We live in volatile times. Those tuned into stock markets and economic events are probably more keenly aware of that fact than most.
Plunging shares in China, sputtering emerging market growth, flat-lining developed world demand, convulsing European integration — there are many things to keep the shares in our portfolios bouncing around like fleas in a box.
Make hay when the clouds roll in
Jittery investors can cause the shares of good firms to fall despite a robust underlying business story, perhaps a story unaffected by whatever the panic-du-jour happens to be.
Today I’m flagging up three compelling growth shares from my own portfolio that show share-price weakness right now. Times like this could be perfect opportunities to get interested in a company, because we might end up bagging a good-value entry point.
We have a spread of sectors and market capitalisations here with technology firm and FTSE 100 constituent ARM Holdings (LSE: ARM), pharmaceutical company and FTSE 250 constituent BTG (LSE: BTG) and restaurant chain and FTSE AIM constituent Tasty (LSE: TAST).
Trading in line with expectations
Yesterday’s second-quarter results release from ARM Holdings showed the firm trading in line with City analysts’ expectations, yet the technology giant’s shares plunged more than 6% on the day. That fall meant the shares eased back more than 19% since the 1205p or so they reached earlier in the year.
Investors watch growth numbers closely at ARM, but the firm didn’t slip, and the directors sound bullish on the operational momentum in the business. Revenues are up 15% year-on-year, achieved by posting a 3% gain in processor licensing revenue and a 31% uplift in processor royalty revenue. Earnings per share are up 34% and the dividend rose 25%. These are good growthy numbers, as we’ve come to expect from ARM Holdings.
ARM’s announcement coincided with news from Apple (NASDAQ: AAPL.US), one of ARM’s biggest customers, where fourth-quarter revenue forecast fell short of estimates and it missed some targets for iPhone sales. Yet, to me, that’s just ‘noise’. ARM Holdings still holds its central position supplying much of the intellectual property (IP) that drives the communication and data industry, which is one of the most powerful growth trends of our time.
BTG specialises in targeting acute care, cancer and vascular diseases, and generates revenues from sales of self-marketed products and from royalties on partnered products.
Growth numbers are good with City analysts following the firm predicting a 26% earning-per-share uplift during the year to March 2016 and a further 41% improvement the year after that.
However, since peaking around 830p at the beginning of the year BTG’s shares dropped as much as 25% by June. They now seem to be back on the rise.
The firm aims to ramp up sales of a varicose vein treatment called Varithena in the US, but the process is slow. Perhaps some investors were hoping for a faster ramp-up. In an update this month BTG said it expects to take around two years from the first commercial sales in August 2014 to establish a smooth payment process and to achieve widespread adoption and reordering of Varithena by physicians. Despite that, the directors seem upbeat on the product’s potential, and it’s not the only market offering driving the firm’s growth.
On a roll
Tasty shares are down around 15% from the 145p or so they achieved in March. I can see no reason for the drift — perhaps there is none.
Full-year results in March revealed the firm’s restaurant rollout programme going well. The company opened seven new outlets during 2014 and a further three up to the end of March, bringing the total number of outlets to 39.
I don’t think there could be a better time than now to invest in a restaurant rollout programme. Macro-economic conditions seem benign overall, with perhaps a potentially steady increase in disposable income finding its way into consumers’ pockets as we move through the macro-cycle. That’s more and more money for Tasty to attract with its mostly Wildwood-branded eating and drinking venues.
The firm’s success shows in the numbers with full-year revenue up 28%, gross profit up 26% and pre-tax profit up 46% on the year-ago figures.
ARM Holdings, BTG and Tasty look attractive right now, in my view, but let me throw a fourth idea into the mix. If you click the link that follows, you can find out more about the story behind three hidden factors that we think make this company a potentially lucrative investment for 2015. Growth flying under the radar can reward early investors well. You can follow this idea up right now by clicking here.
Kevin Godbold owns shares in ARM Holdings, BTG and Tasty. The Motley Fool UK has recommended ARM Holdings and BTG. The Motley Fool UK owns shares of Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.