Most of my Stocks and Shares ISA portfolio is made up of dependable FTSE 100 dividend shares. But there is one AIM star showing searing growth I think could boost my returns.
I sometimes cover brilliant shares I haven’t bought yet, but this one I already own.
My caveat is the same for AIM shares as with the Bitcoin I hold. I allocate a smaller percentage of my Stocks and Shares ISA to potentially riskier companies.
That’s because more things can go wrong at this end of the market. There’s usually more competition for customers. Prices can be more volatile. And because the companies aren’t yet household names, it can be harder to convince new investors to buy in.
But if I go into this investment knowing the risks, I think I can still end up with a plumper Stocks and Shares ISA from share price growth and dividend payouts.
I like a diversified Stocks and Shares ISA portfolio. But because I work in finance, I tend to favour finance stocks and shares. That means to protect my gains I’ve had to force myself to think outside the box. So my pick to improve my yearly returns and grow my wealth? It’s a low-cost, highly profitable, debt-free South African platinum metals producer called Sylvania Platinum (LSE:SLP).
Some people love having random punts on pie-in-the-sky AIM miners but it’s not for me. It takes a vast amount of cash to discover new sources of metals, and even more to get that product to market. No matter how well intentioned, companies can so easily run out of money in the intervening time. I say, why gamble my money on a miner than hasn’t found metal yet if I can buy one that’s already producing? That’s why I can’t find a much better Stocks and Shares ISA investment than Sylvania Platinum.
SLP pays a tidgy 1.2% dividend for now, but I’m more interested in the share price growth. Since I first bought in June 2020 the shares have jumped nearly 80% to 133p.
I still say this is great value for my Stocks and Shares ISA. How can that be? Well, I reckon the shares have gone from ridiculously undervalued to just undervalued. Today SLP trades at a below-average price-to-earnings ratio of less than 13.
Stocks and Shares ISA growth
Looking further ahead is better news: a forward P/E of 3.5 is crazy good value, considering expected earnings growth of over 45% next year.
On 1 June the company announced it had restarted share buybacks. That’s good for me as an investor as it tips supply and demand in my favour. With fewer shares on the market, prices should rise more quickly in future.
Platinum group metals are in high demand now for electric vehicles, medical devices, and electronics. This demand could fall, bringing the share price down, so that’s a consistent risk to be aware of. And persistent supply chain issues have already delayed processing and increased costs at SLP’s Lannex plant in Steelpoort.
But I’ve only got £20,000 of tax-free space each year in my Stocks and Shares ISA. So I have to choose companies carefully to make the most of it. I think SLP is one of my best shots at boosting my returns.
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TomRodgers owns Bitcoin and shares of Sylvania Platinum. 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.