Just look at Filtronic for proof. Shares of the communications technology firm were changing hands for as little as 9p back in 2022. Fast forward to today, you’d have to pay nearly £2 to snap one up!

With this in mind, I asked AI app ChatGPT to name a penny stock that could make me rich. Here’s what it said.

Annoying habit

As is widely accepted, AI chatbots can pump out inaccuracies like a drunk at the bar explaining geopolitics after five pints. And they sometimes hallucinate like they’ve had 10 pints.

I exaggerate, slightly. But in my experience, ChatGPT has an annoying habit of not giving me what I asked for. A penny stock is generally defined as trading for less than 100p, typically with a market-cap below £100m. 

So what did ChatGPT give me? One trading for 118p, with a market-cap of £190m! 

Corporate distress

Anyway, the stock it suggested was Begbies Traynor (LSE:BEG), an AIM-listed company specialising in insolvencies. I’m familiar with this one because I wrote about it in the summer, saying it should perform well due to the sorry state of the UK economy.

Begbies Traynor stock has only meandered sideways since, but it’s up 28% over one year, outperforming the FTSE AIM All-Share Index. Across five years though, it’s essentially flat.

ChatGPT called Begbies Traynor a “counter-cyclical beast”, as it makes money from insolvencies and corporate distress. Today, many businesses are failing and in need of restructuring. This is primary due to inflation, higher interest rates and weak consumer demand.

In the first half of 2025, the company’s revenue grew 7% to £82m, while adjusted diluted earnings per share lifted 6%, boosted by a share buyback programme. The interim dividend edged up 7%, the eighth consecutive year of growth.

In the firm’s property advisory unit, profit growth was 26% as it benefited from efficiencies and resilient property auction volumes despite macroeconomic uncertainty.

Begbies Taylor has a specialist team that provides pre-insolvency planning services to UK sports clubs. In October, it was appointed as the joint administrators to Sheffield Wednesday after the football club fell into administration.

The company says there’s “a growing structural financial distress among lower-league clubs in the UK’s three most popular sports — football, rugby league, and cricket“.

For the full year, the firm is confident of meeting market expectations for adjusted pre-tax profit of £23.7m-£24.9m.

Doom and gloom

One risk here is that the economy suddenly starts firing again (no laughing at the back). Begbies Traynor also faces competition, though it’s operating in a fragmented market in which it has been quietly buying smaller firms.

Earlier this week, the company published its quarterly ‘Red Flag Alert Report’ for Q4 2025. In this, it said the number of businesses in ‘critical’ financial distress rocketed 43.8% year on year.

On balance, I still think the stock will do well. It’s trading at just 10 times forward earnings while offering a 3.9% dividend yield.

Begbies Traynor could be considered as a hedge against the weak UK economy. But I doubt it’s one to make investors rich, despite what my chatbot chum says. I’ll keep looking.

The post I asked ChatGPT for a penny stock that could make me rich and it said… appeared first on The Motley Fool UK.

However, things could get bumpier from here. In the UK, we have sticky inflation, anaemic growth, and sky-high government borrowing. If taxes go up in the autumn, which I think is increasingly likely, then a recession could follow soon after.

Consequently, investors might start looking for stocks that could do well in a recession. Here are two that I think are worth exploring further.

Footsie utility giant

The most obvious defensive pick in the FTSE 100 is probably National Grid (LSE:NG.). It owns and runs the infrastructure — pylons, power lines, and substations — that moves electricity around the UK and parts of Northeast America.

Demand for power doesn’t collapse during economic downturns. Moreover, National Grid is a regulated utility. That means the UK energy regulator sets how much profit the utility can earn, which results in incredibly reliable cash flows. 

These support regular dividend payments. Right now, the forecast dividend yield is 4.8%. 

The main risk here is the company’s balance sheet. In March, net debt stood at a whopping £41.3bn. With eye-watering investments being made to decarbonise the grid, there’s no guarantee that dividend growth will prove durable long term.

Nevertheless, with National Grid’s reputation as the quintessential safe-haven stock, I would expect it to do well during a recession. 

Small-cap wildcard

Given that National Grid is a somewhat predictable pick, I’ll also highlight Begbies Traynor (LSE:BEG).

This AIM-listed company assists struggling businesses with restructuring, administration, liquidation, and turnaround support. It’s also one of the leading property auction houses by volume.

