share I hold. It’s also cheap. The shares trade on a P/E of only three. That’s staggeringly low, even compared to many other miners.

That’s a reflection of 2021 being a tough year for the company. Prices of the metals it processes – particularly rhodium – fell substantially in the second half of the year. At the same time costs rose. That’s a double whammy that really hit the shares. As I’ve cautioned before, mining is an inherently difficult and cyclical business. And operating in South Africa, which has seen civil unrest, won’t have helped the share price either. 

Overall though, the shares are dirt-cheap and I’ll be keeping them in my portfolio for the foreseeable future. If the price of rhodium, in particular, rises this year the shares could recover strongly.

Building back better

Another cheap penny stock I’ve come across is Speedy Hire (LSE: SDY). Its price-to-book ratio is 1.47, which is incredibly low. As an aside, it was a key metric for Warren Buffett’s mentor, Benjamin Graham, and is important for many value investors. 

The tools and equipment rental specialist recorded a 29.9% year-on-year improvement in EBITDA for the six months ended 30 September, to £49.1m, while its adjusted operating profit was £9.9m higher at £16.2m.

The company said artificial intelligence has meant it’s been better able to utilise its assets, which in an asset-heavy business is important. The more it rents out, the better it’s going to do financially and in turn for shareholders.

The concern with such a business is the need for continuous investment in equipment. Many investors prefer asset-light businesses that can scale more easily. Speedy Hire is also very exposed to the construction market. Any slowdown in building in the UK, in particular, would hurt the company and the share price. I’ll keep an eye on Speedy Hire but have no plans to add the penny stock as a new investment.

Vertu Motors, Sylvania Platinum and Speedy Hire all look cheap on slightly different metrics. The standout one that appears very undervalued to me though is Sylvania Platinum. That’s why I hold the shares and will likely add more. 

Vertu Motors

Although the type of cars people drive may change in the future, I think demand for automobiles in general will stay high in coming years. That’s one reason I feel quite upbeat about the prospects for car dealers.

One such dealer is Vertu Motors (LSE: VTU). It sells a wide range of car marques from over 150 outlets nationwide. It is the fifth largest car dealer in the UK and operates under brands such as Macklin Motors and Bristol Street Motors. The car dealership industry remains quite fragmented so I like Vertu’s strategy of integrating regionally strong firms into its company. Last month, for example, it announced the purchase of a couple of Toyota dealerships in the Midlands. I see that strategy as one that could add significant scale in the coming decade, boosting profitability.

Share price surge

The Vertu share price has more than tripled since the depths of pandemic uncertainty in April 2020. It is up 102% over the past year, at the time of writing this article yesterday.

But I don’t think it is too late to add the company to my portfolio. It has started paying dividends again, although that doesn’t mean it will necessarily do so in future. Last month, it raised its full-year profit forecasts.

One risk that the company itself has noted is supply constraints in the car industry. Staff absence due to medical isolation could lead to reduced operating hours at some dealerships too. Both factors could eat into revenues and profits.

Lloyds

Another nationwide chain with strong local brands is banking group Lloyds (LSE: LLOY). As well as the Lloyds brand, it operates under well-known names such as Halifax and Bank of Scotland.

Banking can be a very profitable business. For the first nine months of this year, the company reported statutory pre-tax profits of £5.9bn. I think demand for banking will be resilient over the next decade. Unlike high street neighbours such as shops, I actually think a boon in online custom could be good for banks. Many customers feel reassured banking online with a familiar, well-established bank like Lloyds rather than a digital start-up. So I think digital banking could help sustain revenues while possibly offering the chance to lower costs in coming years.

A large bank among the penny stocks

Lloyds trades among other penny stocks despite its strong business and what I see as a bright future. There are some clouds on the horizon, though. It is heavily exposed to the UK property market, so any crash in housing values could hurt its profitability.

I’m hopeful the bank will raise its dividend in 2022 as it has been stockpiling spare cash. But whether it does or not, I reckon there is strong long-term profit potential at the company. That’s why I’d be happy tucking it away in my portfolio for a decade.