Topps Tiles (LSE: TPT) is a name you may be familiar with. What you may not know is that this established business trades for less than £1 on the FTSE Alternative Investment Market (AIM), making it a penny stock. It also possesses a huge dividend yield of over 7%, which is only one of the reasons I will be adding some shares to my holdings imminently.

Tile specialist

Topps Tiles is the UK’s leading tile supplier with over 300 stores nationwide and an online presence too. With origins stretching back over 50 years, the business has grown over time to become one of the market leaders in its industry.

Topps shares are up 20% over a 12-month period. As I write they’re trading for 47p, whereas this time last year they were trading for 39p. I believe promising trading results and a solid balance sheet have propelled the shares upwards.

Risks to note

There are two main issues I can see that could impact Topps negatively. To start with, it could experience less demand for its products due to the current cost-of-living crisis. Consumers are more concerned with rising food costs, energy bills, and increased mortgage payments, and may wait to undertake major home renovations.

Next, with inflation rising, as well as the cost of raw materials required to produce its tiles, Topps could find itself paying higher prices for its products. This could squeeze profit margins and returns. It could increase its prices but then it risks driving customers to seek cheaper alternatives elsewhere.

A top penny stock I’m buying

Let’s move onto Topps’ bullish factors then. As I mentioned earlier, the passive income opportunity is excellent. A dividend yield of over 7% for a small cap is rare. I do understand that dividends are never guaranteed. My confidence in sustained and consistent returns is linked to Topps’ growth journey to date and performance history. Past performance is no guarantee of the future, but the company has increased revenue and profit in each of the last two years, since the pandemic.

Next, Topps’ market position is an enviable one. Its large store network, coupled with it being a retail favourite for tiles and a loyal trade customer base, should allow it to perform consistently and grow.

Finally, in the most recent results, it had £20m net cash in the coffers. This tells me it has the liquid cash to navigate any stormy waters, as well as invest in growth aspirations too.

To summarise, I believe Topps will be an excellent long-term addition to my holdings. I invest to hold for the long term and I understand there may be some short-term issues linked to the current macroeconomic outlook. I expect handsome returns over time.

The post Here’s why I’m buying this penny stock with its monster 7% dividend yield appeared first on The Twelfth Magpie.

More reading

• Growth AND dividends? Check out this top cheap penny share!

Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

One penny stock that has caught my eye recently is Severfield (LSE:SFR). It has some attractive fundamentals as well as some defensive capabilities, in my opinion. Should I buy the shares for long-term growth and returns? Let’s take a closer look.

Construction steel

As an introduction, Severfield is a steel designer, manufacturer, and installer for large-scale construction projects. Steelworks are essential in a lot of construction as they form the initial structure of any property being built. Severfield is one of the largest firms in its market and has an extensive presence throughout Europe too.

So what’s happening with Severfield shares currently? Well, as I write, they’re trading for 50p, putting them in penny stock territory. At this time last year, the stock was trading for 65p. This equates to a 23% decline over a 12-month period.

A penny stock with risks to consider

I believe the Severfield share price has come under pressure due to macroeconomic headwinds. These include soaring inflation, the rising cost of materials, as well as a global supply chain crisis. All of these challenges could hinder its progress moving forward too. Rising costs eat into profit margins, which can affect investor sentiment and returns. The supply chain issues are impacting many firms and affecting product availability and performance.

With the worldwide economy in a state of volatility, construction projects may be halted, or slowed down at least. This could have a detrimental impact on demand, which would in turn, affect Severfield’s performance and level of return.

The bull case and my verdict

To start with, I believe Severfield has some defensive traits. This is because of the essential nature of its core offering, steel works, and the role steel plays in virtually every construction project. No matter the project, some form of steel is required to help build the initial structure. Steel is as important as bricks and mortar. This should help boost performance and growth for a long time to come.

Next, I can see Severfield shares would boost my passive income stream through dividend payments. At present, the dividend yield on offer is 6%. This is higher than the FTSE 100 and FTSE 250 averages of 3%-4% and 1.9% respectively. I am aware that dividends are never guaranteed, however. Furthermore, the shares look decent value for money right now on a price-to-earnings ratio of just 11.

