Have £2,000? Here are 2 essential UK growth shares I’d buy and hold for retirement

Looking to grow your money for retirement? Paul Summers thinks these two small-cap stocks have the potential to reward investors handsomely over the long term.

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Buying stocks for retirement is easy. It’s having the patience to hold on to them that a lot of people find difficult.

One way around this is to build stakes in companies providing products or services that are deemed ‘essential’ to daily life. Since earnings should be relatively constant (or rising), there’s less incentive to check out early. 

Here are a couple of small-cap stocks with great growth prospects I think fit this strategy well. 

Eyes on retirement

New-stock-on-the-block Inspecs (LSE: SPEC) designs, manufactures and distributes eyewear frames to global retail chains. It may not quicken the pulse like a glitzy tech share but, for me, that’s part of the appeal. Some of the best investments are those that rarely make headlines.

Unsurprisingly, Inspecs was doing rather well before arriving on the market in February. In 2019, group revenue rose 6.9% to $61.25m and pre-tax profit more than doubled to $7.35m.

Of course, all this was pre-coronavirus. Like most businesses, the pandemic has motivated the small-cap to reduce costs and save cash where it can.  

Looking further ahead, however, the investment case becomes compelling. As CEO Robin Totterman stated in May: “The structural growth drivers in the $131 billion global eyewear market remain unchanged.” Moreover, the number of people requiring vision correction looks likely to increase as we learn more about the damage done from staring at computer screens and mobile phones for too long. 

It may be early days, but shares have done very well given what 2020 has thrown at investors so far. Had you bought in early April, you’d be sitting on a near-60% gain by now. This leaves the business trading at 14 times FY21 earnings. Considering the aforementioned growth prospects, that looks pretty reasonable.

The only thing I’d watch out for with Inspecs is the buy/sell spread. The larger this is, the more you’ll need the shares to rise just to get back to break-even. 

Long-term winner

If there was one lockdown trend that stood out for me, it was the huge demand for pets. This should be great news for leading veterinary service provider and online pharmacy operator CVS Group (LSE: CVSG) once the coronavirus crisis subsides. All those new, pampered family members will need regular care for years to come.

This isn’t to say CVS hasn’t been impacted by the pandemic. During lockdown, vets were restricted to undertaking only emergency work in their practices, leading to a “significant reduction” in revenue.

In response, the company temporality shut half of its small animal practices and placed half of its employees on furlough. Thankfully, a recovery in revenues to “pre-Covid-19 levels” since has led management to predict that full-year revenue will now come in “comfortably ahead of the prior year.”

Changing hands for 22 times forecast FY21 earnings, CVS is unlikely to appeal to committed value investors. Some may also be concerned by the company’s reluctance to comment on its earnings outlook or pay a final dividend.

For me, however, all this seems very prudent. With more local lockdowns looming, the move to permanently close 33 mostly-small branches, a proportion of which were loss-making, also makes sense. 

The short-term outlook may be foggy but I think CVS is a great pick for those building their wealth for retirement.

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.

Paul Summers 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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