Every quarter, Begbies Traynor publishes its Red Flag Alert report, offering a snapshot of the financial health of UK businesses. It has made for grim reading for quite some time. 

The latest Q2 research shows that 21% more businesses were in ‘critical’ financial distress than the year before. 

Financial distress has intensified over the past twelve months in every corner of the economy…With no end in sight to the current economic malaise, I fear the financial burdens companies are enduring at present are simply too high for many not to avoid collapse.

Julie Palmer, Partner at Begbies Traynor

Last year, revenue increased 12% to £154m, with adjusted EBITDA growth of 11% (£31.7m). The dividend was hiked 8%, the eighth consecutive year of increasing payouts.

The forward dividend yield of 3.9% is well covered by prospective earnings.

Now, the company does face a lot of competition in a highly fragmented market. Also, a spike in insolvencies is hardly a long-term trend, so it will be important to keep broadening its range of advisory services, as well as grow through acquisitions.

However, earnings are forecast to rise strongly this year, putting the stock on a reasonable 10.8 times forward earnings.

Given the economic challenges, the company’s services are likely to remain in high demand for some time. Therefore, I think this is another stock that might do well during a recession.

The post 2 UK stocks that might do well in an ISA during a recession appeared first on The Motley Fool UK.

Here, I want to highlight a stock example, quite literally. But first, I must warn readers that things are now going to turn gloomy…

Depressing backdrop

That’s because today (28 July), insolvency expert Begbies Traynor (LSE: BEG) released its latest quarterly (Q2) Red Flag Alert report. And it made for grim reading.

According to this, nearly 50,000 UK businesses were in “critical” financial distress. That figure was up 21.4% from a year ago.

Worryingly, every single one of the 22 sectors tracked saw an increase in distress. And the number of companies in “significant” financial distress (a step down from critical) also rose sharply to 666,876, up 15.2% from Q1. 

There were some glimmers of hope, with sectors like manufacturing seeing modest improvements. But it’s clear that businesses are being squeezed by rising costs, higher wages, and fragile consumer confidence. 

Elsewhere, hedge fund manager Ray Dalio is warning that the UK economy appears trapped in a “doom loop”. Gulp.

I did warn that this was gloomy stuff! 

Facing up to reality

Now, one silver lining might be that most politicians now recognise that the UK is in economic decline. Acknowledging the problem is half the battle, as they say.

Deregulation of certain areas is being talked up, as is unleashing AI across the bloated public service to improve efficiency. Looking ahead, falling interest rates might help boost consumer spending.

For investors, it means that there are probably many quality small-cap UK shares being thrown out with the bathwater, due to all the pessimism.

The FTSE stock

Returning to Begbies Traynor, this looks like an interesting opportunity to me. The company specialises in insolvency, restructuring, and turnaround advice, stepping in when firms are in serious financial trouble. In other words, it helps struggling businesses.

The firm is quite small, with a £194m market cap, and is listed in the FTSE AIM 100 Index. The share price is up 28% year to date, but still around 14% lower than three years ago.

Begbies Traynor is doing well operationally. In the year to 30 April (FY25), revenue increased 12% to £153.7m, while adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) rose 11% to £31.7m.

It was the firm’s tenth consecutive year of profitable growth, during which time adjusted pre-tax profit has grown sixfold.

Now, one thing to note here is that Begbies Traynor operates in a very competitive market. And given the state of the economy, that could intensify further if more firms pivot towards insolvency and restructuring services.

Encouragingly, though, management says that the company has maintained its market-leading position (by volume of appointments). And it expects larger, higher-value cases to continue driving growth.

Despite this, the stock is trading at just 10.6 times next year’s forecast earnings (FY27). When paired with a 3.6% dividend yield, that looks attractive.

Meanwhile, brokers covering Begbies Traynor have it down as a Strong Buy, with a 155p price target (around 27% higher than the current 121p).

Of course, there’s no guarantee it will reach that price. But given the dire economic conditions, I think this insolvency specialist will do well, making the stock worth considering.

The post This cheap FTSE stock could jump 27%, according to brokers appeared first on The Motley Fool UK.

As someone who generally looks for the positive things in life, my most recent investment might be a little surprising. After all, Begbies Traynor is more likely to do well when other UK businesses are struggling. Surely an optimistic person like me should be enthusiastic about the country’s prospects?

Unfortunately, that’s not the case. In recent weeks, I’ve become increasingly worried about the state of the nation’s finances and the implications for the wider economy. I’m now more optimistic about the prospects for Begbies Traynor than I am for the country as a whole.

