2 Cheap Penny Stocks Investors Should Consider in July!

Penny stocks can be very interesting investments. And not necessarily in a good way.

These small-cap stocks are often young companies with significant growth potential. If all goes well, they can experience explosive earnings growth, sending their stock prices soaring.

However, penny stocks can also experience significant price volatility, reflecting low liquidity and high levels of speculation. Their prices can fall particularly sharply when economic conditions deteriorate and concerns about the strength of their balance sheets increase.

Buy cheap

That’s why it can be a good idea to buy penny stocks, which have low valuations. The risk of a sharp drop in the stock price can be limited, because the market already has a pessimistic view of the company’s prospects.

Buying cheap stocks has other benefits as well. If the company performs well, the stock price can skyrocket as investors recognize the true value of the company.

With that in mind, here are two top growth stocks that I think are worth taking a close look at today.

Star of gold

Buying commodity stocks can be a bumpy ride. Commodity prices are often volatile, meaning these stocks can soar or plummet at any time.

But the promising outlook for precious metals means investing in gold producers could be a good idea. Serabi Gold (LSE:SRB), which trades at 66.5p per share and has a market capitalisation of £50.4m, is one such company on my radar.

There is no guarantee that gold prices will surpass May’s record highs of around $2,450 per ounce. But there is a “perfect storm” of factors that could push metal prices higher. These include:

• Stubborn global inflation

• Major electoral changes in Europe (and particularly in France)

• A significant public debt, particularly in the United States

• China’s economy continues to weaken

• Growing Western tensions with Russia and China

But why buy Serabi Gold shares to profit? For one thing, its shares offer good value today. The Brazilian miner is trading on an extremely low forward price-to-earnings (PE) ratio of 4 times.

The story continues

Gold production is also increasing as the company ramps up production at its Coringa asset. The group’s production rose 12.5% ​​between January and March, the highest quarterly total since 2021.

Block Party

Michelmersh Brick Holdings (LSE:MBH) is another good value penny stock to consider today.

At its current price of 95.4p, the £93.7m market capitalisation company appears significantly undervalued compared to some of its peers. The gap between its forward price-to-earnings ratio of 9.4 times and that of its rivals Ibstock (in blue) and Forterra (in green), is shown below.

But what makes brickyards like this one so attractive as an investment? It must be acknowledged that demand for housing in the UK is currently weak due to higher than usual interest rates. This threat will remain if inflation fails to stay low.

The long-term outlook for the housing market remains strong, however. Britain will need to significantly accelerate housebuilding in the coming years to meet the housing needs of its growing population. Sales of all types of construction products could therefore take off.

Michelmersh can also expect demand for bricks from the repair, maintenance and improvement (RMI) market to remain strong. Britain’s older building stock requires constant renewal to remain standing.

The article 2 Cheap Penny Stock Investors Should Consider This July! appeared first on The Motley Fool UK.

Further reading

Royston Wild holds a position in Ibstock Plc. The Motley Fool UK has recommended Ibstock Plc. The views expressed on the companies mentioned in this article are those of the author and may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a broad range of ideas makes us better investors.

Motley Fool UK 2024