2 monster stocks in the making I’d buy for 2018

Bilaal Mohamed looks at two AIM-listed companies with huge long-term growth potential.

| 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.

Hulk monster

Image: Public domain

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.

Over the course of your stock-picking career you’ll no doubt have studied your fair share of price charts, perhaps splattered with a handful of technical indicators showing moving averages, volume, and so on. Personally, I look at hundreds of charts each week to get a feel for price action and momentum, but that’s because I have a technical background, and also because I’m a little sad.

Missed opportunities

Very often you’ll come across a company that you’d previously dismissed as being too risky, only to discover some years later that the business has morphed into a £1bn monster. As investors we often have to deal with the negative emotions that arise from such missed opportunities, those who missed out on ASOS and Boohoo.Com will know exactly what I’m talking about.

That said, we can’t just go chasing after tomorrow’s hidden winners willy nilly – that would certainly be a recipe for disaster. The trick is to separate the wheat from the chaff, the valuable from the worthless. So today I’m looking at two AIM-listed companies that I believe could turn out to be monster stocks of the future.

Fighting fraud and cybercrime

First up is GB Group (LSE: GBG), the global specialist in identity data intelligence. The Chester-based technology group helps companies and governments fight fraud and cyber crime, specialising in areas such as fraud, risk & compliance, employee screening, and customer & location intelligence.

With both governments and individual companies becoming increasingly wary of fraud and cybercrime in particular, it will perhaps come as no surprise that GBG has more-than-doubled its revenues and pre-tax profits since 2014.

A storming year

The group boasts a strong renewal stream from its existing customer base, while also attracting new, high-profile customers to its growing portfolio. I see a bright future for GBG, with the business well positioned to meet the growing demand for identity data intelligence products.

The downside is that after a storming year, the shares are trading on very high rating of 36 times forward earnings for FY2018, so I would suggest adding it to your watch list to buy on any weakness during the coming months.

Promising cancer drugs

My second offering comes from the orient – Hong Kong to be precise. Hutchison China MediTech (LSE: HCM), better known as Chi-Med. It is an AIM-listed biopharmaceutical company focused on discovering and developing targeted therapies for oncology and immunological diseases for the global market.

Last year, global market sales of oncology drugs grew by 11% to $175.7bn making it the largest treatment area in the global pharmaceutical market, with a 17% market share. But in China, despite being home to 8.1m cancer patients, or about 20%-30% of those in the world, market sales of oncology drugs were just $7.3bn, or around 4% of the global market. This clearly indicates a huge opportunity for Chi-Med in its domestic market, as well as overseas.

Despite rapidly-growing revenues, the company is not yet profitable as funds continue to be pumped into research and development. But with a number of promising cancer drugs in the pipeline this won’t be the case for very long. The share price is riding high after more-than-doubling to £58 in the last 12 months alone, so this is another one to add to your watch list in 2018.

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 owns shares of and has recommended ASOS. The Motley Fool UK has recommended boohoo.com. 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

Close-up of British bank notes
Investing Articles

£8 per year in extra income for life, for each £100 invested today? Here’s how!

Christopher Ruane explains how he would aim to set up extra income streams for the rest of his life by…

Read more »

Photo of a man going through financial problems
Investing Articles

With a £20K Stocks and Shares ISA, I’d target £1,964 in annual dividends like this

With an annual passive income target close to £2,000, our writer explains how he'd put a £20K Stocks and Shares…

Read more »

Illustration of flames over a black background
Investing Articles

Down 63% in 2024, what’s going on with the Avacta (AVCT) share price?

2024 has been a difficult year for many companies in the biotechnology sector, with the AVCT share price down heavily.…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Here’s how I’d invest £800 the Warren Buffett way!

Christopher Ruane learns some lessons from super-investor Warren Buffett he hopes could improve his own stock market performance.

Read more »

British Isles on nautical map
Investing Articles

Michael Burry just bought 175,000 shares in this FTSE 100 company

Scion Asset Management announced a $6.5bn stake in BP this week. But what could Michael Burry be seeing in an…

Read more »

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office
Investing Articles

£5,000 in savings? Here’s how I’d aim to start making powerful passive income today

With a cash lump sum to invest, this Fool lays out how he'd start making passive income. He also details…

Read more »

Investing Articles

Just released: our 3 top small-cap stocks to consider buying before June [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

My best FTSE 250 stock to consider buying now for passive income while it’s near 168p

This is a rare stock with a growing underlying business and a fat dividend yield – it’s worth consideration for…

Read more »