3 UK Growth Stocks That Could Produce 10X Returns
If you’re hunting for growth, it’s easy to fall into the trap of thinking you have to focus exclusively on the US markets. Don’t write off UK small-cap stocks, which have in the past produced stellar returns themselves! In this article we take you through 3 top picks for growth-hungry investors, all sourced from the UK small-cap market.
- AJ Bell
The FTSE 100, the largest 100 UK firms by market cap, is often unpopular with investors because it is too dominated by so-called ‘old industries’. These are things which had great prospects in the past, but might have their best days behind them. A good example are the big banks, who are unlikely to grow much more, and now face a wave of disruption from smaller, more agile and tech-savvy competitors.
Luckily, the UK has an amazing fintech scene, however, so investors can grab a slice of this action! AJ Bell is a FTSE 250 constituent member who provides bespoke online brokerage services to clients in the UK and internationally. Founded in 1995, the stock has been a steady but not spectacular performer over recent years. However, it makes it onto this list of UK growth stocks that could produce 10x returns due to the massive increase in DIY investing seen during the pandemic. If this trend is here to stay, the AJ Bell should be able to continue its impressive run of revenue growth.
Essentially, there are lots of gains to be had for AJ Bell and other smaller financial firms – the big banks lots slow and sluggish to adapt their business models, and firms like AJ Bell are likely to keep growing fast for several years ahead.
Next up, a firm that sits at the heart of a sector that has struggled over the pandemic, but can be expected to come roaring back very soon. UK property prices, certainly in inner-city areas have suffered a little recently. Many more people than before want to move out of the city centers and into larger houses as opposed to flats. However, there can be few doubts that the UK property market as a whole remains buoyant, and firms that service this market provide excellent long-term bets.
Forterra is a brick-maker whose shares have soared 47% to date this year. Forterra supply to a wide range of projects and specialist builders, and the effects of the pandemic will in the long run only strengthen the desire of most people to own their own homes. Forterra thus represent a good long-run investment bet – property is never going to be disrupted or disappear, and the new expectation of larger living spaces only means demand for bricks will increase. Forterra have posted some very respectable revenue results this year, and their board are increasingly looked to as one of the most competent in the sector. Analysts expect Forterra to continue to outperform next year, too.
Finally, fast-fashion is definitely here to stay, and no one does it better or more profitably than Boohoo. Boohoo had a tough time in 2020 due to the scandal of investigators finding evidence of modern slavery in the Boohoo supply-chain. However, although this spooked many investors, revenues have held up surprisingly well. Importantly, Boohoo were perceived to have acknowledged the mistake and taken steps to rectify things immediately, and this seems to have counted for a lot. Right now, Boohoo is keeping shareholders happy with their profits, and customers happy with their low prices.
In terms of the future, this sector still has a long way to grow before it reaches maturity. As such, Boohoo can still return high multiples from here forwards. The speed with which Boohoo fixed concerns over its supply-chain was very impressive, and this suggests the company will be agile enough to continue finding growth opportunities.
Finding A 10 Bagger
Finding a 10x return on any investment is hard, but far from impossible! It’s mostly about finding a good company, at a good price, and then being prepared to stay the course for as long as it takes. The companies above all have some sort of valuable specialism that can be expected to remain desirable for years to come. As such, they have a very real chance of producing 10x returns.
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