The economic outlook remains plagued with uncertainty as the Covid-19 crisis rolls on. But questions over the timing of the eventual economic recovery haven’t stopped me from buying UK shares recently. In fact, there are some quality penny stocks I’m thinking of buying before April’s Stocks and Shares ISA deadline.
Here are two cheap penny stocks I’m considering buying for the new bull market. UK shares like this all cost less than £1 each.
#1: A top penny stock for the retail recovery
2020 was a disaster for the broader fashion sector as Covid-19 took hold. Shop closures, allied with the rise of home working and restrictions on social gathering, caused total sales volumes of clothes in the UK to fall more than a quarter year-on-year. But I think fashion demand could be about to spike as lockdowns unwind and economic conditions improve.
Past form shows us that spending on discretionary items always picks up strongly during the early stages of economic upturns. Things could be particularly explosive during the upcoming bounce-back too given the huge savings chests people have built up during lockdowns. I think all this bodes well for Coats Group (LSE: COA), a penny stock that makes threads, zips and trims for clothing (alongside a broad range of other products).
This explains why City analysts think earnings here will soar 125% in 2021. It’s a projection that leaves this stock trading on a forward price-to-earnings growth (PEG) ratio of 0.1. Any value below 1 can suggest that a UK share is undervalued by the market. Be warned though, sustainability is becoming an increasingly pressing issue in the minds of consumers. It has the potential to hit demand for Coats’ products in future if people begin to scale back their wardrobes.
#2: A UK share with serious muscle
I also think Glanbia (LSE: GLB) could experience strong profits growth in the new bull market. Even UK shares that operate in the more stable food industry benefit from the uplift in broader consumer activity during economic recoveries. So I think this cheese manufacturer could see demand for its dairy products and ingredients growing.
Glanbia also has its fingers in the sports nutrition products segment. It therefore stands to gain from the mass reopening of gyms and leisure centres as the Covid-19 crisis steadily recedes. I think that this particular side of the penny stock’s operations provide exceptional long-term profits opportunities too. Analysts at Grand View research reckon the protein supplements market will grow at an annualised rate of 8.4% through to 2028.
City brokers think Glanbia’s profits will rise 7% in 2021, leaving the company trading on an undemanding forward price-to-earnings (P/E) ratio of 15 times. It’s possible that the rising popularity of vegan diets could hamper earnings growth at the dairy products manufacturer beyond the immediate term. But all things considered, I think this stock merits serious attention at current prices.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Coats Group and Glanbia. Views expressed on the companies mentioned in this article are those of the writer and therefore 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 diverse range of insights makes us better investors.