Once again, Marks & Spencer has let down investors. I wouldn’t be keen to invest in the supermarket, as it tries to turn around its ailing clothing division. Whereas there are a good number of AIM growth shares that have far more potential to increase their shares prices and dividends.
A growth share with plenty of potential to outperform Marks & Spencer shares
In my view, one such share is Polar Capital Holdings (LSE: POLR). The boutique asset manager has a dividend yield of 4.8%, which is very solid for an AIM-listed company. It’s established and has a value approaching £700m, so this isn’t one of the AIM’s Wild West-style penny shares.
Many of its funds have been performing very well for investors, including the Polar Capital Technology Trust.
Growth is both organic and through acquisition. As part of its acquisitive growth strategy, Polar Capital bought Dalton Capital, the parent company of London-based boutique asset manager Dalton, for £15.6m in December. The latter has £1.24bn of assets under management and a strong European presence.
In its last annual report, the company stated it was keen to expand in the US and has bought financial companies over the Atlantic to help achieve this. Along with expansion in other regions like Asia and the Nordics I think there’s a lot more growth to come from Polar Capital Holdings.
An AIM share in a growth industry – gaming
Gaming group Frontier Developments (LSE: FDEV) is part of a red hot sector. Under lockdowns in 2020 shares in companies in the sector flew. Many are now expensive on traditional valuation measures like the price-to-earnings (P/E) ratio, but if they can post exceptional growth there may still be opportunities for the share prices to rise.
I might consider Frontier Developments as a future buy for my portfolio since I have confidence in the sector and am not averse to buying a highly rated stock. There’s little doubt it’s a very solid operator.
It has plenty of cash and a strong balance sheet. The games are very popular and of high quality, and include titles such as Zoo Tycoon and Disneyland Adventures.
With the global gaming market forecast to grow from $151.55bn in 2019 to $256.97bn by 2025.
I think investor optimism and interest in the sector will keep pushing share prices higher. The quality of Frontier Development’s games means I believe it’ll stay near the front of the pack. It’s such a good company that it may even get taken over. Codemasters, a rival game producer has recently been bought, so there’s precedent.
I like both Polar Capital and Frontier Developments because they look to be high quality AIM growth shares. The former is particularly attractive because it’s valuation is lower and it pays a dividend. The latter is in a sector that is in fashion and could well remain so for some time. I expect both to massively outperform floundering Marks & Spencer shares.
Andy Ross owns shares in Polar Capital Holdings. The Motley Fool UK has recommended Frontier Developments and Polar Capital Holdings. 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.