I think this is the 2 penny stock bargaining

I like to make a selection of penny stocks in my portfolio because I think there are some interesting bargains in this segment of the market.

That said, small cap stocks can make big gains, they can make significant losses. As such, this strategy may not be suitable for all investors.

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Nevertheless, I feel comfortable owning a penny stock in my portfolio. With that in mind, here are two companies I will buy today.

Bargaining again

Is the first company Card factory (LSE: Card). Shares of this retailer have lost about 50% of their value since the beginning of May. Although the economy has grown considerably during this period.

That’s why I believe there is an opportunity here. According to the card factory’s interim results for the last six months of July, sales rose 16%, albeit from a lower base.

Still, the group is incredibly cash-generating. This created an operating cash flow of £ 36m in the first half, which allowed it to be reduced by 33×33%.

The company needs a strong balance sheet and cash generation to help it reach its ambitious goal of earning about m 100 million in its 202 financial year. By comparison, first half sales totaled 117m.

To reach this goal, management is looking to invest more in the firm’s online business and retail partnerships. While there is no guarantee that the card factory will achieve this growth target, I am encouraged by its cash production and expansion management plans.

That’s why I buy this beat-down penny stock for my portfolio today. As we move forward, the challenges we may face include more coronavirus restrictions and higher costs, which could hurt profit margins.

Hospitality Penny Stock

Another stock that seems to me to have been penalized despite an improved basic performance Of Marston (LSE: Mars). Since March of this year, shares have fallen about 25%, although the economy has almost completely recovered.

According to its most recent trading update, Marston’s sales have returned to 2019 levels. For the quarter ended October 2, the group reported that sales across the portfolio were 2% higher than the 201 levels.

I think it’s good for the rest of the year. While there is still some way to go before the company returns to 2019 sales and profit levels, it is heading in the right direction.

That’s why I buy this firm for my penny stock portfolio, considering its growth and recent share price performance.

Challenges that could slow pub operators’ recovery include staff growth and material costs. Disruption from the HGV crisis can also lead to headaches.

The group has also built up some debt over the past 18 months (a total of 2 1.2bn at the beginning of October), which could be a significant liability if interest rates rise.

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Rupert Hargreaves has no position on any of the shares mentioned. Motley Flower UK has recommended Card Factory and Marston. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.

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