Two UK growth shares I’m buying

In a hunt for UK growth shares, Christopher Ruane has identified two companies for his portfolio. Here he explains why he’s been buying them.

| More on:

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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I am happy collecting dividends from income shares. But I also like the prospect of capital growth. So I’ve been adding UK growth shares to my holdings. Here are two I’m buying for my portfolio.

Proven adman

I was surprised recently to notice that Martin Sorrell had bought 10,000 shares in the company he leads, S4 Capital (LSE: SFOR). After all, he already held over 54m shares in the company. Why buy more?

Like me, he apparently remains excited about the prospects for these UK growth shares. He bought on 17 May during a fallback to £5.13 and the shares have now bounced back to £5.60. Over the past year, the S4 Capital share price has put on 130%.

With his track record at WPP, Sorrell has proven his ability to build an ad agency network at scale. He’s doing the same thing at S4, which now numbers almost 5,000 employees in 31 countries.

UK growth shares

I regard these as growth shares because the company is positioned in digital marketing, which continues to increase in size. With its wide offering and exclusive focus on digital, S4 is positioned to ride this rising tide. That combines with Sorrell’s dealmaking prowess to make S4 capital a growth machine.

The company’s first-quarter results showed revenue up 71%. Even stripping out the impact of acquisitions, like-for-like revenues rose 35%. Reported gross profit also rose 71%, with a like-for-like increase of 33%.

The company is looking to tap the bond markets so it can build a £500m war chest for acquisitions. I continue to see strong growth potential for S4. I would consider buying more of these UK growth shares for my portfolio today.

However, the role of Martin Sorrell here is a risk. While the company’s talent pool is growing fast, it still seems to rely on the vision, energy and skill of its founder. If for any reason he left suddenly, I think it would hurt the S4 Capital share price.

Medical exposure

I recently opened a position in Renalytix AI (LSE: RENX). These UK growth shares made it into my portfolio because, like S4, I think they could be a way to benefit from the increased role of digital technology.

In the case of Renalytix, that’s in the field of kidney diagnosis. Its artificial intelligence platform may allow it to deliver this vital service in a cost-effective way.

Growth potential

I’ve been following Renalytix for a while. But what made me decide to buy these UK growth shares was a combination of two news stories I thought boded well. First came positive results from a clinical study into the use of the company’s flagship product. Then a deal with the US government was announced. It enables Renalytix to supply customers such as the US military.

Such sales are not guaranteed, however. One risk with the Renalytix AI share price is that sales may not materialise fast enough. Competitors are working in the same space. They could impact the revenues it’s able to generate by developing their own cheaper alternatives.

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.

christopherruane owns shares of S4 Capital plc. 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.

More on Investing Articles

British bank notes and coins
Investing Articles

Should I buy M&G shares for the 9.8% dividend yield?

With the M&G dividend yield close to double digits, this existing shareholder explains why he'd happily buy more of the…

Read more »

British Isles on nautical map
Investing Articles

This cheap UK stock could rise 30%, the City says

Analysts covering Serco Group shares reckon they could rise by over a quarter. But is this UK stock a good…

Read more »

2024 year number handwritten on a sandy beach at sunrise
Investing Articles

Here’s how I’d aim for a million by investing £45 a day

Christopher Ruane thinks putting £45 a day into blue-chip shares could help him aim for a million. Here are some…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

I’d buy FTSE 100 shares in December before the next stock market rally!

Christopher Ruane explains why he would happily snap up cheap FTSE 100 shares between now and the end of the…

Read more »

Businesswoman calculating finances in an office
Investing Articles

6% yield and 8% annual revenue growth! A passive income opportunity

Why not have the best of both worlds? Our writer explores a passive income opportunity with a 6% yield, bolstered…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’ve been loading up on this FTSE 250 share in November!

Christopher Ruane explains why he's been adding even more shares in this well-known FTSE 250 name to his portfolio this…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

Down 30%, these cheap shares are on sale!

Cheap shares don’t mean anything to our analyst unless there’s real value in what he’s buying. Let’s see his Foolish…

Read more »

Photo of a man going through financial problems
Investing Articles

I can’t believe how far these FTSE 100 shares have fallen!

While the FTSE 100 is up 0.7% over six months, these five Footsie flops have collapsed 26% to 40%. But…

Read more »