The near-term outlook for car retailers like penny stock Pendragon (LSE: PDG) is less than certain. The supply of new autos is a problem the firm’s flagged up before and news that British car production has hit 65-year lows isn’t going to soothe nerves.
Sellers of big-ticket items like Pendragon might also suffer as rocketing inflation smacks consumer confidence.
That said, I think Pendragon’s cheap price might still make it a great long-term buy today. At 21.6p per share, it trades on an ultra-low forward price-to-earnings (P/E) ratio of 6.5 times.
I’m minded to buy the penny stock as I think sales of its electric vehicles could soar as concerns over the climate emergency grow. The Society of Motor Manufacturers and Traders has previously guided that 300,000 new battery-powered vehicles could roll out of UK showrooms in 2022.
Protection from surging inflation
I think investing in some choice property good stocks could be a good idea too as inflation hits 30-year highs. Many UK companies face pressure from rising prices in some way, shape or form, whether that be through rising costs or falling consumer spending power. Property shares are a good hedge against this as rents tend to rise in line with inflation.
This is one of the reasons I’m considering buying Empiric Student Property (LSE: ESP). But it’s not the only one. Sure, the student accommodation specialist would take a hit if the Covid-19 crisis worsens and university attendances dive again. However, I think the long-term benefits of owning this share outweigh this more immediate danger.
Soaring numbers of overseas students is only increasing the shortage of student beds in Britain. This is steadily nudging rents up and property supply is tipped to continue lagging demand for years to come.
At 89p per share, Empiric Student Property trades on a forward price-to-earnings growth (PEG) ratio of just 0.2. This is well inside the widely-accepted bargain benchmark of 1 and below.
Another dirt-cheap penny stock!
Pub operator Marston’s (LSE: MARS) is another penny stock that could suffer if Covid-19 rates increase and lockdowns return. Investors already have to tolerate a big dollop of risk here as labour costs rise.
But it’s my opinion that recent share price weakness here represents a terrific buying opportunity for long-term investors. Today, the firm trades on a forward P/E ratio of 10.2 times.
I’m encouraged by news that sales here were bouncing back before Omicron emerged and fresh restrictions followed. Revenues were up 1.3% in the eight weeks to 27 November, Marston’s said last week.
Britons were spending more and more money on leisure activities like drinking and easting out before the Covid-19 emergency. Those fresh numbers suggest this positive trend remains in tact and could power profits at pub operators like Marston’s in the years ahead.
Today, the UK leisure share trades at 81p per share. I’m thinking it could be too cheap for me to miss.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Marstons and Pendragon. 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.
