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B.P. Marsh & Partners 

What it does: B.P. Marsh is a specialist private equity investor in early-stage financial services businesses. 

By G A Chester. B.P. Marsh & Partners (LSE: BPM) takes minority equity stakes in selective early-stage financial services businesses. It aims to exit with a good profit further down the line. It creates value for its own shareholders principally by increasing the company’s net asset value (NAV). It has a long history of double-digit annual NAV growth. 

The shares are trading at a 24% discount to NAV. The company’s also recently agreed a £51m sale of its stake in one investee company. Management will recycle much of this into new investments. But it also intends to pay shareholders a £1m special dividend, and dividends of £2m a year in 2024, 2025 and 2026. It’s earmarked a further £6m return, likely through share buybacks. 

There’s a risk the sale doesn’t go through (it’s subject to regulatory approvals). Either way though, I think the AIM stock’s many years of NAV growth, and the discount shares, make for an attractive opportunity. 

G A Chester does not own shares in B.P. Marsh. 

SRT Marine Systems

What it does: SRT Marine Systems is a global leader in maritime domain awareness technologies, products and systems.   

By Ben McPoland. SRT Marine Systems (LSE: SRT) is growing rapidly due to the ongoing global adoption of the automatic identification system (AIS). This is a tracking system that transmits a ship’s position and identity, enabling the precise monitoring of all marine traffic. SRT is a global leader in AIS systems and products.

Its customers include the United States Coast Guard and the Panama Canal. Yet the firm estimates that only about 500,000 vessels out of 26m currently have an AIS device, with thousands of the world’s ports and coast guards still to fully digitise their operations.

One risk here is the firm has been posting losses as it invests heavily in its technology. But growth last year was spectacular, with revenue rocketing 273% year on year to £30.5m. Its forward systems order book is up to £160m. And for FY 2024, brokers are forecasting 232% revenue growth (£70.9m), with a profit of £7.4m and earnings per share of 3.80p.

As I write, a current price of 47p per share equates to an attractive forward P/E ratio of 12.5 for the AIM stock.

Ben McPoland does not own shares in SRT Marine Systems.  

Warpaint

What it does: Warpaint sells affordable branded cosmetics under the brand names of W7 and Technic to major retailers and via its own website.

By Harshil Patel. Warpaint (LSE:W7L) is growing fast. It experienced “significant” growth across all its geographical areas. For the first half of this year, it reported pretax profit of £6.2m, up 77% from £3.5m the year before.

There’s much to like about this London-based cosmetics business. First, it’s still run by its founders. Founder-led businesses are typically entrepreneurial and carefully managed, in my opinion.

Next, its affordable range of cosmetics is proving popular in a world hit by higher costs elsewhere. By owning the brand and operating a small team, Warpaint has been able to keep its cost low and pass savings to customers.

Finally, there’s ample opportunity for growth. It aims to turn its W7 and Technic products into global brands. And so far, it’s making excellent progress.

Bear in mind that the AIM stock operates in a competitive space. And it’s surrounded by much larger players that have giant marketing budgets.

That said, its nimble operation has allowed it to become a highly-profitable and cash-generating business.

Harshil Patel does not own shares in Warpaint.

The post Best AIM stocks to consider buying in October appeared first on The Motley Fool UK.

Today I want to look at three AIM-listed companies that I think have great potential as long-term investments.

NWF shares: a 25-year track record

Small-cap NWF (LSE: NWF) is a distribution business that supplies fuel oils, animal feed, and stores, and delivers food for supermarkets. NWF flies below the radar for many investors, but has delivered reliable profits and growth for more than 20 years.

The company first floated on the AIM market in 1995 and has expanded steadily. Since 2017, annual profits have risen from £5.5m to £8.4m.

NWF has also increased its dividend every year for the last 25 years. That’s a fairly rare achievement, even among top FTSE 100 firms.

