Today I’m hunting for the best low-cost UK shares to buy for my shares portfolio. Here are two quality penny stocks I think could help me generate terrific investment returns.
A precious metals powerhouse
Mining for raw materials is rarely plain sailing. Exploring, developing, and then extracting metals can throw up a wide variety of problems. These, in turn, push up costs and hammer revenues. The danger is particularly high for small-cap companies which operate on much tighter budgets than industry behemoths like BHP Group or Rio Tinto.
That being said, I think penny stock Sylvania Platinum (LSE: SLP) could still be a top stock for me to buy now. Okay, this platinum group metal (or PGM) producer has itself suffered from lower ore grades and increased costs of late. But the company trades on a forward price-to-earnings (P/E) ratio of below four times. This suggests to me that, at current prices of 98p per share, Sylvania’s valuation more than reflects such problems and their potential impact on future profits.
Secondly, Sylvania has no debt on the balance sheet and a decent cash pile with which to continue working at its world-class South African assets. This puts it in a much stronger position that some other small-cap mining stocks. And finally, I believe that PGM prices should remain pretty strong. The car industry is gobbling up increasing amounts of the metals for which they are used to reduce emissions. Concerns over runaway inflation should also support prices for some time yet as central banks keep rates locked around recent lows.
A penny stock I’d buy for the CBD boom
Zoetic International (LSE: ZOE) is another great penny stock I’d happily buy for the years ahead. This is despite the highly-regulated environment in which the cannabidiol (or CBD) oil product manufacturer operates in. Recent law changes around the use of the drug for medicinal purposes have turbocharged demand for UK shares like Zoetic. But the topic remains a contentious one and any u-turn by regulators could sink its share price.
Still, for the time being, the regulatory outlook is ultra encouraging for CBD specialists such as this. Legislators are taking increasing notice of studies showing the medicinal benefits of using cannabis-based products to treat a range of ailments. In fact, research is showing that CBD products can effectively treat a growing list of conditions. This is further encouraging lawmakers to loosen rules and boosting the sales opportunities for healthcare stocks like Zoetic International.
Today this penny stock (which is set to change its name to Chill Brands) trades at around 37p per share. I think its retreat back below the penny stock limit of £1 in recent months presents me with an attractive dip-buying opportunity.
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Royston Wild 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.