Retiring with £2.3m in the bank

The average return generated from the stock market varies depending on what investments are made. But here in the UK, that return’s typically sat between 8% for large-caps and 10% for small-caps annually over the last 30 years.

For someone who’s just turned 30 and has no savings, securing that upper rate of return with a £500 monthly investment will grow to £2.3m when compounded over 37 years. And for those earning enough to maximise their annual ISA allowance (£1,667 a month), their retirement wealth could be a staggering £7.8m! And unlike when using a Self-Invested Personal Pension (SIPP), that money can be withdrawn all at once with zero taxes to pay.

Of course, in practice, consistently earning a 10% annual return isn’t easy. In fact, even when relying on an index fund, some years will be far better than others. And similarly, over a 37-year time span, chances are an investment portfolio will go through multiple corrections and crashes that could leave investors with less money than expected come retirement.

Nevertheless, even earning half of this amount still leaves someone with over £1m in the bank – more than enough to live comfortably by today’s standard.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Earning a 10% return with small-caps

Investing in small-cap stocks opens the door to superior returns. But the small size of these businesses can also make them far more volatile and sensitive to external disruptions.

In other words, aiming for a 10% return with this class of equities is a riskier endeavour compared to investing in boring FTSE 100 companies. Nevertheless, there is a wide range of promising opportunities to capitalise on right now.

One stock that might have the potential to outperform in the long run is dotDigital Group (LSE:DOTD). The digital marketing platform allows small- and medium-sized businesses to automate their marketing campaigns and use artificial intelligence (AI) predictive analytics to maximise engagement.

It’s a tool that’s proving particularly popular among e-commerce stores, resulting in the average revenue per customer quadrupling over the last decade.

Unfavourable product mix with SMS contracts has resulted in margin compression. However, with management refocusing the mix toward maximising profitability, margins are expected to start recovering in 2025. And with the fundamentals now catching up to its previously lofty valuation, the stock’s recent flat performance may soon improve.

What could go wrong?

Seeing new and existing customers spend more money each year is an encouraging sign. As is the group’s impressive free cash flow generation, something that’s rare for a small-cap stock. However, that doesn’t make it a guaranteed winner.

Despite my bullish stance, there are still some notable risks and challenges to consider. The digital advertising market is highly competitive with a lot of rivals sitting on big cash war chests. And so far, the group’s progress regarding its expansion into international markets like Japan have been underwhelming.

Nevertheless, if dotDigital can overcome these hurdles, the investment returns could be a further-research candidate as it may prove helpful in growing a Stocks and Shares ISA towards millionaire territory.

The post If a 30-year-old puts £500 a month into a Stocks and Shares ISA, they could have £2.3m at retirement! appeared first on The Motley Fool UK.

Bioventix

What it does: Bioventix specialises in the supply of high-affinity monoclonal antibodies for applications in clinical diagnostics

By Paul Summers. There’s not an abundance of quality AIM-listed companies. One exception is arguably Bioventix (LSE: BVXP). The Farnham-based developer and commercial supplier of monoclonal antibodies consistently posts some of the highest operating margins in the entire UK stock market! 

All that said, investor confidence has been knocked after the company disclosed it had overstated revenues. Even though the miscalculation appears to be due to an error on the part of one of its customers, this has pushed the shares down significantly in value as a result of the company now failing to hit analyst expectations.

However, I reckon now is a great time to consider loading up. Bioventix remains a leader in its niche market. The current valuation is also significantly below the firm’s five-year average. While never guaranteed, the dividend yield currently stands at 5.8% and the balance sheet looks very healthy indeed. 

Paul Summers has no position in Bioventix.

dotDigital

What it does: A digital marketing enterprise helping businesse monetise their audiences and improve customer experience.

By Zaven Boyrazian. When it comes to digital marketing, dotDigital (LSE:DOTD) isn’t short on competition. Yet, as economic conditions have improved, the firm has continuously maintained double-digit revenue and profit growth that seems to have gone ignored by investors.

The small-cap enterprise now generates an average of £1,916 per month from each of its customers, almost double the amount compared to five years ago. And a big part of the rising spending trends is courtesy of management’s investments into its technology, including an AI prediction engine to maximise customer conversion through personalisation.

It’s a powerful tool that few of its competitors provide. And with new marketing channels like WhatsApp being added into the mix, dotDigital is slowly becoming a one-stop-shop for everything that is marketing.

Larger rivals like Hubspot remain a serious threat. However, with larger customers like Mountain Warehouse and British Airways joining the client list, this AIM-listed enterprise seems to be taking the right steps.

Zaven Boyrazian owns shares in dotDigital.

Serabi Gold

What it does: Serabi Gold owns a series of mining projects in Brazil, including the Palito and Coringa complexes.

By Royston Wild. Precious metal stocks like Serabi Gold (LSE:SRB) continue to go from strength to strength. This yellow metal miner is up a stunning 39% in the year to date, propelled by gold prices rising through the $3,000 per ounce marker for the first time.

With this key psychological and technical level taken out, metal values — and with them the prices of Serabi and its peers — could strengthen further.

