2 penny stocks I’d buy now for the next bull market

The stock market last fall is not comfortable today. But it can present a good buying opportunity for smart long-term investors. Today, I’m looking at two penny stocks that I think should do well on their comeback.

Foxtons is ready for recovery

Estate agents Foxtons (LSE: FOXT) is a key player in the London housing market. However, the business has gone through a bad patch over the past few years and is not doing as well as I would like.

Its share price has fallen more than 80% since the flotation in 2013. But last year’s results show a welcome rise in profits and I think the group is well positioned for a strong turnaround.

One of the important changes is that the company has increased its exposure to the mail market, which now generates 65% of its revenue. The importance of these rentals is generally recurring and non-cyclical.

While the upfront costs available from home sales can be higher, this market sector has a lot going for it. As we’ve seen over the past year, the housing market can slow down dramatically from time to time.

Foxtons also has a new chief executive. Guy Gittins has returned to the business where he began his career 20 years ago. A highly experienced London property agent, he decided to build the brand and invest in its growth.

I think it could be a wise buy at current levels, in a medium-term view.

A market leading business

The next choice is a boiler maker Strix (LSE: KETL). This little-known business is the world’s largest manufacturer of boiler safety controls – the part that makes the boiler shut off when it boils.

It has a market share of around 50% for the segment. It shows a trusted relationship with many manufacturers. The only problem with this is that it doesn’t give you much opportunity to grow.

To try and solve this problem, Strix has bought small companies in related areas, such as hot water taps and water filtration. The company has also built a new factory in China

Unfortunately, the move left the company with quite a lot of debt. The group’s financial situation has also worsened due to supply chain issues and the Covid disruption in China last year.

A dividend cut is also expected in this month’s results, although brokerage forecasts show the stock could still yield 6%.

I’m not sure if Strix’s new acquisition will be as profitable as its core business. The only risk, in my view, is that some of this spending will eventually be phased out.

However, I am encouraged by the recent change in the tone of the company’s management. In an update in January, Strix said it was not planning any acquisitions or building factories.

However, the company wants to return to it “core operating model” be very cash generative.

If chief executive Mark Bartlett is able to deliver on this promise to shareholders, I think the stock could be worth less at current levels. If I were looking for a small value stock to buy today, I would definitely consider Strix.