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Two super growth stocks I’d buy before bitcoin

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It’s been a wild ride for bitcoin investors this summer. The price of the best-known cryptocurrency has dropped from a December high of more than $19,000, to about $6,450 at the time of writing.

Bitcoin vs stocks?

I’m a firm believer in new technology. And I reckon that blockchain — the technology behind bitcoin — has a bright future. But unless bitcoin gains widespread usage, which seems unlikely to me, I think its value will probably keep on falling.

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Even if you’re more optimistic than me, you’ll probably agree that individual cryptocurrencies are still pretty speculative. Like all currencies, they have no intrinsic value if people don’t use and trust them.

In contrast, the value of shares is backed by tangible assets and profits. I can take a reasonable guess at what these might be worth in the future. That’s why I’m putting my investment cash into the stock market.

Getting rich with stocks

The first stock I’m writing about today has doubled in less than two years. And it’s done this while generating enough cash to pay a useful dividend and fund acquisitions.

Vitec Group (LSE: VTC) makes equipment used by photographers, videographers and broadcasters. This £580m company owns a portfolio of mid-to-high-end brands, such as Lowepro, Manfrotto, Gitzo, Anton/Bauer and Autocue.

Growth is mixed between organic expansion and acquisitions. But the group’s return on capital employed of 14.3% suggests to me that management is spending wisely, and not overpaying for new brands.

Sales rose by 11.2% to £183.3m during the six months to 30 June, while pre-tax profit climbed 20.1% to £19.7m. There was also a reassuring reduction in net debt, which fell by 18% to £43m.

Cheap enough to buy?

The latest consensus forecasts show that City analysts expect the group’s adjusted earnings to rise by 21% to 83.7p per share this year, putting the stock on a forecast P/E of 15.3. Dividend growth is expected to be more modest, at about 6%, giving the stock a forward yield of 2.5%.

Vitec shares have edged lower today, perhaps because management has left its guidance for the year unchanged. But based on today’s figures, I think the shares look reasonably priced. I’m happy to continue holding.

An essential service

Testing and quality assurance specialist Spirent Communications (LSE: SPT) provides a service its customers can’t easily do without. The company supplies the tools and support needed for testing services such as 400G high-speed Ethernet and 5G mobile networks.

After a difficult period in 2016, this business is getting back on track. Adjusted operating profit rose by 27% to $58.9m last year, and the firm reported a further gain during the first half of this year.

Why I’d keep buying

One attraction of this business for investors is that it generates a lot of cash. A $29.9m special dividend was paid during the first half, but despite this, Spirent ended the period with net cash of $95.4m. That’s equivalent to just over 10% of the share price.

Results for the full year are expected to show adjusted earnings growth of 16.5%, putting the stock on a forecast P/E of 17. Earnings growth is expected to continue at a similar rate in 2019. There’s also a 3.6% dividend yield pencilled in for the current year.

In my view, this high-tech growth business is likely to be a profitable investment over the next few years.

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Roland Head owns shares of Vitec Group. 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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