The African miner’s low valuation certainly leaves room for further gains. Today it trades on a forward price-to-earnings (P/E) ratio of just 3.4 times.

I don’t just believe Serabi Gold is a great stock to consider buying for the current bull run, however. Through a blend of organic growth and acquisitions, the business has plans to turbocharge earnings by lifting production to 200,000 ounces a year over the next few years.

That’s up from the 60,000 ounces planned for 2026. Remember, though, that mining is risky business, and any setbacks at the exploration, production or mine development phases could prove disastrous for profits projections, and with it the share price.

Royston Wild does not own shares in Serabi Gold.

Tristel

What it does: Tristel makes and distributes chlorine dioxide wipes that are used for disinfecting hospital environments.

By Stephen Wright. Shares in Tristel (LSE:TSTL) have fallen almost 30% since the start of the year. I think that’s a lot for a company that still has a lot of potential. 

Tristel is in the process of expanding to start selling its (patented) chlorine dioxide wipes across the Atlantic. But getting into the US has proved challenging.

With a premium product, there’s always a danger of customers being unwilling to move away from established practices. And that’s the risk with the stock.

I think, however, the potential rewards are worth it. Tristel has been following up its ultrasound disinfectant system with a product for ophthalmic devices and this looks promising to me.

If the company can make a breakthrough on this front, I think there could be huge growth ahead. If not, there’s a dividend with a 4.6% yield to fall back on.

Stephen Wright owns shares in Tristel.

YouGov

What it does: YouGov is a market research and data analytics company.

By Alan Oscroft. In a first-half update on 31 March, YouGov (LSE: YOU) said it only “expects modest revenue growth for the rest of the financial year as trading conditions remain challenging reflecting the current macro-economic backdrop.“

The company is still searching for a new permanent CEO after Steve Hatch left by mutual agreement in February. And when interim CEO Stephan Shakespeare talks about a “resilient” performance, and he mentions “considerable change” and “execution challenges,” then we can tell things have been a bit tough.

But the company still says it should meet market expectations for the full year. And it expects operating profit to be balanced more equally between the two halves.

There are clearly risks here, and the share price could remain depressed for some time yet. But analysts expect positive earnings per share (EPS) this year, and then an 80% boost by 2027 that would take the price-to-earnings (P/E) ratio down to only about eight.

Alan Oscroft has no position in YouGov.

The post 5 AIM stocks to consider buying for the long term appeared first on The Motley Fool UK.

However, the UK has its own collection of companies that are poised to thrive and rarely make the headlines. As a result, they trade at far cheaper valuations, offering far greater upside potential. And right now, two AI shares have caught my eye.

AI-powered digital marketing

Marketing techniques have evolved drastically over the last decade. With data mining becoming far more effective, personalised advertising’s gone from a fringe technology to an industry standard. And now, leading digital marketing platforms like dotDigital (LSE:DOTD) are leveraging AI to take personalisation to the next level.

Beyond the obvious applications of AI to create more compelling marketing copy, dotDigital has built an AI model with predictive capabilities.

Businesses leveraging its CXDP platform can now use AI-powered projections to identify which customers are most likely to spend, how much money they’ll spend, and even when this spending’s most likely to occur.

The forecasts go even further to approximate how many orders someone will place over their lifetime, along with the expected churn rate to predict a customer’s lifetime value.

The end result is companies can far more effectively allocate marketing budgets while simultaneously improving customer experiences. Of course, dotDigital isn’t the only business innovating its marketing platform with AI. And there’s a lot of deep-pocketed competition to fend off.

Nevertheless, given that the average revenue per customer has already increased by 30% since the AI model launched, I remain optimistic. That’s why I’ve already added dotDigital to my portfolio.

A new AI-driven device cycle

In the world of building and maintaining digital infrastructure, Softcat’s (LSE:SCT) been a stellar performer. As more businesses seek to automate and digitalise operations, the IT reseller has had little trouble attracting customers. And its performance has been reflected in its share price growing by over 40% in the last two years.

Yet, this momentum could be just the tip of the iceberg. Management’s been making some aggressive investments into expanding its talent pool as well as training existing employees in preparation for a new AI spending cycle in 2025.

We’ve already seen the explosive results of AI spending in the US. And now that IT upgrades are making their way to the UK, Softcat could soon be sent flying. At least that’s what management’s double-digit gross profit growth forecast would suggest.

With the shares trading at a price-to-earnings ratio of 28.7, there’s no denying that Softcat’s quite an expensive-looking investment. Yet, this premium pales in comparison to the likes of Nivida, which stands at 64 times the earnings. And if management’s projections are accurate, then the valuation starts to look far more reasonable.

Needless to say, expectation-driven stock prices carry a lot of risk. Should performance fall short of market forecasts, then investors can expect a significant amount of volatility on the horizon. And given that Softcat isn’t the only business chasing this opportunity, if competitors prove more effective, this could very easily become a reality.

Having said that, Softcat’s impressive track record makes me cautiously optimistic. That’s why I’m carefully considering adding these shares to my growth portfolio this month.

