With the final reopening of major economies around the world within reaching distance, investors are increasingly turning their attention back to the greatest question of all: where to find the best growth potential? When picking growth stocks for a portfolio several factors should be considered.
Firstly, the company in question should have a strong track record and proven successes it can build on. Secondly, and more importantly, the future prospects have to look very promising. It’s all about picking good companies today who will become great companies in the future, and hopefully the near future! Needless to say, this is very hard to do, but here are five UK growth stocks we think look very attractive right now.
5 UK Growth Stocks To Buy:
The first growth stock that pique investors interest is Cineworld.
A household name in the UK and one of the dominant firms within the cinema industry, Cineworld definitely has some good things going for it right now. However, Cineworld stock is not for the faint-hearted! 2020 saw the stock plumet a breath-taking 70.74%, only to be followed by a partial rebound of 31.7% so far in 2021.
This level of volatility is of course unusual for an established brand like Cineworld and stands to reason given that cinemas have been one of the most affected sectors of the pandemic.
The point is that with the coming full reopening, and right now cinemas are already trading again, there are good reasons to think the worst is already behind Cineworld.
The rise of home streaming movie services is unlikely to fully push cinemas out, and Cineworld stock currently looks very cheap compared to its pre-pandemic highs. Caution should be advised however, since Cineworld has now topped the infamous list of most shorted FTSE stocks.
However, the short-sellers have been wrong at least as many times as they have been right this pandemic! You only need to look at previous top short-sold UK stocks which have soared in price since (for example Morrisons, which is up 50% this year since private equity buyers have shown interest).
Cineworld stock as such can be seen as a risky bet, but one with big growth potential from its current deflated price.
Not so much of a household name as the first pick, tech company Avast is another tempting growth prospect. Already a big force in cybersecurity, Avast’s share price rose over 5% in June alone and is now ranked as a ‘buy’ by the majority of analysts covering the stock.
In fact, of 6 analysts covering Avast, 4 rank it as a ‘buy’, one as ‘hold’ and only one as a ‘sell’. This positivity seems well founded – Avast has a host of successful cybersecurity products as well as an active plan to boost sales. Recently Avast partnered with Enterprise Nation in order to bring its tech to more small and medium-sized enterprises, in addition to the major international clients they already serve.
This energetic approach to increasing sales revenue is part of what is powering the recent share price rise, but Avast still has many more markets they can enter and therefore their growth potential is still far from exhausted.
In fact, Avast has recently raised its revenue forecasts for the full year after posting a strong rise in profit for the first quarter of 2021. They booked revenue of $237m (£170m) in the first three months of the year, and this was up a healthy 10.5% on last year
We have heard a lot for many years now about London’s burgeoning fintech scene. However, there have been relatively few opportunities for investors to easily get exposure to this. There are not so many publicly listed fintechs on the FTSE, although this has changed recently with the IPO of Wise. Better known as ‘TransferWise’, the name it used to trade under, Wise’s floatation valued it at nearly £9 billion, making it the largest ever floatation of a London tech company.
Wise was founded by tech entrepreneurs who has been involved in Skype and saw potential to make international money transfers cheaper and quicker. Today, Wise can boast over 10 million personal and business customers and can offer financial services in 55 world currencies.
Wise is already a huge success story, and as such commands a high share price. However, Wise’s IPO could well just be the beginning for the innovative payments company, and the growth in both customer numbers and sales revenue that Wise has been achieving year and year shows no signs of slowing. Put simply, this one could well have much further to run over the next few years.
Next up, no set of growth picks for 2021 would be complete without something from the pharma/healthcare universe! The pandemic has reminded all investors of the massive growth potential to be found in this sector, although the risks are obviously high here too. Diaceutics USP is what they call ‘precision and personalised medicine’. Basically, this term may be on everyone’s lips in a few years or so.
The motivation is that all medicines can have nasty side effects, or sometimes just don’t work. The industry response is to start trying to develop personalised medicines where the drugs they give you are specifically tailored to your particular symptoms and allergies etc. This should lead to better medical outcomes.
This approach clearly requires huge amounts of testing in laboratories, and Diaceutics are essentially the middleman between the pharma company and the laboratories, and they work with both sides to make sure that the drugs have the equivalent tests and that they actually work. If this system works and proves popular, the growth potential is through the roof.
5. Wizz Air
Finally, a budget airline who have been battered for the last 18 months but could be set to bounce back sharply. Wizz Air specialize in intra-Europe routes, and thus maximize the deployment of their staff and capital assets. They were hot on the heels of Ryanair and the other budget carriers before the pandemic, and right now their share price is heavily deflated.
However, June saw an 80% increase in passenger numbers compared to the previous month, and it could be time to start thinking some sort of normality may be returning to the travel market. If that is even partly true, then Wizz Air stock looks like a very attractive buy right now.
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