4 penny stocks to buy with £500

I’m looking for the best penny stocks to buy today. Here are several dirt-cheap UK shares I’d buy with £500 each.

A UK software star

The digital revolution creates plenty of opportunity for many UK shares such as Tribal Group. This particular IT business supplies software services that enable universities and colleges to serve, and stay in touch with, their students. I feel encouraged to buy Tribal as its switch to a software-as-a-service (or SaaS) model already seems to be paying off handsomely.

A word of warning, however: acquisitions form an important part of the penny stock’s growth strategy. This leaves it susceptible to a broad range of extra risks, from overpaying for an asset to enduring unexpected costs.

Building bridges

Severfield produces massive amounts of structural steel from its manufacturing sites in Britain and India. I like this particular cyclical share because it sells its products into a healthy mix of project types across the public and private sector. Its steel can be found in buildings like Tate Modern in London, Charles de Gaulle airport in Paris and Manchester City’s Etihad football stadium.

This broad project range gives Severfield terrific strength through diversification. And it has also helped power the company’s order book to record highs. I’d buy this cyclical UK share despite the threat of an economic slowdown to its operations.

Some ground rules

I already have exposure to the housebuilding sector with my holdings in Barratt Developments and Taylor Wimpey. The strong outlook for the industry is encouraging me to bulk up my exposure too. One cheap UK share I’m thinking of buying to do this is Van Elle Holdings, a business that provides ground engineering and geotechnical services.

I also like this particular company because it gives me the opportunity to profit from rising investment in British infrastructure. Van Elle also works on roads and railways alongside power stations and water works, to name a few of its other areas of expertise. A high-profile failure of its services could create significant reputational damage that could hit revenues. But I still think the company’s a highly-attractive buy today.

A penny stock for the sports car explosion

Surging sports car demand also offers plenty of opportunity for UK share investors like me. According to Statista the performance car market is set to grow at an annualised rate of 7% between now and 2025. But rather than splashing the cash on a carmaker like Aston Martin I’d invest in one of London’s listed car parts manufacturers. This eliminates the possibility of me buying a marque whose motor vehicles suddenly might suddenly become unfashionable with the buying public.

This is why I’d rather invest in Surface Transforms, for example. This particular UK share manufactures brake units that keep cars glued to the road. Despite the threat posed by potential problems in bringing new furnaces online, I still think this is a great way to play the sports car boom.

The post 4 penny stocks to buy with £500 appeared first on The Motley Fool UK.

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Royston Wild owns shares of Barratt Developments and Taylor Wimpey. 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.

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