The Motley Fool

Top UK growth shares to buy if this market bubble bursts

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.

Photo of a floating bubble
Image source: Getty Images.

All stock market bubbles pop eventually and I suspect there’s a decent chance this will happen ‘across the pond’ in 2021. Since indexes tend to move in tandem, this may affect share prices here and provide me with a perfect opportunity to buy some of the best UK growth shares at a discount. Here are three I’d definitely be interested in snapping up.

On song

Last Friday’s trading update from music software specialist Focusrite (LSE: TUNE) was more good news for existing holders. 

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

A trusted brand among amateurs and professionals, Focusrite’s products continue to fly out of warehouses. Trading has been so good that revenue, profits and cash are ahead of where management predicted they would be at this stage of the financial year. As a result, the £600m cap suspects it will exceed current market expectations. It also confirmed it has cleared all bank debt.

Naturally, this good news hasn’t gone unnoticed. The valuation is now 28 times forecast earnings. That’s punchy given the global shortage of semiconductors (of which it uses a lot) and the impact this could have on trading. Another thing to consider is whether Focusrite’s existing holders will begin banking profits as restrictions are lifted. So I’m watching from the sidelines for now.  

Purple patch

It’s hard to talk about quality stocks and not mention Games Workshop (LSE: GAW). After all, the FTSE 250 member has been one of the best performing UK growth shares over the last five years. 

Based on recent trading, it looks like this purple patch can continue. January’s half-year report revealed a 26% rise in revenue and 56% increase in pre-tax profit compared to the same period in the previous year. 

I feel GAW possesses many of the hallmarks of a stonking business. It generates high margins and returns on capital. It’s also cash-rich and the clear leader in a niche market. Once again, however, the valuation is far from cheap at 29 times forecast earnings. Like Focusrite, there’s also a chance trading could normalise once restrictions are lifted. In such circumstances, one might expect food and beverage firms, holiday companies and airlines to make the biggest gains. Fantasy figurine makers? Perhaps not.

Again, I’m not inclined to buy right now but I will be backing up the truck in the event of a sustained fall in the wider market.

Outperforming

The last of the UK growth shares I’d be interested in buying would be ingredients provider Treatt (LSE: TET). Similar to Focusrite and Games Workshop, its shares have been on a tear since the market crash. They’re up 200% in just eleven months.

There’s no shortage of reasons for staying bullish either. Trading in FY21 to date has been “significantly better than expected” and supported by new business wins in the fast-growing global alcoholic seltzer category. This has, in turn, led Treatt’s management to predict that pre-tax profit is now likely to “materially exceed” the £15.1m currently pencilled in by analysts. 

Even so, none of this can be guaranteed. After all, parts of Treatt’s portfolio continue to be affected by the ongoing closure of hospitality venues around the world. A valuation of 38 times forecast earnings also suggests a lot of good news is already priced in. 

It stays on the watchlist for now but if UK growth shares see their prices falling, I’ll jump in.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of Games Workshop. The Motley Fool UK has recommended Focusrite and Treatt. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.