I can see a few concerns. Demand for heating oil and road fuels could one day start to fall as fuel users adopt electric power. Another risk is that many of the group’s operations run on fairly low margins — strong management is essential.

However, I think these risks are reflected in the share price. The business currently trades on a price-to-earnings (P/E) ratio of 12, with a well-covered 3.4% dividend yield. I view the shares as a long-term buy at this level.

A quality, family-owned business

My next pick is timber merchant James Latham (LSE: LTHM). This business has a market cap of £255m and is one of the largest distributors of timber and panels in the UK. The business was founded by the Latham family 260 years ago, and remains under family management today.

Business boomed during the pandemic construction boom, but profits are expected to drop back somewhat this year, mainly due to inflation.

So far, the company says that demand has remained stable, except for builders merchants, where demand has slowed. There’s obviously a risk the UK could suffer a worse recession than expected, but Latham’s long history and £36m cash balance give me confidence the company will ride out any storm.

The shares are currently rated on a forecast P/E of nine, with a 2.6% yield. Given the group’s long record of growth, I think this could be a buying opportunity.

A specialist investor

B.P. Marsh & Partners (LSE: BPM) is not a household name, but it’s a well-known expert in its field. The company, which was founded by chairman and 40% shareholder Brian Marsh, invests in small insurance businesses.

It’s a specialist operation, for sure, and there’s not much I can do to evaluate the company’s investment decisions. However, I think B.P. Marsh’s track record speaks for itself.

Over the last 10 years, the group’s net asset value per share has risen from 189p to 445p. That’s equivalent to an average annual growth rate of 9%. I think that’s a solid achievement for a period that included the pandemic.

This business is led by an expert team, with a long record of success in a specialist niche. At a share price of 325p, the shares are trading at a big discount to their book value. I think this AIM share could deliver solid long-term returns.

The post 3 top AIM shares to buy for retirement appeared first on The Motley Fool UK.

Zaven Boyrazian: Bioventix

Bioventix (LSE:BVXP) is a specialist producer of monoclonal antibodies. These are an essential ingredient for performing blood tests when diagnosing a patient. It’s undoubtedly a niche product but remains in high demand as revenues have consistently grown by double digits over the last five years.

Recently, the stock has taken a hit as hospitals have prioritised spending in areas dealing with Covid-19. Consequently, the group’s bottom line has suffered for it. But, with the vaccine rollout making good progress and the world adapting to the pandemic environment, these disruptions may soon be coming to an end.

As such, I think this could be an excellent addition to my portfolio.

Zaven Boyrazian does not own shares in Bioventix.

Ed Sheldon: Calnex Solutions

My top British small-cap stock for January is Calnex Solutions (LSE: CLX). It’s a leading provider of testing and measurement services to the telecommunications industry.

Calnex looks well placed to benefit from the global telecommunication industry’s upgrade to 5G technology. 5G is ultimately the key to many of the exciting new technologies we keep hearing about such as self-driving cars and remote surgery. Networks will need to be tested thoroughly in order for these kinds of technologies to go mainstream.

One risk to consider here is the ongoing semiconductor shortage. This could cause disruption. However, with the stock trading on a P/E ratio of less than 25, I think the risk/reward proposition is favourable.

Edward Sheldon owns shares in Calnex Solutions.

Roland Head: Finsbury Food

My small-cap pick for January is bakery firm Finsbury Food (LSE: FIF). This group supplies supermarkets and also sells under its own brands.

Finsbury has been going through a turnaround period, but now appears to be trading well. Earnings rose by 15% last year and brokers expect growth of 26% for the year ending 26 June.

Rising costs are a concern and supermarkets will always be tough customers. But I’m impressed by Finsbury’s recent performance. I think the stock still looks good value at under 10 times forecast earnings. I hold Finsbury shares and would buy more.

Roland Head owns shares of Finsbury Food.

