I am always on the lookout for penny stocks to buy now for my portfolio. I think there are plenty of opportunities in the market as the world begins to move on from the pandemic.
As such, here are three top penny stocks I would buy now, considering their growth potential and current valuations.
Top penny stocks
One of my favourite sectors to hunt for bargains at the moment is real estate. Commercial property prices were hit hard by the pandemic, but they have been recovering steadily. In many cases, the share prices of companies with exposure to the sector have been slow to catch up. I think this presents an opportunity.
Real Estate Investors (LSE: RLE) owns a commercial property portfolio in the north of England. The stock is currently trading at a price-to-book (P/B) value of just 0.7, and it also supports a dividend yield of 8.6%.
Even though these metrics look attractive, I need to consider the risks the company is facing. These include higher interest rates and potential economic contraction due to the cost of living crisis.
Despite these headwinds, I think the company looks incredibly attractive and undervalued, considering the recovery in the commercial property market.
Growth opportunity
The short-term lending market has faced a lot of criticism in recent years, and for good reason. Unscrupulous lenders have been ripping off borrowers. And as regulators have clamped down, many have collapsed.
Morses Club (LSE: MCL) is one of the few survivors. I think the corporation now has an opportunity to capture market share where other businesses have been forced out of the market. That said, the prospect of additional regulations is probably the most considerable risk facing the group today.
Nevertheless, I think its low valuation more than makes up for this risk. The stock is trading at a forward 2023 price-to-earnings (P/E) multiple of 5. This makes the firm one of the cheapest penny stocks on the market.
Analysts also believe the company has the potential to yield 12% next year as it returns to growth. Considering these metrics, I believe the opportunity here far outweighs the risks of investing.
One of the best income stocks to buy now
Duke Royalty (LSE: DUKE) has an interesting business model. The company provides financing to its clients and receives interest in the form of royalties. It reinvests some of this money and returns a percentage to investors.
Unfortunately, the firm has had to lean heavily on shareholders to drive growth in recent years. It has dramatically increased the number of shares outstanding as it uses investors’ cash to expand the business. Further equity issuance could hit returns in the future.
Still, I think Duke Royalty has potential as an income and growth investment. That is why I would add the company to my portfolio of penny stocks. At the time of writing, the stock supports a dividend yield of 5.8%, which could hit 7.2% next year, according to City analysts.
Rupert Hargreaves 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.
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