Every month, we ask our freelance writers to share their top ideas for small-cap stocks to buy with investors — here’s what they said for May!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
Agronomics
What it does: Agronomics invests in a range of companies in the field of cellular agriculture.
By Ben McPoland. Agronomics (LSE: ANIC) manages a portfolio of start-ups focused on cellular agriculture. This is the production of animal-based products from cell cultures rather than directly from animals.
In practice, that means milking microbes instead of udders and growing meat and fish rather than rearing animals and overfishing oceans. It’s no secret that husbandry uses extraordinary amounts of water and contributes to greenhouse gas emissions.
Additionally, soaring food prices mean that nations need greater food security. And meat grown from cell cultures doesn’t need huge amounts of grain or fertilisers from, say, Ukraine.
This technology is not science fiction. The first lab-grown chicken product was approved for human consumption in the US last year. This chicken is biologically indistinguishable from meat taken from a slaughtered bird. So taste isn’t an issue and more products are coming.
Of course, consumers may reject this food despite it being more nutritional and (eventually) cheaper. However, consulting firm McKinsey estimates this market could reach $25bn by 2030.
At 12p per share and a market cap of £120m, I think Agronomics looks attractive.
Ben McPoland owns shares in Agronomics.
H&T
What it does: H&T is the UK’s largest pawnbroker. It offers short-term cash loans backed by items of value such as gold jewellery or watches.
By Harshil Patel : Pawnbroking is a hot sector right now. And with over 265 stores, small-cap stock H&T (LSE:HAT) is the biggest player. More stores are expected this year too.
This growth strategy is backed by soaring profits. Gross profit in 2022 rose by 33% to £102m. The impact of inflation on consumer finances boosted demand for short-term loans. At the same time, many competing loan products were withdrawn from the market.
That puts H&T in somewhat of a sweet spot.
In addition to pawnbroking, it also scraps unwanted gold, sells jewellery and provides holiday money. All these areas are experiencing a growth spurt.
Gold prices have jumped since H&T’s last trading update. And travel money should get a boost as the holiday market bounces back.
Bear in mind that if inflation slides, demand for its loans could fall back to historical norms.
That said, with price-to-earnings ratio of just seven, and dividend yield of 5%, this share looks like a solid prospect to me.
Harshil Patel does not own shares in H&T.
Speedy Hire
What it does: Speedy Hire provides equipment and plant hire services to the UK and Ireland’s construction, infrastructure, and industrial markets.
By Gordon Best. Investors in 2023 may struggle to find areas less impacted by the possibility of a recession. One thing that can be relied upon historically is expenditure in infrastructure and construction, as governments seek to stimulate the economy.
One potential beneficiary is Speedy Hire (LSE:SDY), which supplies construction equipment. Revenue has been steadily increasing over the past five years, with the company profitable since 2021.
Speedy Hire’s growth prospects also look positive. When we compare the price-to-earnings ratio of 6.3 times to the industry average of 59.8 times, there could be a great opportunity for investors.
Investments in the construction sector can be less volatile, since work pipelines are likely to be well understood, and the company has a relatively low debt-to-equity ratio, indicating it is not highly leveraged.
Dividends have been rather unpredictable, but in a growing, stable sector of the market, this small-cap stock has potential.
Gordon Best does not own shares in Speedy Hire.