Finally, Severfield has a good track record of performance. I do understand that past performance is not a guarantee of the future. However, looking back, I can see it has grown revenue and profit for the past four years consecutively.

Overall I like the look of Severfield shares. I will be adding them to my buy list for the next time I have some funds to invest. The fundamentals, such as performance track record, passive income opportunity, as well as the shares’ value for money look good. Furthermore, I like Severfield’s brand power and global presence. In fact, its exposure to the Indian market, which is experiencing an infrastructure and construction boom, should boost performance and growth in the coming years too.

The post Is this falling dividend-paying penny stock a must buy? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

One penny stock I am considering adding to my holdings is Speedy Hire (LSE:SDY). Let’s take a closer look at some fundamentals, as well as recent developments to help me make a decision.

Construction equipment

As an introduction, Speedy Hire is a construction tools and equipment rental and hire business. With over 200 depots across the UK and Ireland, it has over 300,000 itemised assets available for trade and DIY customers.

So what’s happening with Speedy shares currently? As I write, they’re trading for 37p, putting them in penny stock territory. At this time last year, the stock was trading for 59p. This equates to a 37% drop over a 12-month period. Many FTSE stocks have fallen in recent months due to macroeconomic headwinds, coupled with the tragic events in Ukraine.

The bull case

Let’s look at some of the positives of Speedy shares. To start with, I can see that they are trading at dirt-cheap levels on a price-to-earnings ratio of just nine.

In addition to this, Speedy shares would boost my passive income stream through dividend payments. The current dividend yield stands at 5.9%. To provide some context, the FTSE 100 and FTSE 250 average yields stand at 3%-4% and 1.9%, respectively. I am conscious that dividends are never guaranteed, however.

Next, Speedy has a decent track record of performance. I do understand that past performance is not a guarantee of the future. However, looking back, I can see it has recorded consistent revenue and profit for the past four years. It’s recent full-year results were very close to pre-pandemic levels. This is encouraging as the pandemic caused disruption for many firms.

Finally, I believe Speedy operates in a burgeoning sector right now. Construction projects and spending is increasing. For example, the UK government is looking to spend more on essential infrastructure. Furthermore, there is a shortfall of new homes in the UK, meaning demand is outstripping supply. Many house builders are working hard to plug this gap. Although I do not profess to be a construction expert, my research tells me that it is more cost-effective to hire tools, rather than buy them. This should help boost Speedy’s performance, and level of return.

A penny stock with risks & my verdict

All stocks have potential downsides and risks, and Speedy is no different. First off, the current economic volatility could play a part in slowing down infrastructure projects. This could hinder demand for its products, as well as hurt performance and returns. Next, due to inflation, the cost of materials has risen. This means that Speedy may need to hike prices to remain profitable. This could also hurt demand and customer numbers.

Overall I like the look of Speedy, as a business, and as a stock to boost my holdings. It has a good profile and presence. The shares look good value for money and would boost my passive income stream. I believe current headwinds could cause shorter term issues. However, I invest for the long term, so would expect to see growth and consistent returns eventually. I will be buying the shares.

The post 1 dirt-cheap penny stock set for huge growth and it already pays a dividend! appeared first on The Twelfth Magpie.

More reading

• 1 penny stock yielding 5.3% that could rocket 201%, according to this broker

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

My investment mantra has always been to buy and hold for a long time period. So despite current economic issues and headwinds, one penny stock I am planning on adding to my holdings is Marston’s (LSE:MARS). Here’s why.

Pubs and bars

Marston’s is an owner and operator of pubs and bars, as well as an ale brewer with over 180 years of experience. It has a workforce of over 14,000 people and is a powerhouse in the leisure sector with more than 1,500 locations. It also operates six breweries that produce over 60 different ales.

So what’s the current state of play with Marston’s share price? Well, as I write, the shares are trading for 35p, putting them in the penny stock category. At this time last year, the stock was trading for 83p, which is a 57% decline over a 12-month period. I’m not concerned by the current share price drop, caused by macroeconomic headwinds. In fact, I view this as an opportunity to buy cheaper shares.

