I’m searching for the best penny stocks to buy. Here are two I think could generate exceptional returns for at least the next decade.
All hail the King
I think profits at Kingspan Group (LSE: KGP) could soar as the fight against climate change revs up. The building materials business is perhaps best known for the insulation products it supplies. I think sales of such materials will soar as housebuilders use larger amounts in their homes and people retrofit their existing homes.
A study by the Royal Institute of British Architects reveals the huge positive impact insulation materials have on reducing emissions. It says that improved insulation, better windows and gas boiler replacement in 3.3m UK suburban homes could cut the country’s carbon footprint by 4%.
The government’s Green Homes Grant is due to end at the end of next month. This could have a big near-term effect on Kingspan’s revenues in the UK. But it’s my view that fresh measures could be resurrected as fears over the environmental emergency inevitably rise.
Besides, it’s important to remember too that Britain accounts for just 16% of Kingspan’s revenues. The business sources almost 60% of sales from other European territories, regions where legislation to help the planet is a very hot topic.
The downside is that Kingspan’s operations are highly cyclical. So any fresh weakness in the global economy could severely damage its revenues. Still, as the fight against climate change intensifies, and housebuilding rates rise to match growing populations, I think this penny stock could still deliver big shareholder returns over the long term.
Another top penny stock to buy
Increasing my exposure to e-commerce is something I’ve strived to do in recent years. Packaging manufacturer DS Smith and warehouse operator Tritax Big Box REIT are a couple of stocks I’ve bought as online shopping volumes continue to increase.
Penny stock Ediston Property Investment Company (LSE: EPIC) is another I’m thinking of buying for the digital revolution too. The property giant specialises in operating retail parks. These are the sort of spaces which are perfect for the ‘click and collect’ age.
The retail units this penny stock lets out tend to be larger than the usual high street or shopping mall space. This gives retailers the space to store products that people order online. It’s also often simpler for customers to pick up goods from shopping parks as they can slip their purchases straight into the back of their car after collection.
The main threat to Ediston is the potential for fresh economic downturns that could hit consumer spending. This may in turn result in retail tenants asking for rent discounts or possibly even vacating.
Still, this is a risk I’d be prepared to swallow. I think the company’s long-term outlook — combined with its bulky 6% dividend yield — make it too good to miss.
Royston Wild owns DS Smith and Tritax Big Box REIT. The Motley Fool UK has recommended DS Smith and Tritax Big Box REIT. 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
