Penny stocks are considered high-risk investments at the best of times. They can be prone to bouts of extreme share price volatility, even when macroeconomic conditions remain benign and company-related news remains stable. Even the smallest sign that trading has slipped can cause these low-cost stocks to plummet.
As a rule, UK shares with low market-caps also tend to have less financial clout than larger businesses. So in times like these, when economic indicators begin to worsen, share price falls can be particularly wild. For example the FTSE AIM All-Share index has fallen 7% in value since the start of September. By comparison, the FTSE 100 has dropped just 0.1% in the same period.
Robust top-quality penny stocks can be caught in the carnage as well as the duds. And this gives eagle-eyed investors the chance to nip in and grab a bargain.
A rock-solid penny stock to buy
For example, I don’t understand why Assura has plummeted in value in recent weeks. This UK share owns and operates real estate for primary healthcare providers. As a consequence, its services are in high demand, regardless of broader economic conditions.
Of course Assura’s vulnerable to changes in NHS policy. But, right now, conditions look favourable as lawmakers look to shift patients away from hospitals and towards primary healthcare facilities instead. I think the long-term outlook here’s promising too, as Britain’s rapidly-ageing population will inevitably boost demand for healthcare services.
Another solid Ten
Ten Lifestyle Group is another penny stock I think is too cheap to miss following recent heavy selling. This UK share provides concierge services to companies and to high-net-worth individuals. No surprise then that its shares have sold off heavily as concerns over the macroeconomic landscape have grown.
But despite the threat of near-term earnings turbulence I think Ten Lifestyle remains a very-exciting growth pick. Let’s not forget that the number of uber-wealthy individuals is predicted to soar over the next decade. What’s more, this penny stock also continues to rack up contracts with major organisations (it just sealed a multi-year renewal contract with Barclays, for example). And the business has a healthy balance sheet with zero debt to help it see out any sharp economic downturn.
Get in the zone
I also think Shoe Zone could be a great penny stocks to buy following recent price weakness. It’s thought that retailers like this could suffer a profits meltdown as booming inflation hits broader consumer confidence. However, I think this value retailer could actually benefit as shoppers try to draw their budgets out that little bit further.
In fact, value retail is considered to be one of the hottest games in town, perfectly evidenced by the rampant growth of supermarkets Aldi and Lidl over the past decade. What I like about Shoe Zone too, is that it also has cash on the balance sheet and no debt.
This should also allow it to keep investing in, for example, its digital operations to boost long-term earnings.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. 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.
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