Challenges to note

There are a few current macroeconomic headwinds at play such as soaring inflation, rising costs, the energy crisis, and the supply chain crisis. Marston’s shares have fallen and the business could suffer further yet. For example, rising costs eat into profit margins. Next, the energy crisis here in the UK is causing many businesses to crumble under pressure from higher energy costs.

Finally, due to these factors, a cost-of-living crisis has emerged in the UK. Marston’s could see its customer numbers fall as people have less money to spend on going out.

Why I like Marston’s shares

So let’s take a look at the bull case then. To start with, I believe the risks mentioned earlier are shorter term. My belief is that a business like Marston’s, with its diversified offering, brand power, and large presence in the UK should be able to boost growth, performance, and shares in the longer term.

Despite Marston’s performance falling since the pandemic, which was a really tough period for all in the leisure industry, it still manages to record a consistent profit. I believe it can return to pre-pandemic levels eventually based on previous track record, as well as my points earlier around brand power and size.

One final positive aspect I believe that could boost Marston’s in the longer term is pent-up demand. The pandemic gave many people a new-found appreciation for socialising, and attending their favourite restaurants and bars. When restrictions originally eased last year, pent-up demand boosted many businesses, Marston’s included. This resurgent attitude towards socialising should continue to boost Marston’s, in my opinion.

My verdict

In conclusion, I expect Marston’s shares to experience some tough times ahead, more so in the shorter term. Despite that, they look like a cheap penny stock option for me to buy and hold for the long term with a diversified business model, a great presence, and brand power. I’ll be buying the shares imminently.

The post I’m buying this penny stock in October for long-term growth and returns! appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended Marstons. 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.

One falling penny stock that has caught my eye recently is SIG (LSE:SHI). Despite its recent drop off, is there a chance it could recover to boost my holdings? Should I look to buy the shares at a cheaper price now?

Building supplies business

SIG is a specialist building supplies firm that produces products such as insulation, roofing, and other interior products. It has a worldwide presence, supported by its close to 8,000 employees.

As I write, SIG shares are trading for 32p, putting them in penny stock territory. A year ago, the stock was trading for 47p, meaning it has seen a 31% decline over a 12-month period. It is worth mentioning that many shares have fallen in recent months due to macroeconomic headwinds and the tragic events in Ukraine.

Challenges to note

As mentioned above, macroeconomic and geopolitical issues are negatively impacting SIG shares. I believe these same challenges could affect investor sentiment, as well as performance and returns, for some time.

Soaring inflation has led to a rise in the cost of raw materials. For a producer of goods like SIG, this is bad news. Rising costs could put pressure on profit margins. A hike in prices could result in customers looking elsewhere for cheaper alternatives.

Spending on building projects may also slow down. This could have a detrimental effect on SIG’s demand, balance sheet, and returns.

The positives and my verdict

SIG released a half-year report for the six months ended 30 June 2022, which I found to be positive. Revenue, like-for-like sales, operating profit, and margin all increased compared to the same period last year. SIG did point to inflationary pressures but said it was able to mitigate the impact due to its high standard of products and service.

Next, although fears of shorter-term demand issues loom large due to the current volatility, I believe SIG could experience heightened demand and growth longer term. This is because, as a whole, the European construction market is a growing one. A prime example of this is the current UK housing market. Demand is outstripping supply so many house builders are looking to fill this void. SIG’s products are essential for many aspects of construction, so it could benefit here.

Finally, SIG’s insulation products could drive growth for the company. This is because rising energy bills across the world, especially here in the UK, will mean many turn to these products to help with the cost of these bills. SIG could experience increased demand, which could boost performance and returns.

To summarise, I believe SIG could be in line for decent growth in the longer term. Its recent trading update is a step in the right direction. Despite that, for me, there are currently too many ifs and buts linked to SIG’s success, especially in the face of such severe economic volatility. I will keep SIG shares on my watch list for now, but I believe there are better penny stock options for my holdings.

The post Could this falling penny stock be perfect for growth and returns? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

One penny stock I will be adding to my holdings soon is Pendragon (LSE:PDG). It fits into my investment strategy of looking for small-cap stocks that could help boost my holdings over the long term. Here’s why I like the shares.

