I’m searching for the best penny stocks to buy for my Stocks and Shares ISA. Here are two on my radar today.
The global population is increasing rapidly. Yet there is a finite amount of land to grow crops to feed it. So demand for fertilisers is tipped to surge in a bid to boost yields.
The outlook is especially strong for potash too, a key ingredient in the yield-boosting material. This is why I’m considering adding Gensource Potash (LSE:GSP) shares to my portfolio.
The business is developing the Tugaske mining project in Canada, from which the business hopes to begin extracting material in 2024. It has plans to produce 500,000 tonnes of potash a year, a target it hiked from 250,000 last year, owing to the market’s favourable outlook.
As well as boosting yields, potash has allows farmers to use water more efficiently. The latter is especially important as climate change creates drier landscapes.
Investing in Gensource presents higher risk than buying shares in larger miners. Development issues at Tugaske could create large, unexpected costs that add extra stress to its balance sheet. And this penny stock doesn’t have the financial might of say a Rio Tinto to help it overcome any problems.
Yet I still believe this stock is an attractive buy today. The quality of its Canadian asset, allied with bright forecasts for the potash market, could lead to explosive profits growth here. BHP has predicted that global potash demand could double between the late 2010s and late 2040s.
A fast-growing world population — allied with strong economic growth in emerging regions — means that energy consumption is also set to rocket. Yet fossil fuels are unlikely to plug the supply and demand gap as governments accelerate green policy.
This provides a huge opportunity for UK shares that provide renewable energy or alternative fuels. It’s why Aura Energy (LSE:AURA) is also on my shopping list today.
The company’s flagship asset is the Tiris uranium project in Mauritania where it hopes to start production next year. The site has been subject to recent resource upgrades and is now said to contain 29.6m pounds of the radioactive material. This was up 52% from prior estimates.
Nuclear energy remains a controversial topic. And so the building of a new global fleet of reactors to meet growing power demand is by no means certain.
Yet as countries try to cut oil and gas use — in response to the climate crisis and to reduce their reliance on Russian imports — there appears to be little choice but to increase nuclear output. This is one reason why the International Atomic Energy Agency reckons nuclear energy will account for 14% of total electricity by 2050. That’s up from 10% today.
And Aura, with its uranium-producing assets in Africa and Scandinavia, could be well placed to meet this growing demand. If Sweden lifts a uranium mining ban there — a position that lawmakers are edging closer towards — this penny stock could soar in value.
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
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Royston Wild has positions in Rio Tinto Group. 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.