Doom and gloom

Each quarter, the group publishes its ‘Red Flag Alert Report’. The latest version reveals there are 45,416 UK businesses in “critical” financial distress. In some respects, the absolute number doesn’t really matter. It’s the direction of travel that’s important. Although 2.4% lower than for the previous quarter, the number’s 13% higher than a year ago.

The report concludes: “Optimism remains in short supply for UK businesses”. Alongside stubbornly high inflation, an economy that shrank during the previous two quarters and the Office for Budget Responsibility warning that the UK fiscal outlook “remains daunting” it’s hard to be positive.

Against this backdrop, my investment in Begbies Traynor can be viewed as a hedge against a poorly performing UK economy.

Looking on the bright side

Of course, things might pick up soon. The government’s pulling as many ‘growth levers’ as it can and the Bank of England’s widely expected to resume cutting interest rates shortly.

But even if the country does start growing again, there’s always a lag between the ‘real’ economy and the headline numbers. On this basis, Begbies Traynor should continue to do well for a while longer. That’s because in addition to the 45,416 “critical” businesses, there are another 579,276 experiencing “significant” distress.

Pros and cons

This gloomy picture has helped improve all of the company’s key financial metrics. During the year ended 30 April (FY25), year-on-year revenue increased by 12.4% to £153.7m, profit before tax almost doubled and free cash flow went up by 56%. The group also moved from a net debt to a net cash position at the end of the year.

Adjusted diluted earnings per share increased from 9.9p to 10.5p. This means the stock’s currently (16 July) trading on a very reasonable 11.7 times historic earnings. The current yield of 3.5% isn’t bad either.

But the group faces some challenges. Its offering to clients is only as good as the staff it employs. The recruitment and retention of key personnel is essential for its continued success. And the nature of its business means it has a high fixed cost basis (mainly salaries and property) which cannot be quickly reduced during difficult times.

It also operates in a very competitive market place.

However, on balance, I think the group’s well positioned to benefit from the challenging times in which we live. That’s why I recently added the stock to my portfolio. Other investors could consider doing the same.

The post I’ve just bought this FTSE share… appeared first on The Motley Fool UK.

Here are two top companies I think share pickers should consider today.

Begbies Traynor

Begbies Traynor (LSE:BEG) provides a range of services for companies in distress, and is an expert in the field of corporate insolvency.

Its services are in high demand as the UK economy struggles, with latest financials showing revenues up 16% (or 11% on an organic basis) in the six months to October.

A stream of industry surveys since then suggest takings have likely remained strong. On Monday (18 February), the Insolvency Service reported 1,971 registered company insolvencies in England and Wales for January.

This was up 11% year on year, and 6% from December. With businesses facing higher national insurance contributions and National Wage hikes, and spending by consumers remaining weak, insolvency numbers look set to (unfortunately) keep chugging higher.

A strong balance sheet mean Begbies Traynor has headroom to continue investing in its operations and on additional acquisitions to give earnings an extra boost. Its net-debt-to-adjusted EBITDA (earnings before interest, taxation, depreciation, and amortisation) ratio was just 0.2 as of October.

I don’t think this picture is reflected in the company’s low share price. At 93.4p per share, it trades on a forward price-to-earnings (P/E) ratio of 8.9 times.

This provides scope for fresh share price gains, in my opinion. Though be aware that signs of economic recovery could blunt any price appreciation.

Serabi Gold

Tension over the global economy and political landscape is creeping higher, and as a result demand for gold is taking off.

The yellow metal hit new peaks around $2,943 per ounce in recent days, pulling the prices of gold stocks with it. A move through the $3,000 marker looks inevitable to many, a scenario that in itself could fuel further substantial gains.

Investing in gold mining shares can be a bumpy ride at times. Commodity prices are notoriously volatile. On top of this, exploration and production issues can be common, damaging profits even when metal prices surge.

Yet this threat is baked into the share prices of many of London’s mining stocks. Gold miner Serabi Gold (LSE:SRB), for instance, trades on a forward P/E ratio of just 3.2 times.

It’s a rock-bottom reading I think leaves scope for more upwards price action. Serabi’s shares have leapt almost 30% in value since the start of 2025 alone.

I’m also encouraged by Serabi’s efforts to supercharge production from its South American assets.

