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1 top UK growth stock for my ISA – I think it could double in price!

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At a time when interest rates are at historic lows, and economies are struggling, finding an investment that can make you a decent return is hard. Fortunately, there’s still some great opportunities to be found within the FTSE 100. Investing in top UK growth stocks now can hopefully provide long-term capital appreciation to an investment. 

I like Barratt Developments (LSE:BDEV). The share price is up 3.5% this week, but is still trading at a large discount to where we started the year. The UK-based housebuilder is seen as a bellwether for the broader UK economy. At a very simplistic level, the demand for housing is often correlated to income and wealth. It’s also tied to the growth of the workforce and the broader population. If all of these above points are firing on all cylinders, housebuilders like Barratt should perform very well.

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Could it double in price?

Saying a stock can double in price is a bold claim. In my eyes, a top UK growth stock needs to have the potential to double your money to really generate interest. Barratt does this for me when I look at its future. But before we get to that, let’s review the year so far. It hasn’t been great, mostly due to the impact of the coronavirus. The business and industry is sound, but lockdown meant that construction was hampered. In a mid-year trading update, annual completions were down 29%. As a result, a planned special dividend of £175m has been cut.

This is bad news, but it’s now in the past. The share price suffered during the stock market crash in March, and is still at depressed levels. To make it back to the highs from this year would already be a 60% rally. So doubling in price would make new highs, but isn’t such a stretch that it makes a ridiculous statement.

Positive outlook for Barratt as a growth stock

The construction industry looks at forward sales with great importance, given the lag time between starting and finishing a project. For Barratt, forward sales are up 22% on the year. In the mid-year update, it was also noted that the average selling price is creeping higher to £280,000 as well. Given the fiscal measures put in place recently with a stamp duty holiday, I expect the demand to remain strong across all verticals in the property industry. From construction to the end product, there is a lot of pent up demand from lockdown which Barratt can capitalise on. 

News reports out this week show house prices rebounding to reach all time highs, which provide a further indication on why Barratt is a favoured UK growth stock of mine right now. In order to maximise the potential profits here, I’d buy the stock within my Stocks and Shares ISA. This allows me to build up and realise all of the profits whenever I come to sell the stock, without having to pay capital gains tax on it.

So if you’re looking for a growth stock that could have large potential to increase in value over the longer term as the economy bounces back, I’d look to buy Barratt.

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jonathansmith1 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.

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