2 penny shares I’d like to supercharge my new ISA year

Penny stocks can be a good choice to add to my portfolio. Although I never put all my money in a small number of stocks, owning a few allows me to diversify my holdings. It also gives me the potential to get some high returns that large-cap stocks would struggle to offer, given their size.

With the new Stocks and Shares ISA year starting next week, here are some early contenders for me to think about including.

Record the revenue in the book

Topps Tiles (LSE:TPT) is a well-known box retailer in the UK. With a market capitalization of £91m and a share price of 47p, it ticks the box for penny stocks. Over the past year, the share price has fallen by 15%.

The business has dealt with a number of issues over the past 12 months. This included a rather public spat with a large shareholder, MS Galleon. Topps Tiles has called on others to vote against plans to oust its current chairman, saying MS Galleon has a conflict of interest in launching a rival tile brand.

High inflation is also causing problems for the company, but the 2022 annual report shows how cost savings and store reductions have compensated for keeping costs down.

In fact, last year was the second consecutive record year for revenue in the business. Adjusted profit before tax was up 4% on last year, to £15.6m. If there is another record year in 2023, I think it’s only a matter of time before people start taking notice and buying the stock, pushing it higher.

Furthermore, I have all the characteristics of a good defensive stock. This could come in handy if the UK economy slows down this year.

Invest in Britain

Northern Venture Trust (LSE: NVT) is a very interesting stock that caught my attention. The trust invests mainly in privately owned UK manufacturing, services and technology businesses.

It focuses on screening for companies based on growth potential, strong management and cash generation.

Today, the trust has a market capitalization of £95m and a share price of 56p. The stock has fallen 11.5% in value over the past year. In the annual report, this decline was mostly due to the lower value of the technology stocks held in the trust.

I admit that these are high-risk penny stocks. This small capper invests in other small stocks! However, I think the UK economy will be in a recovery phase next year, followed by a growth cycle. For this purpose, buying now makes sense to try and reap big profits in the coming years.

Apart from the pure capital gains, I benefited from a large dividend yield. Currently, it is at 6.96%.

I am considering adding two stocks to the ISA when I have some free cash. However, I will only invest a small amount, because of the risk involved.