Rupert Hargreaves: Michelmersh Brick Holdings

My top small-cap is Michelmersh Brick Holdings (LSE: MBH). The specialist brick manufacturer looks set to report a bumper year of growth for 2021, which could underpin further development in the year ahead.

The firm has no debt and a cash-rich balance sheet, suggesting that it has the financial headroom to support its growth ambitions this year. There is also room for shareholder returns. Michelmersh currently supports a dividend yield of 2.5%.

Inflation and competition are the two primary risks the business will have to overcome going forward. Despite these challenges, I would buy this small-cap stock today.

Rupert Hargreaves does not own shares in Michelmersh Brick Holdings.

G A Chester: B.P. Marsh & Partners 

B.P. Marsh (LSE: BPM) is a specialist investor in unquoted, early-stage financial services businesses that are in need of growth capital. 

Marsh looks for strong management and business plans. It takes a minority equity stake (typically 20%-40%), and aims to be a supportive, long-term partner. It works with management to grow the business’s value, ultimately towards a profitable exit via a public flotation, trade sale or other route. 

It has a long history of delivering value for shareholders through net-asset-value (NAV) appreciation and dividends. The shares are currently trading at a 20%+ discount, and I’m expecting a further NAV uplift in an early-February trading update. 

G A Chester has no position in B.P. Marsh & Partners.

Niki Jerath: Zephyr Energy 

For January, I’m looking at Zephyr Energy (LSE:ZPHR). This has oil and gas interests in Utah, Colorado and North Dakota.  

As oil and gas prices increased during 2021, its shares surged by over 600%. Although year-to-date, the stock is down around 2% due to worries about the Omicron variant. 

That said, its Paradox Basin project, in Utah, shows a lot of promise for 2022 and it has a pending deal in North Dakota, which was delayed last year. 

I could be wrong, but if the transaction goes ahead, I expect the share price to see a jump. 

Niki Jerath does not own shares in Zephyr Energy

Royston Wild: Card Factory 

I think Card Factory (LSE: CARD) is a small-cap stock whose eye-catching all-round value merits serious attention. The card and greetings retailer trades on a forward P/E ratio of below 6 times. It sports a mammoth 6.1% dividend yield as well. 

I like Card Factory for a number of reasons. Its strategy of selling products at low prices puts it in good shape to ride the value retail revolution. Recent investments in digital will allow it to make money during the e-commerce boom. I also like Card Factory’s focus on a more-defensive part of the retail market. We don’t stop celebrating birthdays, Christmas and other special occasions when times get tough, right? 

Royston Wild does not own shares in Card Factory.

Paul Summers: Cake Box Holdings

At 25 times earnings, shares in Cake Box Holdings (LSE: CBOX) certainly aren’t cheap. That said, the company’s fundamentals help justify this valuation. Returns on capital and operating margins are consistently high and there’s net cash on the balance sheet. CEO Sukh Chamdal also owns almost 25% of the company, which should mean that his interests are aligned with those of other investors.

Having already climbed 70% in the last year, share price growth may moderate in 2021. However, this looks like the sort of quality minnow I’d be comfortable holding a stake in for years rather than months.

Paul Summers has no position in Cake Box Holdings

Andy Ross: Property Franchise Group 

Shares in Property Franchise Group (LSE: TPFG) bring together an attractive combination of growth and income. Over three years the shares have gone from 120p to around 314p. Historic share price growth then has been good. The dividend yield is currently around 3%, but with decent levels of dividend cover, as well as earnings growth, I’m sure the dividend can keep growing.  

As a franchising operation, the business has high operating margins and returns on capital. For me, this makes Property Franchise Group a top British small-cap stock and I’ll likely be adding more, especially if the share price dips again.  

Andy Ross owns shares in Property Franchise Group.

The post Top British small-cap stocks for January 2022 appeared first on The Motley Fool UK.

