Why I’d risk £2,000 on these 2 growth stocks today

These two small-cap growth shares could help spice up your investment portfolio.

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Investing in growth stocks can be risky, but sometimes the balance seems right, and as long as it’s part of a diversified portfolio then I reckon it can be a risk worth taking.

I feel like that when I look at Arix Bioscience (LSE: ARIX), a company that came to market only in February 2017, having raised £100m in an oversubscribed offering. Its investors included Woodford Investment Management on behalf of clients, and a couple of international pharmaceuticals companies.

The aim, in the words of chief executive Dr Joe Anderson at the time, is “supporting businesses in the vanguard of medical innovation.

Though it’s too early for there to be any meaningful financial valuations, Arix has been making steady progress in financing for a number of start-up companies and has signed a few key strategic agreements.

New deal

One came Wednesday as the firm has partnered with Ipsen, which it described as “a global specialty-driven biopharmaceutical company focused on innovation and specialty care.

The deal will see the two developing and commercialising innovative therapies, with Ipsen gaining access to Arix’s professional and scientific advisors. In turn Ipsen will “contribute research, development and commercial expertise to the partnership” and the two will work to “jointly create new companies focused primarily on the development and commercialisation of innovative therapies for patients.

This comes on the back of a similar agreement on 19 February with Fosun International to collaborate in pretty much the same way, and I think it points to an increasingly attractive-looking road towards profit.

There’s no profit currently forecast, so Arix is very much a ‘blue sky’ investment. But I’d say it deserves a close look.

Return to growth

Post-recovery growth can be a profitable investment too, and that’s what Avingtrans (LSE: ABG) is showing. After a few disappointing years, the small-cap engineer has some very strong forecasts on the cards. There’s a trebling of EPS indicated this year after a return to growth, followed by a further 86% in 2019.

Avingtrans sold off its aerospace division in 2016, returning £19m to shareholders in the process, and the company is currently focused on products and services for the energy and medical sectors. 

Now subsidiary Hayward Tyler has secured a $6.7m contract with Korea Hydro & Nuclear Power. It has been providing pumps and spare parts for more than 40 years, and the new order is for spares to upgrade and refurbish existing nuclear power plants.

Avingtrans only completed its acquisition of Hayward Tyler in September 2017, and this latest development means it has already contributed more than $10m in orders.

Good first half

Interim results from Avingtrans should be with us on 28 February, and January’s update told us that the first half has gone well and that results should be in line with forecasts. At the time, the firm had already secured new contracts to the value of almost £7m, including deals in the UK, Sweden and South Korea.

The key event has been the integration of Hayward Tyler, and that looks to me to be a potentially big driver of future growth.

The dividend is modest with a prospective yield of 1.7%, but it’s progressive and should be well covered by 2019. And there was year-end net cash on the books at 31 May of £26.4m.

Avingtrans could turn into a cash cow in the next decade.

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.

Alan Oscroft 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.

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