Automotive retailer

Pendragon is the second-largest car retailer in the UK. It operates over 150 sites across the UK, where it represents over 20 different vehicle manufacturers. Some of these manufacturers include household names such as BMW, Mercedes Benz, Ferrari, Nissan, and many more.

Pendragon shares are currently trading for 22p, putting them in penny stock territory. At this time last year, the stock was trading for 19p, which is a 15% return over a 12-month period.

Risks to note

Despite my intention to buy Pendragon shares, I must note credible risks attached to them. The first issue is the fact there is a severe shortage of new cars available to sell. This is a direct result of a shortage of semiconductors, which are essential components to newer cars, especially electric vehicles (EVs). This lack of new cars could hamper performance and returns for Pendragon. I must note that due to this issue, the used car market is booming currently, which could somewhat offset this specific risk.

The next issue I must bear in mind is that of macroeconomic headwinds. Soaring inflation, the rising cost of materials, as well as supply chain constraints could hamper Pendragon. For example, rising costs and supply chain issues could impact profit margins, as well as day-to-day operations.

Why I would buy this penny stock

So let’s look at the positive aspects of Pendragon then. I believe the shares look excellent value for money currently on a price-to-earnings ratio of just four.

In addition to this, Pendragon has a decent track record of performance, although I am conscious that past performance is no guarantee of the future. Looking back, I can see its recent performance indicates that pandemic-related issues could be a thing of the past. Revenue and profit in 2020 were low due to the impact of Covid-19, but the following year, it managed to grow revenue and profit closer to pre-pandemic levels. I would expect performance to return closer to 2019 levels soon.

Lastly, I like Pendragon’s diversified business model as well as its brand power and profile. Through its many brands selling used, new, budget, and premium vehicles, it is able to derive revenue through many channels and geographical locations. Furthermore, it also has a separate parts business, as well as a company that focuses on automotive software solutions for the industry.

To summarise, I believe Pendragon is a penny stock that is being suppressed by current headwinds and volatility. With its diversified business model and presence, I believe it could be a great addition to my portfolio to provide long-term growth and returns. This is why I am planning on buying Pendragon shares imminently.

The post Here’s why I am buying this automotive penny stock for growth and returns! appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended Pendragon. 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.

I noticed that Luceco (LSE:LUCE) shares jumped yesterday after the company released interim results for its first half year period. Let’s take a closer look at the results as well as other aspects this potential investment. This will help me decide if I should buy this penny stock for my holdings or not.

Lighting products

As a quick reminder, Luceco is best known as a manufacturer and supplier of lighting products for both commercial and domestic use. It also creates and supplies wiring accessories as well as portable power solutions too.

It is worth remembering that a penny stock is one that trades for less than £1. So what’s happening with Luceco shares currently? Well, as I write, they’re trading for 88p. At this time last year, the stock was trading for 373p, which is a decline of 76% over a 12-month period.

I believe macroeconomic headwinds, as well the stock market correction caused by geopolitical events, have hampered the performance of Luceco shares.

Interim results and the bull case

Since Luceco released results for the six months ended 30 June 2022 yesterday, the shares have climbed 10%. So let’s dig deeper into the results. I see that revenue, profit, margin, and dividend per share all dropped compared to 2021. This is because 2021 was a record year for Luceco. It benefitted from last year’s DIY boom linked to the pandemic and stay-at-home guidance. It said that results posted for these six months were in line with expectations, due to normalised trading conditions.

I believe the shares rallied due to the comparison between 2022 interim results and the company’s pre-pandemic results. Revenue and margins were both up significantly. Furthermore, Luceco said it is undergoing a “strategic improvement process“. This will help it draw a line under the pandemic period, which hindered it massively. Based on these results, it said this strategy was working.

Next, I note that Luceco has entered the electric vehicle (EV) charging market by purchasing Sync EV in March. This will help diversify its business and boost performance. It is estimated that the EV changing market is to surge by close to £500m by 2025. Sync currently has 2% of market share. Luceco believes it can boost this figure and benefit due to its profile and infrastructure already in place.

