Recent volatility in the markets has been a cautionary reminder that sentiment can turn on a sixpence. Whatever does happen next, it pays to be prepared for all eventualities.
That’s why, in addition to building up my cash reserves, I’ve started drawing up a list of ‘expensive’ looking businesses I might just buy a slice of if they were to come on sale in a general market meltdown. Here are just three I’ve got my eye on.
Not cheap enough…yet
£700m cap ticketing and virtual queuing solution firm Accesso Technology (LSE: ACSO) has thoroughly earned its market darling status. Had you bought the shares five years ago and learned to sit on your hands, the value of our capital would have grown by 300%.
Given the growth opportunities available — such as providing solutions for music concerts and sporting events, in addition to building on its established presence at many tourist attractions — I still think the company warrants attention from growth investors. Last week’s announcement of a strategic partnership with Groupon is yet another positive development.
Nevertheless, all this promise comes at a price. On 46 times earnings, it could be argued that the company still looks priced to perfection, even if this valuation is set to become far less punchy next year if analyst targets are hit.
Having looked at the business back in June, challenger law firm Keystone Law (LSE: KEYS) continues to grab my attention. I’m not alone. Even after taking into account the market’s recent wobble, the shares are still worth twice what they were when it listed on AIM in November last year.
Keystone continues to grow at a rapid pace, so much so that it’s already smashing its own earnings estimates. Revenue rose just under 30% in the six months to the end of July with profit before tax soaring 40.3% to £2.3m. As evidence of its growing profile, the £120m cap also increased its number of lawyers by more than 50% to 31 over the reporting period and continued investing in its IT platform.
A forecast price-to-earnings (P/E) of 33 is too hot for me in the current political and economic climate, but with first mover advantage, the defensive qualities of its work, and CEO James Knight describing the UK legal services sector as “ripe for disruption“, I’m keen as mustard to add the company to my portfolio.
Doubled in value
Fryer management firm Filta Group (LSE: FLTA) is certainly the least glamorous of the trio, not that you’d know by the performance of its stock.
Since coming to the market in 2016, the Rugby-based business has more than doubled in value — further evidence that backing market minnows can seriously improve your wealth, so long as you can accept greater volatility and are fortunate/skilled enough to get in early.
It’s not hard to see why growth aficionados have warmed to it. Last month’s half-year results revealed a 22% rise in both revenues (£6.6m) and pre-tax profit (£1m). Currently expanding into Canada and Germany at a fair clip, Filta added 10 new franchises and 28 mobile filtration units in the period, bringing the total in operation to 192 and 422 respectively.
Right now, the stock is trading on 28 times earnings for the current year — too punchy for my liking. That said, a general market sell-off could be just the ticket to get me involved.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.