Rupert Hargreaves: Braemar Shipping Services 

Braemar Shipping Services (LSE: BMS) is an international shipbroker and shipping services provider. Its exposure to seaborne trade suggests the company is highly leveraged to the global economic recovery. Indeed, analysts reckon group earnings per share will increase 40% this fiscal year. 

Based on these projections, the stock looks cheap trading at a forward price-to-earnings (P/E) multiple of 12.8. 

The company’s valuation and growth potential are the reasons why I’d buy Braemar as a recovery stock in July. 

That said, if the economic recovery fails to live up to expectations, Braemar may be one of the first to suffer. As such, this investment has quite a high level of risk. 

Rupert Hargreaves does not own shares in Braemar Shipping Services.

Edward Sheldon: Keystone Law

My top small-cap stock is Keystone Law (LSE: KEYS). It’s an innovative, platform-based law firm that’s disrupting the UK legal industry. Last year, it won ‘Law Firm of the Year’ at The Lawyer Awards.  

Keystone has generated strong revenue and profit growth in recent years and I expect it to continue doing so in the years ahead. In the short term, the company should benefit as the UK reopens and economic activity picks up. In the long run, the expansion of its platform should drive top- and bottom-line growth higher.

One thing to be aware of is that the stock’s valuation is quite high. This adds risk to the investment case. Overall, however, I think the risk/reward proposition here is attractive.

Edward Sheldon owns shares in Keystone Law

Harshil Patel: Cake Box Holdings 

Cake Box Holdings (LSE:CBOX) is a specialist retailer of fresh cream cakes. It’s a franchise business and delivers most of its growth by opening new stores.  

So it’s encouraging to see a strong pipeline of new locations. It currently has 157 franchised stores and another 18-24 are expected this year. It’s also trialing several kiosks with a national supermarket. 

At some point, locations could become saturated and an optimum number of stores will be reached. That said, there’s currently plenty of eligible franchise applicants and potential locations to keep Cake Box growing.  

Overall, Cake Box is a quality company led by entrepreneurial management. I like that it offers double-digit earnings growth and strong margins. Its balance sheet looks strong and even offers a well-covered dividend. 

Harshil Patel owns shares in Cake Box Holdings.

Tom Rodgers: SCS

With home refurbishment markets booming, sofa manufacturer SCS Group (LSE:SCS) is my top small-cap stock for July 2021. The £116m market cap firm has produced operating profit growth of 30.6% in the last 12 months as sales and profits surge post-lockdown. Dividends are expected to return in force, as high as 12p per share for 2022, offering substantial future income even after a 40% rise in the share price in the year to date. A forward P/E of 11 times earnings is cheap and I see more upside for July and beyond.

Tom has no position in SCS at time of writing.

G A Chester: B.P. Marsh & Partners 

Founded in 1990, and still founder-led, B.P. Marsh & Partners (LSE: BPM) is a specialist private equity investor in early stage financial services businesses. There’s higher risk with fledgling businesses, but the company has an impressive long-term record of growing its net asset value (NAV). It reported another year of growth last month, with NAV up £13m to £150m. 

The stock is currently priced with a market capitalisation around £120m. In other words, at a 20% discount to NAV. Given the company’s track record of delivering strong shareholder returns (including dividends), and the growth prospects of its investee businesses, I think there’s exceptional value on offer here. 

G A Chester has no position in B.P. Marsh & Partners.

Zaven Boyrazian: Bioventix 

Bioventix (LSE:BVXP) is a biotech company that manufactures specialised antibodies for blood testing. It’s a niche product. But remains an essential ingredient for diagnosing almost every type of disease – including Covid-19.

The firm generates revenue from direct sales to in-vitro diagnostic companies and royalties from any product developed using its propriety material. The latter has yet to evolve into a substantial source of income. But it does provide the facility for a recurring revenue stream in the future.

Bioventix operates in a highly regulated industry. This undoubtedly adds some operational risks. Suppose the firm or any of its royalty-generating customers fail to comply with regulations. In that case, its reputation and income could be compromised. But personally, I think the potential reward is worth the risk.

