Lloyds shares are among the most followed by British retail investors. We asked three of our free-site writers to put forward a stock they think will prove a better investment over the next half-decade, without knowing the names that others were considering — and we still got the same answer twice!
Alpha Group International
What it does: Currency risk management specialist diversifying into a full suite of alternative banking solutions.
By Zaven Boyrazian. The UK’s biggest banks, like Lloyds, undeniably play a critical role in the UK economy. But they’re not the only players in town. Alpha Group International (LSE:ALPH) has been quietly taking market share within the corporate banking space. And so far, it’s massively outperformed the industry titans.
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The services provided include FX risk management, alternative banking, fund financing, and bank connectivity technologies. These offerings are also supplied by Lloyds’ and other’s corporate banking division. Yet, in most cases, it’s prohibitively expensive for smaller businesses. That’s where Alpha has built its niche, translating into a 275% return over the last five years.
Obviously, Alpha isn’t risk-free. The finance sector is heavily regulated, and any breach, even accidental, can result in massive fines. Currency hedging can backfire spectacularly if executed poorly. And when issuing fund financing, borrowers may default if not properly vetted.
Nevertheless, despite the risks, Alpha continues to beat the odds. And having only scratched the surface of its total addressable market, there could be plenty more explosive performance to come.
Zaven Boyrazian owns shares in Alpha Group International.
Alpha Group International
What it does: Alpha Group International is a financial services business that provides currency risk management and payments solutions.
By Edward Sheldon, CFA. Lloyds shares look cheap today. But I reckon a lot of other UK stocks will provide higher returns over the next five years.
One stock that I believe can outperform Lloyds is Alpha Group International (LSE: ALPH). It’s an under-the-radar financial services company that’s in the FTSE 250 index.
This company is growing at a much faster rate than Lloyds today. Over the last five years, its profits have soared.
It’s also far more scalable than Lloyds. This is a business that could potentially double or triple in size in the years ahead. I can’t see that happening with Lloyds as it’s a very mature company now.
One risk with Alpha Group International is that the company is led by a very driven founder (Morgan Tillbrook). If he was to leave the business, it may not enjoy the same level of success it has had in the last few years.
Overall though, I think this stock has bags of potential. I own it in my portfolio and I plan to stay invested for the long term.
Edward Sheldon owns shares in Alpha Group International
Taylor Wimpey
What it does: Taylor Wimpey is one of the UK’s biggest housebuilders and also has operations in Spain.
By Paul Summers. I think Taylor Wimpey (LSE: TW.) shares could outperform the banking behemoth. This is partly based on the assumption that the new government will change existing planning laws and get close to achieving its goal of building 1.5 million homes in the next five years.
There are a lot of caveats here. Housebuilding stocks are notoriously cyclical. If the economy takes a downturn, I’d expect this stock’s value to sink as it has before.
Still, Taylor Wimpey is no slouch when it comes to generating passive income for investors. As I type, the dividend yield stands at 5.7%. That’s on par with Lloyds and far more than I’d get from a FTSE 100 tracker.
With interest rates coming down and the mortgage market getting more competitive, I think the medium-term outlook for earnings – and the share price – is positive.
Paul Summers has no position in Taylor Wimpey
