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Two UK growth shares I’m buying

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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?

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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.

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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.

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