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Industry analyst Coindesk suggests its 24% drop over the past 10 days started with a series of highly leveraged contract positions being liquidated on the Bitmex cryptocurrency exchange.
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Those left holding the bag might urge you to buy the dip. Happily, there are other ways to capitalise on growth industries. Instead I’d look at companies with rising prospects whose managements are making strong decisions that could mean even faster growth and rapid share price appreciation.
I think investors seeking early entry into high-growth stocks should consider TP Group (LSE:TPG). At a market cap of £51m it’s one of the smallest firms on my watchlist.
On 17 September the AIM-listed firm announced a new order worth £1m from the Ministry of Defence (MoD) to supply 750 oxygen generators to upgrade Royal Navy submarines.
CEO Phil Cartmell said: “We are very pleased to see a further significant order materialise from our long-standing agreement framework with the MoD,” as he suggested the latest sale “highlights the enduring value of these arrangements“.
I would definitely agree. Government contracts are a lucrative place for young companies to find growth as they represent reliable sources of income over the long term.
TP was awarded a £22m contract in May 2017 to provide atmosphere equipment for Royal Navy submarines and in February 2019 also won an MoD contract to supply lithium hydroxide curtains across the fleet to help manage carbon dioxide contamination.
Institutions make up 73% of TP Group shareholders, which suggests professional investors regard the company as one which can offer a good return.
In fact, the investment management arms of FTSE 100 giants Legal & General and Hargreaves Lansdown both own significant slices in the company, with 11.9% and 4.3% respectively.
The company hasn’t posted any operating profits in the last five years, which may come as some concern. But if you dig into the numbers, operating losses have narrowed every year, from £3.93m in 2014 to £30,000 in 2018, as revenue has jumped from £21.6m to £39m over the same period.
And in year-end results to 31 December 2018, TP announced it had turned those £39m in sales into its first after-tax profits of £170,000.
Head in the clouds
Cloud computing provider Nasstar (LSE:NASA) is another high growth stock I think has significant potential.
The £64m market cap firm is a minnow compared to the high dividend, multi-billion pound companies I usually favour, but that means there’s much more opportunity to get a market-beating return on investment.
A chart of its share price over the last five years shows positive growth with very few blips and after-tax profits are very close to turning positive, with revenues up every year for the last five years.
Half-year results posted on 30 September add to this positive growth outlook. Revenues are up 2% year on year to £12.8m and operating profit for the six months to 30 June 2019 was £0.5m, compared to a £0.3m loss for the first half of 2018.
CEO Nigel Redwood has my confidence because he is investing in the right things: improving automation to cut costs and to deliver better customer support.
Monthly revenues from a new three-year contract with an as-yet-unnamed top 50 UK law firm will begin to be realised in the second half of the year and into the first half of 2020.