Group output hit 10,022 ounces in the final quarter of 2024, the highest level for five years. And with 2025’s production tipped at 44,000 to 47,000 ounces, the miner’s targeting annual growth of at least 17.3%.

All in all, I think conditions are ripe for Serabi to enjoy blistering profits growth.

The post 2 cheap UK stocks I think could thrive during a tough 2025 appeared first on The Motley Fool UK.

Begbies Traynor

These are tough times for British business as costs rise and consumer spending slumps. In this climate, Begbies Traynor (LSE:BEG) could experience strong and sustained demand for its services, driving its share price higher.

This AIM company provides insolvency services and other support for troubled companies. Its latest research released on Friday (24 January) showed “[an] historic jump in the number of firms in critical financial distress“.

According to Begbies, the number of UK firms in ‘critical’ financial distress leapt 50.2% between quarters three and four, to 46,853.

The £146m cap firm has proved itself adept at capturing business in difficult climates like this. Half-year financials released last month showed revenues up 16% year on year between April and September, at £76.3m, and pre-tax profit 57% higher at £4.7m.

I don’t currently think this reflected in the company’s valuation, which leaves scope for substantial share price gains in my view. It trades on a forward price-to-earnings (P/E) ratio of just 8.8 times.

Begbies’ share price could head in the opposite direction if Britain’s economy perks up. But on balance, I think the profits outlook here is pretty robust, helped by the company’s ongoing commitment to acquisitions.

Warehouse REIT

Property stocks like Warehouse REIT (LSE:WHR) have slumped in this era of higher-than-normal interest rates. There’s a danger, too, that this may persist into 2025 and beyond if inflationary pressures remain stubborn.

Greater interest rates are problematic by raising firms’ borrowing costs and depressing their net asset values (NAVs).

Yet I believe this threat is more than baked into the ultra-low valuations of many of these stocks. In the case of Warehouse REIT, the trust’s share price, at 78.2p, sits at a near-40% discount to a NAV per share of 127.6p.

Besides, the prospect of multiple interest rate reductions in the current economic and inflationary landscape remains a very realistic one. On Friday, Lloyds Bank chief executive Charlie Nunn told Sky News he expects as many as three Bank of England rate cuts this year.

There are about 50 real estate investment trusts (REITs) listed in the UK. I like Warehouse REIT because it has multiple growth opportunities to exploit, like the steady rise of e-commerce, increasing onshoring, and the evolution of supply chain management.

With around 450 tenants on its books, its rental income should remain robust too even if one or two companies struggle in the current climate. This means shareholders can look forward to more market-beating dividends.

REIT rules state that at least 90% of annual rental profits must be distributed through dividends. As a result, the forward dividend yield at Warehouse REIT is a robust 8.1%.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

The post Looking for stocks to buy? Here are 2 that I think could surge in 2025! appeared first on The Motley Fool UK.

However, these performances pale in comparison to those recorded by major US share indexes. The S&P 500 is up a whopping 27.6% since the start of January.

The continued underperformance of domestic shares means the London Stock Exchange remains packed with brilliant bargains. So I’m building a list of the best ones to buy in the New Year.

According to eToro, some 53% of its clients expect the global bull run to continue in 2025. Here’s one UK share I think could soar in value next year.

Setting the scene

Economic conditions remain tough heading into the New Year. According to the Insolvency Service, the number of company insolvencies rose to 1,966 in November, up 13% year on year.

The service expects numbers to remain grisly in 2025 too. It says that “insolvency levels have remained high throughout the course of the year [and] we anticipate them remaining so in 2025 as firms continue to carry unsustainable levels of debt.”

Moderating inflation and falling interest rates are providing support. Yet the upcoming National Living Wage hike and higher National Insurance contributions could offset these positives in the New Year.

A thriving stock

With Britain’s economy also contracting again, insolvency services providers like Begbies Traynor (LSE:BEG) should remain in high demand. Latest financials on 10 December underlined how the Alternative Investment Market (AIM) company is thriving in the current landscape.

Revenues here rose 16% in the six months to October, with sales up 11% on an organic basis. It was market leader in terms of appointment volumes, and the number of higher value insolvency cases at the group increased too.

As a consequence, adjusted pre-tax profit also rose 16% year on year.

Begbies has proved to be a reliable earnings grower over time. They’ve increased in four of the past five years, in fact. It’s a record that looks set to continue, and especially as the firm keeps splashing the cash on acquisitions.

