The Motley Fool

Forget Bitcoin. I’d invest in this hot ‘millennial’ stock and this video game company

Bitcoin has had a great run in 2020 so far, rising from $7,200 to around $9,600. That 30%+ price rise has got many investors interested in the cryptocurrency again.

I’m not tempted to invest, however. Not only is the digital asset notoriously volatile, but it’s also impossible to value – it could rise to $20,000 but it could just as easily fall back to $1,000.  

Claim your FREE copy of The Motley Fool’s Bear Market Survival Guide.

Global stock markets may be reeling from the coronavirus, but you don’t have to face this down market alone. Help yourself to a FREE copy of The Motley Fool’s Bear Market Survival Guide and discover the five steps you can take right now to try and bolster your portfolio… including how you can aim to turn today’s market uncertainty to your advantage. Click here to claim your FREE copy now!

If large financial gains are what you’re looking for, I say you’re better off investing in smaller growth companies. As smaller companies grow in size and their profits increase, their share prices tend to rise as well. This means that if you pick the right stocks, you can turn a little bit of money into quite a large sum. 

With that in mind, here’s a look at two smaller growth companies I’m backing right now.

Online fashion superstar

One of my favourite growth stocks at the moment is online fashion retailer Boohoo (LSE: BOO), which owns a number of leading brands including Boohoo, Pretty Little Thing, MissPap and Nasty Gal – all of which are very popular with millennials. While many UK retailers are struggling at present, Boohoo is absolutely flying.

Indeed, a trading update in January showed that for the four months to 31 December 2019, total group revenue surged 44%. And for the full financial year ending 29 February 2020, the group raised its revenue guidance to 40% to 42%, significantly higher than its previous guidance of 33% to 38%. These growth figures suggest that the AIM-listed company has considerable momentum at present.

Now, Boohoo shares aren’t cheap. With analysts forecasting earnings per share of 6.96p for the year ending 28 February 2021, the forward-looking P/E ratio is about 47. That’s a high valuation that doesn’t leave a lot of room for error. However, the share price trend here is up, so I think the shares are likely to continue rising if growth remains strong.

Video game specialist

Another growth stock that I really like the look of right now is Keywords Studios (LSE: KWS). It specialises in video game technical and creative services such as functional testing, localisation, and art creation, and works with most of the world’s largest video game developers, including Epic Games (Fortnite) and Activision Blizzard (Call of Duty).

Like Boohoo, Keywords is growing at a fast pace. In January, the company advised that it expects full-year FY2019 revenue growth of around 30%. And looking ahead, analysts expect top-line growth of around 15% this year.

KWS shares have received a number of broker price target upgrades recently. For example, earlier this month, analysts at Berenberg lifted their price target from 1,288p to 1,700p, stating that the company is well placed to deliver “material growth” in 2020 and beyond. “We have always argued that Keywords is a multi-year winner,” the analysts wrote in a note to clients. Meanwhile, analysts at Jefferies also lifted their price target for the stock recently, to 1,881p. “We’re confident [Keywords’] opportunity-set and attractiveness has grown,” they said to clients.

Keywords Studios currently trades on a forward-looking P/E ratio of about 31. That is an expensive valuation no doubt, but given the rapid growth of the video game industry, I think it’s a fair price to pay.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Edward Sheldon owns shares in Boohoo Group and Keywords Studios. The Motley Fool UK has recommended boohoo group and Keywords Studios. 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.