Right now, a lot of the most obvious investment opportunities are in more cyclical businesses. But there are also some growth stocks that I’m looking to buy at the moment.
The two I’m looking at arguably couldn’t be more different. One is a UK retailer with big expansion plans and the other is a US tech company looking for an artificial intelligence (AI) boost.
B&M European Value Retail
On the face of it, B&M European Value Retail (LSE:BME) doesn’t look like a growth stock. For one thing, the company has distributed around 39% of its earnings as dividends over the last decade.
That’s not usually a sign of a business in growth mode. But things ain’t always what they seem – the firm has plans to boost its revenues and profits through a big increase in its store count.
The ambition is to grow from 741 outlets to 1,200. And if it can do this while maintaining its profitability on a per-store basis, the stock will look like a bargain at today’s prices.
The ability to do this isn’t guaranteed, though. There’s a limit to how many units a company can open in a finite space before they start getting in each other’s way, cutting into sales and profits.
That’s the risk with the plan B&M is looking to execute. And it’s made worse by pressures on household budgets easing, leading to consumers returning to the likes of Tesco and Sainsbury.
It’s worth noting, though, that 1,200 isn’t an implausibly high number in the context of other UK retailers. Tesco currently operates 4,273 stores and Sainsbury has over 1,400.
Even if the company falls short of its target, I think there’s scope for future growth. And a price-to-earnings (P/E) ratio of 12.5 makes the stock cheap enough for my buy list.
Apple
Apple (NASDAQ:AAPL) is a more conventional growth stock. And with AI leaving speculative territory and starting to actually do things, I’m looking to add to my investment in the company.
There are some clear risks with the business. One of these is the company’s exposure to China, both in terms of manufacturing and its customer base.
That’s a significant issue and one that I think investors ought to be aware of. But I think it’s possible to see the stock as attractive even despite this.
Apple’s iPhone accounts for around 17% of the global smartphone market. And importantly, its customers tend to be more affluent with more disposable income than average.
In other words, they’re the kind of customers businesses want to target. That’s why the company is able to use OpenAI’s latest features without paying for them.
I think this will make the iPhone even more desirable, boosting sales. Whether it will cause an immediate surge in shipments is unclear, but I expect positive results over the long term.
In short, I think Apple’s market position gives it a big advantage over its competitors and I see this as something that can drive growth as AI emerges. That’s why I’m looking to buy it in August.