The business snapped up White Maund Insolvency Practitioners earlier this month as part of its ongoing expansion drive. Acquisitions contributed to 5% of revenue growth in the first half.

Undervalued gem

Today Begbies shares trade on a forward price-to-earnings (P/E) ratio of 9.1 times. I think this valuation fails to reflect the firm’s solid progress and its strong balance sheet that should support further M&A.

I also think Begbies’ low rating leaves scope for a share price rebound in 2025.

City analysts expect annual earnings per share to edge 1% higher this financial year (to April 2025) before accelerating to 4% the year after. They’re numbers I believe could be upgraded in the weeks and months ahead.

A sudden upturn in the UK economy could upset Begbies’ earnings growth. Profits could also disappoint if it makes poor acquisitions. But as things stand, I’m seriously considering adding it to my portfolio.

The post 53% of investors expect a 2025 bull market! Here’s a cheap UK stock I’m considering appeared first on The Motley Fool UK.

The UK has a growing cohort of ISA millionaires. The first to publicly declare he’d achieved that status was Lord John Lee.

However, it’s no good just dreaming about becoming an ISA millionaire, what’s needed is a workable plan to aim for that goal.

Here are three ideas to build into that plan.

1. Invest in growth shares

The UK stock market regularly produces multi-bagging stocks. That means share prices that increase manyfold in value, often over a decade or so.

Recent examples include Melrose Industries, Ashtead, Judges Scientific, Halma, London Stock Exchange Group and others.

Not all earnings-growing businesses will multi-bag their share prices. However, that’s no reason to avoid trying to find some of the next potential super-growth stocks.

One or two big multi-year winners in a portfolio can make a big difference to its performance and take an investor closer to that magic million.

2. Invest in dividend-growing businesses

A big part of the overall returns from the stock market can arrive in the form of shareholder dividends. It can be wise to invest in firms that have a good record of growing their dividends each year, then reinvest the dividends into buying more shares.

That way, gains can compound in a portfolio to help edge it closer to that £1m goal.

For example, FTSE 100 company Coca-Cola HBC has a ‘clean’ dividend growth record, meaning it’s raised the shareholder payment for the past few years.

The compound annual growth rate (CAGR) of the dividend is running at just over 10%. But it’s not the only dividend-growing enterprise to focus on right now.

Another is Begbies Traynor (LSE: BEG), the business recovery, financial advisory and property services consultancy.

However, this is a much smaller outfit with a market capitalisation of just under £177m (25 March), which compares to around £9bn for Coca-Cola HBC.

Smaller outfits can be volatile. There’s also some risk because Begbie Traynor’s assets are its skilled personnel. The talent in the company could leave at any time. Nevertheless, it can be a good idea to diversify a portfolio by company size including large-, mid- and small-caps.

One reason for that is smaller firms often deliver higher growth rates. Indeed, Begbies Traynor is another with a clean dividend record. The CAGR of the shareholder payment is running near 9.63%, on par with Coca-Cola HBC.

Meanwhile, with the share price in the ballpark of 111p, the forward-looking dividend yield is just below 3.8% for the trading year to April 2025. That level of income compares well to the average of the wider stock market running near 4%.

3. Cut losses

Despite thorough research and an investor’s best efforts, some stock investments won’t work out as planned.

Investors can often improve their returns if they systematically cut losses along the way. For example, Lord Lee is on record as saying he sells a stock when the price moves 20% against him. Other investors use even tighter limits.

Investing with a long-term perspective can work well for the winners. But so can impatience with the losers!

The post 3 ideas to help investors aim for a million-pound Stocks & Shares ISA appeared first on The Motley Fool UK.

Begbies Traynor Group

Insolvency specialist Begbies Traynor Group (LSE:BEG) has grown dividends for six straight years, including a 9% year-on-year hike in the last financial period (to April 2023). This is thanks to its excellent cash generation and impressive acquisition-based growth strategy.

City analysts shareholder payouts to keep rising strongly, too. So investors can enjoy healthy dividend yields of 3.6% and 3.8% for financial 2024 and 2025.

Begbies’ counter-cyclical operations make it ideal for today’s current tough conditions. Demand for its services has peaked as the number of companies in severe financial distress has unfortunately surged.

Latest research from the AIM-listed company shows that the the number of businesses experiencing trouble is picking up momentum, too. Those close to financial collapse soared 25.9% between the third and fourth quarters of 2023, to 47,000. There were also 539,900 firms in ‘significant’ financial distress in quarter four, up 12.9% over the same time period.

