Business is booming for some companies right now. In particular, car retailers and logistics companies are reporting soaring sales. There are several penny stocks in these sectors that I’d consider buying right now. Let’s take a look.
Penny stocks in the driving seat
Used car sales are driving much of the growth for car retailers. So why is there so much demand for used cars right now? Well, a pandemic-related shortage of semiconductors is having a knock-on effect that’s causing delays in new car production.
Fewer new cars, and a limited supply of used cars is a recipe for keeping car prices elevated. This is resulting in car retailers like Vertu Motors (LSE:VTU) reporting “record profitability”. I’d say Vertu is one of the cheapest penny stocks available right now. Not only is it delivering a record trading performance, but it also has what I’d call a bullet-proof balance sheet. Having plenty of freehold property gives Vertu a decent margin of safety too, in my opinion.
The boom in profits could continue for now as the market conditions remain favourable. However, bear in mind that shortages are unlikely to last forever. At some point, things will normalise. And so might Vertu’s profits. Also, as in many industries right now, wage costs are rising. Vertu isn’t immune to these cost pressures so it’s something I’d keep an eye on.
Overall, the management team are experienced and look like they can navigate any challenges. I’d buy this penny stock today and park it in my Stocks and Shares ISA.
Another one to look at
For similar reasons to liking Vertu Motors, I also like Lookers. This British motor retail company recently reported strong trading too. It now expects “underlying profit before tax for 2021 to be materially ahead of its previous expectations”. I like the sound of that.
As interest in electric vehicles continues to grow, Lookers seems well-positioned to benefit. That said, uncertainty remains regarding the supply of new vehicles. And like Vertu, the boom in used car sales should return to normal levels one day. But overall, I like Lookers and would consider buying the shares.
Delivering the goods
With many companies reporting shortages and logistical issues, it might be a good time to look at Xpediator (LSE:XPD). This small British company provides international freight management services. In recent months, it reported strong trading, plus rising sales and profits. The positive trends should continue in the second half of the year, in my opinion. And with many logistics businesses, that’s when most of the profits are made.
Brexit has also created some challenges regarding logistics and customs. But this should bode well for Xpediator. It should benefit from the need for more customs clearance services.
A word of warning, however. This business is competitive and operates at relatively low profit margins. And although trends are currently positive, that could normalise next year. That said, given its cheap valuation and positive current trends, I’d consider buying this penny stock.
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Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Vertu Motors. 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.
This post was originally published on Motley Fool