Finally, I’m buoyed that Luceco pays a dividend that would boost my passive income stream, although I am conscious that dividends are never guaranteed.

Risks and my verdict

Despite Luceco shares rallying, macroeconomic headwinds could continue to cause issues. Rising costs could put pressure on profit margins. Supply chain constraints could affect its ability to deliver to its clients and hamper its overall sales figures. This could have a material impact on performance and returns.

In conclusion, I have decided that Luceco is not a penny stock I would add to my holdings. The pandemic affected the business negatively, and although it bounced back well due to heightened demand for DIY products, macroeconomic issues currently present yet another challenge for the business. I believe there are better stocks out there for me to buy for my portfolio.

The post This penny stock is up 10% after releasing interim results! Should I buy shares? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

I’m always searching for small-cap stocks that could be diamonds in the rough. One penny stock I’m currently considering adding to my holdings is Savannah Resources (LSE:SAV). Let’s take a closer look at the bull and bear case to help me decide if I should buy the shares.

Lithium miner

As a quick introduction, Savannah is an early-stage miner with a focus on a few different metal types. Although small in size, it possesses the largest lithium mining asset in the whole of Europe. This is where I believe its growth prospects lie, but more on that later.

It is worth remembering that a penny stock is one that trades for less than £1. As I write, Savannah shares are trading for 2.95p, so they qualify. At this time last year, the stock was trading for 3.5p, which is a decline of 15% over a 12-month period.

To buy or not to buy?

So let’s take a closer look at the pros and cons of me buying Savannah shares.

FOR: Savannah owns the Barroso lithium project in Portugal. This is perhaps the reason I’m most excited when it comes to the miner’s growth prospects. Lithium is set to play a huge role in the coming years in the energy and transport sectors. Lithium ion batteries are used in electric vehicles, for example. Demand for EVs is only rising as governments look to cut carbon emissions. Increased demand, coupled with the largest lithium project Europe, could be lucrative for Savannah.

AGAINST: The issue for a penny stock like Savannah is that larger competitors out there could out-muscle and outmanoeuvre them. The mining sector is competitive and saturated. A few big names dominate the market and can often buy out or overtake smaller firms like Savannah.

FOR: At less than 3p per share, Savannah seems to me like a very low risk way for me to open a position in a business that could experience a meteoric rise. That said, I am aware there is a long way to go and many ifs and buts.

AGAINST: Savannah hasn’t actually received sign off from authorities to begin mining at the Barroso mine. With this in mind, there are a couple of things that could occur for the penny stock. The biggest risk for me is that it could run out of money, which means it would need to take on debt to keep the lights on or risk being taken over by a larger competitor. I will monitor events.

A penny stock I would buy

In conclusion, I would add a small number of Savannah Resources shares to my holdings. I do believe that if it receives approval for its Barroso project, it could be quids in. This could be good news for an investor like me looking to get in at current levels.

I am conscious Savannah is a penny stock with some tangible risks, however. Ultimately, this is the case with many small caps entering large markets, looking to make a name for themselves. I’ll buy some shares and keep a close eye on developments.

The post 1 penny stock with huge potential for growth! appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Penny stock Currys (LSE:CURY) is one of the most shorted stocks in recent months. Despite this, I would still add the shares to my holdings for long-term growth and returns.

You might be wondering what “shorting” or “short selling” is. To short a stock is to borrow it from someone else, and sell it at the current price. If the price declines, the short-seller can buy it back at the lower price, return it to the original owner, and make a profit. On the other hand, if the share price rises, the short-seller has to buy it back at a higher price, and will make a loss.

It is worth mentioning that when short-sellers load up on certain stocks, this is because they expect, often for good reason, that something negative will drive the stock’s price down.

Tech and home retailer

Currys is one of the UK’s leading retailers of technology products as well as household electrical and white goods. It currently has over 800 stores spanning seven countries and operates online too.

So what’s happening with Currys shares currently? Well, as I write, they’re trading for 59p, which puts Currys into the penny stock category. At this time last year, the stock was trading for 137p, which is a 56% drop over a 12-month period.

