Finding UK shares with growth potential is not as hard as it seems.
I think all of the three companies outlined below have significant growth potential, which is why I would buy them for my portfolio today.
The first company on my list is the engineering business Weir (LSE: WEIR). The group produces engineering equipment for the mining and oil and gas sectors, and it is currently benefiting from an increase in commodity prices. As prices rise, miners have more cash to spend on new and existing projects. This means more orders for Weir.
According to its interim results for the six months to the end of June, orders during the period increased 17% and adjusted operating profit jumped 12%.
I think commodity prices will continue to boom as demand for critical resources expands. Governments are spending significant sums on infrastructure projects worldwide, and the resources for these projects will need to come from somewhere. Weir may continue to benefit as miners grow to meet this demand.
That is the main reason why I would buy this stock for my portfolio of UK shares. However, I should note that the commodities industry is incredibly volatile. If prices slump, producers could slash orders. That would be terrible news for Weir.
In my opinion, casino operator Rank Group (LSE: RNK) is an attractive pandemic recovery play. During the pandemic, the firm’s casinos were forced to close. The company survived by boosting the size of its online business, which provided much-needed cash flow for the organisation.
Thanks to its online business, the group was in a solid position to stage a recovery as the economy reopened. And since that reopening, in the 13 weeks to 15 August, sales have rebounded. During the period, they were just 19% below the same period in 2019. With average weekly revenues of £5.7m, the firm is comfortably above its cash break-even level of £4.4m.
I think these figures imply the company is set for a strong recovery in the weeks and months ahead. That is why I would buy the stock for my portfolio of UK growth shares.
Issues that may destabilise the group’s growth include the risk of another lockdown, and additional regulations, which may increase costs and reduce customer spending.
Basket of UK shares
The final company I would buy as a growth investment is Virgin Money UK (LSE: VMUK).
I think this challenger bank has tremendous potential. Its growth slowed last year, mainly due to the pandemic, but management is targeting expansion this year. The company is trying to grow in personal lending and mortgages, and it is targeting higher interest loans to improve profit margins.
It is also investing heavily in its digital capability, and this is already yielding results. Over 100k customers have signed up for online products, and it is working with other fintech companies to improve the offering for consumers.
As the bank pushes ahead with its growth plans, I would buy the stock for my portfolio of UK shares.
However, this equity might not be suitable for all investors. Banks can be challenging to understand, and if there is a sudden economic downturn, this sector is usually the first to feel the pain.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Weir. 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.