Zaven Boyrazian does not own shares in Bioventix.

Roland Head: Vertu Motors

Car dealership group Vertu Motors (LSE: VTU) is one of the UK’s largest motor retailers, with brands including Bristol Street Motors. Vertu says that demand for used cars is “exceptional” at the moment. The latest update from the company revealed strong trading and triggered an upgrade to profit forecasts.

The main risk flagged by the company is that the global chip shortage will cause delays to new car deliveries. However, Vertu’s share price is covered by the value of the group’s property portfolio, and the business currently trades on just seven times forecast earnings. Brokers are also forecasting a useful 3.6% dividend yield this year.

In my view, Vertu looks like a good, cheap, small-cap stock. I recently added the shares to my portfolio.

Roland Head owns shares of Vertu Motors.

Paul Summers: SDI Group

Having multi-bagged over the last year, shares in shares in scientific product maker SDI Group (LSE: SCI) look expensive. However, I suspect they could eventually be worth a lot more thanks to an acquisition-focused growth strategy similar to that of FTSE 100 top stock Halma.

There could even be more upside in July. The company stated in May that it would exceed previous estimates on FY21 revenue and adjusted pre-tax profit (given in February). I wonder if trading since then, combined with the lifting of restrictions, will lead management to also upgrade its FY22 guidance later this month.

Paul Summers has no position in SDI Group or Halma.

Christopher Ruane: M&C Saatchi

Things have been looking up for the previously troubled advertising small-cap stock M&C Saatchi (LSE: SAA).

The shares are up 156% already over the past year. For a company whose survival was in question at one point, that is impressive. But I see further possible gains ahead. The advertising market generally is buoyant. M&C Saatchi is poised to benefit from that. The company recently lifted its forecast for the year.

The company’s reputation remains tarnished, though, which could act as a dampener on growth.

Christopher Ruane does not own shares in M&C Saatchi.

Royston Wild: Begbies Traynor 

The British government’s furlough schemes have helped keep a lid on insolvency rates during the pandemic. But with these financial support programmes set to end, I think now could be a good time to invest in Begbies Traynor Group (LSE: BEG). 

Indeed, buying this UK share before full-year results are released on Tuesday 20 July could be a very good idea. Despite a depressed insolvency market Begbies Traynor said in May that full-year revenues would grow ahead of market expectations following a strong fourth-quarter performance. News that trading has remained robust in the new financial period (to April 2022) could help lift the small cap again following recent share price weakness.

At current prices Begbies Traynor trades on a rock-bottom forward price-to-earnings (PEG) ratio of 0.4. This provides plenty of scope for a fresh move higher.

Royston Wild does not own shares in Begbies Traynor. 

The post Top small-cap stocks for July appeared first on The Motley Fool UK.

I think this business is hugely undervalued and has a track record of building value for its investors. Moreover, it could report tremendous growth this year, due to sector tailwinds.

Growth ahead

The stock is B.P. Marsh & Partners plc (LSE: BPM). As penny stocks go, shares in this company look expensive. They’re currently trading at around £3.20p.

Still, penny stocks don’t necessarily have to be worth less than £1. Technically, any small public company with a low share price can qualify. With a market capitalisation of £118m, B.P. Marsh is a small public company.

This firm operates as a private equity business. It invests in insurance and financial companies and helps them grow, providing further funding if needs be.

This strategy has produced outstanding results over the past 16 years. Since 2005, the firm’s net asset value has risen from £22m to nearly £150m. That’s a compound annual growth rate of 13%. Over the same time frame, the FTSE All-Share has returned around 6.3%, including dividends.

B.P. Marsh has an international presence and investments worldwide. These two traits are relatively unique among penny stocks. For example, in June 2020, the firm acquired a 30% shareholding in Sage Program Underwriters, which provides workers compensation insurance to niche industries, including ground delivery and field sport sectors, in the US.

