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2 Dirt Cheap Penny Stocks That Investors Should Watch This July!

2 Dirt Cheap Penny Stocks That Investors Should Watch This July!

2 Dirt Cheap Penny Stocks That Investors Should Watch This July!

Image source: Getty Images

Penny stocks can be notoriously exciting investments. And not necessarily in a good way.

These small-cap stocks are often young companies with significant growth potential. If things go well, they can experience huge earnings growth that sends their stock prices through the roof.

However, penny stocks can also often experience significant price volatility, a reflection of weak liquidity and high levels of speculative trading. They can fall particularly sharply when economic conditions deteriorate and fears about the strength of their balance sheets increase.

Buy cheap

Therefore, it can be a good idea to buy penny stocks that have a low valuation. The risk of a sharp drop in the stock price can be limited, because the market already has a pessimistic view of the company’s prospects.

Buying cheap stocks has other advantages too. If the company performs well, the stock price can explode as investors recognize the true value of the company.

With that in mind, here are two stocks worth taking a closer look at today.

Golden Star

Buying commodity stocks can be a wild ride. Commodity prices are often volatile, meaning these stocks can go up or down at any time.

But given the positive outlook for precious metals, investing in gold producers may be a good idea. Serabi Gold (LSE:SRB), which trades at 66.5p per share and has a market capitalisation of £50.4 million, is one of the companies I keep an eye on.

There is no guarantee that gold prices will rise further than May’s record highs around $2,450 an ounce. But there is a “perfect storm” of factors that could push metal prices much higher. These include:

  • Persistent global inflation
  • Major electoral shifts in Europe (and especially France)
  • Significant government debt, especially in the US
  • Continued weakness in the Chinese economy
  • Increasing tensions in the West with Russia and China
Gold price movement.
Created with TradingView

But why should you buy Serabi Gold stock to take advantage of this? First, the stock offers good value today. The Brazilian miner is trading at a rock-bottom price-to-earnings (P/E) ratio of 4 times.

Gold production is also increasing as the company ramps up production at its Coringa assets. Group production rose 12.5% ​​between January and March, representing the highest quarterly total since 2021.

Neighborhood party

Michelmersh Brick Holdings (LSE:MBH) is another good value penny stock to consider today.

At its current price of 95.4p, the £93.7m cap business appears significantly undervalued compared to some of its peers. The gap between its forward P/E ratio of 9.4 times and that of rivals Ibstock (in blue) and Forterra (in green), is shown below.

Chart showing the cheap valuation of Michelmersh.
Created with TradingView

What makes these types of brickmakers such an attractive investment? Admittedly, demand for UK homes is currently weak due to higher than normal interest rates. This remains a threat if inflation does not remain low.

However, the long-term outlook for the housing market remains robust. Britain will need to significantly increase housebuilding activity in the coming years to meet the housing needs of its growing population. Sales of all types of building products could therefore benefit from a boost.

Michelmersh can also expect demand for bricks from the repair, maintenance and improvement (RMI) market to remain robust. Britain’s old housing stock needs constant renewal to stay afloat.