A penny stock with risks

I believe the reason that Currys shares have dropped is due to macroeconomic headwinds. Soaring inflation, rising costs, and global supply chain issues have affected it. Inflation levels have hampered many consumers’ ability to purchase certain goods, often considered luxuries, like large TVs or the latest technology that Currys sells. This will hurt performance and returns.

Another issue that could affect Currys is the competitive sector it operates in. Many of its products are generic products on offer from a number of retailers. If a competitor were in a position to offer better value for money, especially in current tough times, Currys could see market share and performance affected.

Why I like Currys shares

So to the positives then. Firstly, I believe Currys’ dominant market position, coupled with its profile and presence, will help see it through current economic volatility.

Next, Currys performance for FY 22/23 made for good reading, in my opinion. I do understand that past performance is not a guarantee of the future, however. For the full-year ending 30 April 2022, it said sales totalled £10.2bn, down 2% compared to last year, but pre-tax profit increased by a healthy 19% to £186m. Store sales increased well and it also opened two new stores in Cyprus too as part of its growth plans.

A penny stock with a passive income opportunity is enticing to me. Currys offers just that with a dividend yield of just over 5%. The FTSE 250 average is below 2%. I am aware that dividends can be cancelled, however. As a bonus, due to Currys shares falling, they look decent value for money on a price-to-earnings ratio of 10.

To summarise, I expect Currys to encounter headwinds in the shorter term. My approach has always been to buy and hold for the long term, however. I would buy and hold the shares as I expect Currys’ dominant market position to boost long-term growth and lucrative returns.

The post This penny stock is one of the most shorted! Here’s why I’d still buy shares appeared first on The Twelfth Magpie.

More reading

• Up 3.5% this month, is it time for UK investors to cycle back into the more domestically-focused FTSE 250 index?

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

A penny stock I’m considering adding to my holdings currently is Foxtons (LSE:FOXT). Volatility in the housing market due to macroeconomic factors is something I must consider, however. Let’s take a closer look at whether I should buy Foxtons shares or not.

Estate agents

As a quick reminder, Foxtons is London’s leading estate agency. It currently has approximately 50 interconnected branches throughout the city and a workforce of over 1,000 employees. The Foxtons website receives nearly 10m visits per year.

A penny stock is one that trades for less than £1, Foxtons shares are currently trading for 40p. At this time last year, the stock was trading for 54p, which is a 25% decline over a 12-month period.

A penny stock with risks

One of the biggest risks I see with Foxtons shares is the action the Bank of England (BoE) is taking to combat soaring inflation. The BoE has increased the base interest rate, which means mortgage payments are now higher too, and obtaining a mortgage is also more difficult. London house prices have always been higher than average but it seems buying a property there is harder than ever. Some even anticipate a housing crash could be on the horizon. Even a bear housing market could impact a business like Foxtons.

Next, Foxtons has impressively grown into London’s leading agency but the national market in the UK is vast. Foxtons does not have much of a presence outside London, which means it is heavily reliant on a market that is saturated and where competition is growing every day. Competition and a lack of diversification in terms of location could hurt performance and returns.

The bull case and my verdict

So to the positives then. I saw that Foxtons has a decent track record of performance. I am aware that past performance is not a guarantee of the future, however. Looking back, it has grown revenue three out of the past four years, with the pandemic-affected 2020 seeing a small dip in levels.

Next, Foxtons’ growth story to date is a positive point too. The London housing market is vast and lucrative, so to be able to navigate its way to the top of this is impressive. House prices in London are statistically higher than the rest of the country. This tells me that there is lots of money to be made for estate agents and Foxtons could leverage its position to profit here. This would boost its balance sheet and potential returns too.

Finally, Foxtons shares currently pay a dividend that would boost my passive income stream. Its current dividend yield stands at just over 1.2%. A penny stock that pays a consistent dividend is not easy to find. I am aware, however, that dividends are never guaranteed.

Overall, I would be willing to open a small position in Foxtons shares. Its unrivalled position in the London market is a big factor in this, as well as the passive income opportunity. As a penny stock, I am expecting some volatility, especially currently due to macroeconomic headwinds.

The post Is this property penny stock one to buy or avoid? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.