2 smart things you could do with £1,000 right now

Bilaal Mohamed considers two very smart, and yet very different ways to invest £1,000 today.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Technical plastic products supplier Carclo (LSE: CAR) issued a trading update earlier this month, with the group delivering good growth after an anticipated strong second-half performance. Preliminary results for the year ended 31 March won’t be officially released until 6 June, but here’s why I think this could be a great small-cap stock to tuck away for the long term.

Premium car market

The West Yorkshire-based business is the leading global manufacturer of fine tolerance parts for the Medical, Industrial, Aerospace, and Luxury & Supercar Lighting markets. Approximately three fifths of group revenues are generated from the supply of fine tolerance, injection-moulded plastic components, primarily for medical products. The rest is derived mainly from the design and supply of specialised injection-moulded LED-based lighting systems to the premium car market.

The small-cap firm’s latest update confirmed that its Technical Plastics division had delivered yet another year of growth and operating margin improvement, with margins expected to be close to its 10% target. The LED division’s Wipac business has continued to win new lighting programmes and has been awarded a second mid-volume project on a vehicle for the hybrid market. The win is important for the division as it endorses the company’s strategy to move into the mid-volume sector.

Attractive valuation

Carclo’s performance has been impressive in recent years, with revenues rising year-on-year from £87m in FY 2013, to £119m for FY 2016. According to our friends in the City, this figure is expected to rise by 19% for the financial year just ended to £142m, and by a further 11% to £157m by fiscal 2019. The group has also achieved strong levels of growth in underlying earnings, rising by a massive 94% from just 6.2p per share in FY 2013 to last year’s reported figure of 10.1p per share.

Analysts’ consensus forecasts suggest that earnings should continue to grow at a healthy rate, rising by a further 55% by FY 2019 to 15.65p per share. This leaves the shares trading on a very attractive valuation of just 11 times earnings for the year to March 2018, dropping to just nine times by FY 2019. I currently view Carclo as a buy for growth hunters who don’t mind taking on a higher degree of risk at the small-cap end of the market.

Death and taxes

I’ll admit that as a small-cap firm with a market value of just over £100m, Carclo may not be every investor’s cup of tea. Generally speaking there is always a higher level of perceived risk that goes hand-in-hand with the promise of untold riches if the share price soars.

For more risk-averse investors, the utilities sector has always been a firm favourite, and for good reason. Along with death and taxes, gas and electricity bills are one of modern life’s certainties. Despite increasing competition in the energy market, British Gas owner Centrica (LSE: CNA) remains the UK’s largest energy supplier, and continues to reward shareholders handsomely with a generous slice of its profits each year.

This year the Windsor-based group is expected to increase its full-year dividend payout from 12p to 12.35p per share, leaving investors with a generous yield of 5.9%.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. 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.

More on Investing Articles

Jumbo jet preparing to take off on a runway at sunset
Investing Articles

Down 70%+ since 2020, is IAG’s share price an unmissable bargain?

IAG’s share price is still down around 73% from its pre-Covid level, but with the business performing well last year,…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

£17,000 of shares in the FTSE 100 dividend giant can make me £18,874 every year in passive income!

This FTSE 100 dividend superstar has an 8.8% yield with dividends projected to rise. It looks very undervalued to me…

Read more »

Investing Articles

2 top UK growth stocks I’m buying for my Stocks and Shares ISA in July

Looking for UK-listed growth firms to add to a Stocks and Shares ISA? Our writer highlights two he's planning to…

Read more »

artificial intelligence investing algorithms
Investing Articles

This overvalued growth stock makes Nvidia look cheap!

ARM Holdings is a growth stock that’s benefitted from the AI rally. Muhammad Cheema takes a look at whether this…

Read more »

Investing Articles

1 penny stock I’d buy today while it’s 63p

This penny stock's down 70% since last March, yet could be set for a big comeback as the firm rebuilds…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Buying 8,617 Legal & General shares would give me a stunning income of £1,840 a year

Legal & General shares offer one of the highest dividend yields on the entire FTSE 100. Harvey Jones wants to…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

£25k to invest? Here’s how I’d try to turn that into a second income of £12,578 a year!

If Harvey Jones had a lump sum to invest today he'd go flat out buying top FTSE 100 second income…

Read more »

Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine
Investing Articles

2 lesser-known dividend stocks to consider this summer

Summer is here and global markets could be heading for a period of subdued trading. But our writer thinks there…

Read more »