2 super growth stocks I’d buy right now

Bilaal Mohamed explains why investors should consider buying these growth stocks for the longer term.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Cuts in defence spending on both sides of the Atlantic have been painful for firms operating in the sector in recent years, but with Donald Trump now occupying The White House the outlook has improved dramatically for them. The new commander-in-chief has vowed to increase spending on infrastructure and defence, and this had led to many UK defence firms enjoying a strong rally since November’s surprising US election result.

Military prowess

Investors will no doubt be looking to FTSE 100 giants such as BAE Systems or perhaps even aircraft engine-maker Rolls-Royce to get in on the action, with the hope of profiting from the somewhat unconventional new president’s lust for military prowess. But I believe there could be even better options for investors wanting to cash-in on the defence spending spree.

Ultra Electronics (LSE: ULE) specialises in applying highly-advanced electronic and software technologies to provide solutions and products to the defence & aerospace, security & cyber, transport, and energy markets. The Middlesex-based group has world-leading positions in many of its specialist capabilities and, as an independent, non-threatening partner, is able to support all of the main prime contractors in its sectors.

Mission critical

As a result of such positioning, the firm’s systems, equipment and services are often mission or safety-critical to the successful operation of the platform to which they contribute. This mission-criticality secures the company’s positions for the long term, which in turn has helped to underpin its strong financial performance over the years.

The FTSE 250-listed group has an excellent track record, achieving growth in underlying earnings in all but one of the last 15 years. With analysts forecasting continued steady growth for the foreseeable future, I see no reason why the share price shouldn’t continue on its upward curve for many years to come. The relatively modest valuation of 15.5 times earnings also means it could be a good time to buy.

Organic sales growth

Another London-listed firm that could benefit from the new US administration is GKN (LSE: GKN). The Redditch-based global engineering group serves both the aerospace and automotive markets, with the former hoping to profit from increased military spending over the coming years.

In its latest trading update, the FTSE 100 group reported good organic sales growth during the first quarter of its financial year as it continued to benefit from favourable currency translation, with the automotive market performing better than expected, and growth in aerospace being slightly slower than previously anticipated.

Attractive valuation

The group’s trading margin was ahead of last year primarily due to an increase in its Driveline division, although it and the Powder Metallurgy division are seeing an impact from higher raw material costs. Meanwhile the Aerospace division saw modest organic growth during the quarter.

GKN’s share price has performed well over the past year, gaining 27% in just 12 months, but I still see further upside over the longer term, with rising earnings leaving the shares trading on a very attractive P/E rating of just 10.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK owns shares of GKN. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »