Searching for the best small-cap stocks to buy in early 2025? Here are two (including a penny stock) I feel savvy investors should consider today.
Glistening gains
Lifted by a resurgent gold price, mining stocks across the London Stock Exchange have soared since 1 January. Serabi Gold (LSE:SRB), which is listed on the Alternative Investment Market (AIM), has seen its share price leap 21.8% up to yesterday (5 February).
Can this small-cap gold stock continue to rise though? I think there’s a good chance it can.
At 135p, Serabi shares still look dirt cheap. City analysts think the miner’s earnings will soar 65% year on year in 2025. This results in a price-to-earnings (P/E) ratio of just 2.9 times, leaving (in my view) plenty of scope for further gains.
There’s no guarantee that bullion prices — which have hit new record highs around $2,885 per ounce this week — will continue rising. A resurgent US dollar, for instance, could curb additional gains, making it more expensive to buy the yellow metal.
But on balance, I think gold could continue its bull run that began in October 2023, pulling gold stocks still higher. Fears over global ‘stagflation’ keep rising, driven by recent inflation readings and fresh trade wars. At the same time, worries over the geopolitical landscape and the possibility of fresh conflict are also ascending.
Serabi’s share price could also take off if production ramp-ups hit their target too. The company plans to raise annual output to 60,000 ounces by next year.
A penny stock pick
At 66.1p per share, the Schroder European Real Estate Investment Trust (LSE:SERE) has risen 5% in value in 2025.
It’s been a busy start to the year for the property stock. It announced plans to sell a food retail asset in Frankfurt, Germany, along with its 50% stake in a shopping centre venture in Seville, Spain.
Following the Frankfurt announcement in January, the trust also announced plans to repurchase 20,046,829 of its shares. It said that this reflects the trust’s “robust financial standing,” and the “attractive opportunity” that recent share price weakness provides.
Even after early 2025’s strong gains, Schroder European Real Estate Investment Trust’s share price still sits at a healthy 33.4% discount to its net asset value (NAV) per share. So it’s still an attractive asset for value investors to consider, in my view.
Unlike most penny stocks, the trust is (like similar financial vehicles) designed to provide a solid stream of passive income to its investors.
As a real estate investment trust (REIT) rules, it’s pays 90% of rental profits or more out in dividends. As a result, its dividend yield sits at 7.4%. To put that into context, the FTSE 100 index’s forward yield sits way back at 3.5%.
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Given persistent inflationary pressures, there’s considerable interest rate risk facing the business. If the European Central Bank (ECB) fails to cut interest rates any further, NAVs will continue to face pressure.
Still, I think the size of the discount on the trust’s shares more than reflects future rate uncertainty. It could also lead to further share price gains if interest from bargain hunters heats up.
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Royston Wild has no position in any of the shares mentioned. 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.
