After a relatively weak year for many UK shares, I’m looking for a selection of top picks that could give a boost to my Stocks and Shares ISA in 2023, by potentially doubling my money.
To find shares that have the potential to double in one year is challenging.
Consider the FTSE 100, which managed to rise by just 1% in 2022. The largest percentage gain came from BAE Systems. Its total return was 60% over the year, boosted by continued fighting in Ukraine.
Most shares in this large-cap index came nowhere close to doubling last year. But I wouldn’t expect them to either.
I’d expect the largest share price gains to come from smaller companies. It’s far easier for a tiny company to double in size. As small-cap investor Jim Slater famously said, “elephants don’t gallop”.
They’re also often overlooked or ignored by big City institutions due to their size. But that’s exactly where I aim to discover these lesser-known UK shares.
Finding the best UK shares
Last year, in the FTSE Small Cap index, a handful of shares managed to double in market value. And that’s where I’d start my search for 2023 top picks.
As a long-term investor, I’m looking for high-quality businesses with strong underlying fundamentals. As such, I prefer well-run and profitable companies. Right now, I’d also consider beaten-down shares that have a chance to recover from 2022 losses. I think this is an approach that would serve many investors well.
Bright idea
So which UK shares have piqued my interest so far? If I had some spare cash right now, I’d buy Luceco (LSE:LUCE). This supplier of LED lighting and EV chargers recently reported record cash generation and profit at the upper end of its previous guidance.
High transportation costs put pressure on this business last year. But in recent months, sea container prices have fallen significantly. This could result in larger profits for Luceco in 2023.
It’s a quality business with double-digit return on capital employed and a reasonable profit margin. That said, as a cyclical business it can be prone to booms and busts. But overall, I reckon its share price has the potential to double this year.
Kettles and toasters
Another small-cap UK share that could benefit from falling shipping costs is UP Global Sourcing Holdings (LSE:UPGS). Its factory in China churns out homeware products that it then sells via supermarkets and discount retailers like B&M European Value Retail.
This business might sound like a low-quality, low-profit business that is easy to replicate. But I’d say it’s the opposite. It focuses on a handful of strong brands. These are well-regarded by consumers and popular enough for retailers to want to stock.
Its products tend to offer good value for money, and they could prove even more popular in an economic downturn.
Post-Covid disruption in China could be an area to watch as much of its manufacturing is in the region.
But with a price-to-earnings ratio of just 10 and a 5% dividend yield, it looks particularly cheap to me. With spare cash, I’d certainly buy these shares today.