Acquired in June for around £200k, this stake was worth £1.2m by January, according to the company. The higher valuation was based on Sage’s explosive growth last year.

In total, B.P. Marsh owns stakes in nearly 20 different insurance brokers and related companies. It also owns a significant stake in wealth manager LEBC Holdings.

The insurance industry is currently experiencing one of the most bullish markets over recent years. Insurance prices across markets are increasing rapidly. This implies the sector is set for a bumper year in 2021.

I think this tailwind could drive the valuations of B.P. Marsh’s investee businesses significantly higher throughout the year. This could lead to further growth in the company’s net asset value and its share price.

Penny stocks and risk

As a small business, there are risks associated with the stock that may not apply to larger companies. The company’s founder owns around 40% of its outstanding shares, which means he has a significant level of control over the corporation.

What’s more, valuing private corporations can be highly subjective. As such, there’s no guarantee the firm will be able to sell its investee businesses for the valuation it has booked on the balance sheet. This could have an impact on net asset value.

Despite these risks, I think this company is one of the best penny stocks to buy now. Its net asset value is 416p, compared to a share price of 320p.

That implies the stock is trading at a discount to the net asset value of 23%. I think this looks too cheap, especially considering the firm’s value creation over the past 15 years. That’s why I’d buy more of the stock for my portfolio today.

The post Penny stocks: here’s 1 I’d buy more of today appeared first on The Motley Fool UK.

This global software business has built a reputation for its ability to help customers utilise new technology and bring struggling IT infrastructure systems up-to-date. For many companies, the cost of keeping up to date with the fast-moving tech world is more than they can afford, so the solutions Micro Focus offers have seen strong demand. Between 2012 and 2014 the group’s revenue expanded a total of 218% thanks to organic growth and bolt-on acquisitions.

However, recently it seems as if the group has fallen off the rails following its enormous acquisition of HP Enterprise’s software business. 

A bad deal 

This $8.8bn deal was supposed to transform Mirco Focus, but instead, management has struggled to integrate the acquired entity and now this deal is taking up so much time the core business is suffering. According to the company’s first-half results, which were published at the beginning of this year, for the six months to October overall revenue grew by 80% but the HP operations (which now account for just over two thirds of revenue) grew at the bottom end of expectations while the legacy Micro Focus business saw sales decline by 7%.

It looks to me as if Micro Focus has bitten off more than it can chew with the HP deal and earnings might continue to suffer for the foreseeable future. With this being the case, even though the shares trade at a relatively attractive forward P/E of only 13.6 and support a dividend yield of 3.9%, I would avoid the company for the time being until organic growth returns.

Proven record of returns for investors

One business I’m more positive on the outlook for is small-cap private equity company B.P. Marsh (LSE: BPM). 

This firm buys stakes in other financial services businesses, mainly located in the insurance sector, sits on these holdings and eventually sells them, usually for a substantial profit. Over the years the company has proven itself to be incredibly adept this strategy. Between its founding in 1990 and January 2017, net asset value has grown at a rate of 11.4% per annum. Over the same period, a similar investment in the FTSE 100 produced an annualised return of just under 5% excluding dividends.

Talking of dividends, B.P. Marsh has always returned any excess cash to investors via dividends and today announced a 26% increase in its full-year distribution to 4.8p giving a yield on the shares of 1.9%.

Deep discount

The most attractive quality of the stock is currently its valuation. Even though it has grown net asset value per share at a double-digit rate for the past two-and-a-half decades, the shares now trade at a deep discount to net asset value. Specifically, the company reported that at the end of July 2017, net asset value had risen to 304p per share, nearly 20% above the current share price.

So overall, B.P. Marsh is a highly successful private equity business that’s currently trading at a discount to net asset value. That’s why I believe the stock is a better buy than struggling tech group Micro Focus.

The post 1 cheap small-cap I’d buy over this expensive FTSE 100 growth stock appeared first on The Motley Fool UK.