Begbies — whose revenues jumped 13% in the six months to November — is expanding its headcount to capitalise on these conditions, too. While an unexpected economic upturn could sap this momentum, right now the business looks in great shape.

And its strong balance sheet gives it extra scope to continue growing business through acquisitions. Last month it agreed to acquire property auctions business SDL Property Auctions for an initial consideration of £2.5m.

BAE Systems

Defence companies like BAE Systems (LSE:BA.) can also be great growth dividend stocks to buy. Their high-tech products tend remain in strong demand at all stages of the economic cycle, giving them the profits and the cash flows to increase shareholder payouts over time.

Unlike smaller industry operators, BAE Systems also has a deep balance sheet that it can use to pay large dividends. This blend of stability and plentiful resources has given it the means to grow annual dividends for many years, as can be seen in the chart below.

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Project delays and lumpy contract timings are a constant threat for defence companies and their profits. Yet I think this is unlikely to hamper further dividend growth at this FTSE 100 firm, and City analysts agree.

Shareholder payouts are tipped to rise again for both 2023 and 2024. Consequently BAE Systems shares carry a decent 2.7% forward dividend yield.

Investors can get better near-term dividend yields with other Footsie stocks. But there may be few better to deliver payout growth over the next decade. NATO’s military exercises later this week — which will be the largest since the Cold War — underline the growing importance countries are placing on military preparedness as geopolitical worries mount.

BAE Systems’ expertise across multiple product segments, combined with its critical supplier status with the US and UK, means it should win massive amounts of business in this climate. Its record order backlog of £66.2bn as of last June underlines its massive growth potential.

The post 2 dividend growth stocks I’d buy in my ISA for passive income in 2024! appeared first on The Motley Fool UK.

Researching all of these would take a considerable amount of time. But one that’s already familiar to me is Begbies Traynor (LSE:BEG).

It specialises in restructuring and insolvency services. And given what it does, I think it’s well placed to cope with an economic downturn.

Doom and gloom

If the economy contracted in the final quarter of 2023 (which it ay have done), it means the UK has entered a technical recession.

That’s because a recession is defined as two successive quarters of falling Gross Domestic Product (GDP).

We won’t know until 15 February whether this is the case. But whatever the number, it’s clear that the economy is struggling at the moment.

A success story

Looking back over the past five years, Begbies Traynor has been growing steadily, which has helped its share price gain over 80%.

Both revenue and adjusted earnings per share have more than doubled.

Since 2020, it’s bought businesses that contributed £38m (31%) of turnover during the year ended 30 April 2023.

And the company hopes to continue this growth trajectory by acquiring other firms.

A worsening picture

But the UK hasn’t been in recession for five years, suggesting that the company isn’t totally reliant on company failures.

Indeed, 20% of revenue is earned from what it calls “pro-cyclical” activities. These include property valuations, corporate finance and transport planning.

However, the pandemic did cause many businesses to go bust. And it severely weakened numerous others.

Figures for December 2023 have yet to be finalised, but based on data for October and November, I think it’s probable that the final quarter of the year will see the highest level of corporate failures, of the past five years.

Despite each being a tragedy for those involved, this bodes well for Begbies Traynor.

But with 80% of revenue earned from “defensive activities” this could also be its Achilles heel.

According to the Bank of England’s latest survey of economists, the average expectation is for GDP growth of 0.6% in 2024, and 1.4% in 2025.

Although far from spectacular, if these predictions are correct, the number of corporate failures is likely to fall.

Cautious optimism

And any reduction in earnings is likely to have a significant impact on the share price.

That’s because, like most firms providing professional services, there’s little substance to its balance sheet.

Of its net assets at 30 April 2023, intangibles accounted for 87%.

These are non-physical things including the premium paid on the businesses that it’s acquired.

They’re difficult to value — and unlikely to generate very much cash — should the company experience its own financial problems and need to raise cash quickly.

Encouragingly, I think the company will pay a dividend of 4.1p for its 2024 financial year. This means its shares are currently yielding 3.6%, which is impressive for a stock that’s listed on the Alternative Investment Market.

Overall, I think Begbies Traynor is likely to do well given the current economic backdrop. Unfortunately, I don’t have the cash available to include its stock in my ISA.

The post One small-cap stock I think could thrive in a recession appeared first on The Motley Fool UK.