The post What are the best under-the-radar UK AI shares for me to buy before 2025? appeared first on The Motley Fool UK.

Even after enjoying a rally so far this year, the British stock market’s still filled with terrific buying opportunities. So if I had a £1,000 lump sum right now, here’s how I’d go about finding them.

Start at the portfolio

My investing journey started over a decade ago. And during that time my portfolio’s grown and changed. As such, finding new companies to diversify into isn’t really a top priority for me anymore. As such, whenever I start looking for the best shares to buy, I always begin with companies I already own. And that’s what’s brought dotDigital (LSE:DOTD) to the forefront.

This small-cap digital marketing group has developed a multi-channel cloud-based advertising platform. It enables marketing experts from various businesses, particularly in the e-commerce space, to create, manage, and run their own ad campaigns.

There are a lot of platforms like this out there today, resulting in a lot of competition, especially when it comes to e-mail-based solutions. However, dotDigital has nevertheless managed to carve out a sizable niche over the years. And looking at the group’s latest progress, its market share seems to be getting wider.

The launch of its artificial intelligence (AI) analytics platform in 2023 now enables marketing teams to analyse their mailing lists to granular details where predictions can be made. dotDigital’s AI forecasts which individuals are likely to spend more money, how much, and when, paving the way to highly personalised and effective marketing that boosts spending across the board. And so far, we’ve already seen the company’s average revenue per customer jump almost 30% in just one year.

A buying opportunity?

Over the last couple of quarters, dotDigital’s revenue, cash flow, and earnings have all been heading in the right direction. More encouragingly, the trends show that this growth’s accelerating. After over a year of going through an advertising winter on the back of higher inflation, it’s a welcome sight for shareholders.

Despite this upward trend, the share price is still moving in the wrong direction, falling by around 15% since January. It seems that investors want to see more progress before granting this business a new wave of momentum. And after seeing the stock collapse by 80% in the wake of the 2022 stock market correction, this isn’t all that surprising.

However, at a forward price-to-earnings ratio of 17, dotDigital seems to be trading at a reasonably cheap valuation, especially in comparison to its historical average of around 30 times earnings. There’s no denying that fierce competition’s a significant threat. But with management seemingly successfully capitalising on the tailwinds of improving economic conditions, it’s a risk I feel’s worth taking at today’s prices.

That’s why I believe dotDigital could be one of the most rewarding shares to buy today for my portfolio, if I had the cash to spare.

The post UK shares to buy now: with a £1,000 lump sum, here’s what I’d do appeared first on The Motley Fool UK.

#1 Fintech’s on the march!

I first invested in Alpha Group International (LSE:ALPH) in 2020. What started out as an affordable currency-risk management service for small- and medium-sized businesses has evolved into a full-on alternative banking platform.

The group now supports a vast array of services, from international payments to alternative investment management. And this business success has also translated into jaw-dropping share price returns, making it one of my largest portfolio positions today.

Recent macroeconomic headwinds have proven challenging as they’ve wreaked havoc on Alpha’s customers. The business has managed to maintain double-digit growth in spite of these headwinds. But it’s been considerably slower than its usual rate of expansion. And continued uncertainty within the financial markets could handicap growth and boost competitors.

Fortunately, the latest results revealed encouraging trends, with July and August showing signs of improvement. And with the shares taking a recent tumble, I may think about buying more.

#2 An ad surge is coming

Following the boom of e-commerce activity after Covid-19, digital advertisers have been stuck in a long winter of customer budget cuts. With high inflation sending discretionary spending into the gutter, firms like dotDigital (LSE:DOTD) haven’t had a fun time of late.

The company runs a digital advertising automation platform where businesses can manage existing and convert potential customers. The client base is largely made up of online retailers, which makes dotDigital highly susceptible to the e-commerce cycle. Growth evaporated once the axe came for marketing budgets.

However, economic conditions have improved this year. And companies have slowly started resuming marketing campaigns, thawing the advertising winter. This is evident when looking at dotDigital’s financials, with double-digit growth already making a comeback.

Yet the share price is basically flat over the last 12 months. Looking at other marketing-based enterprises, it seems to be a recurring story suggesting that investors are still out of love with the sector. But in my experience, investing in unpopular high-quality stocks can be quite lucrative in the long run, even with the added risks of cyclicality.

#3 Infrastructure projects set to explode in 2025

Somero Enterprises (LSE:SOM) has some incredibly lumpy earnings. Unlike most businesses that tend to achieve relatively smooth results, a quick glance at Somero shows revenue, profits, and cash flows have been all over the place.

But such is the nature of operating within the construction industry. As a manufacturer of laser-guided concrete screed machines, management’s a long history of successfully navigating market downturns. And the effects of prudent capital allocation are clear when looking at the last 15 years, with shares climbing more than 1,350%.

With the bulk of its business dependent on construction, project delays due to higher interest rates have been quite a headache for shareholders. And it’s why the shares have tumbled 50% since the start of 2022.

But now rates are starting to fall, the backlog of construction projects is expected to start clearing next year. So a surge in demand could be on the horizon. Obviously, there are no guarantees. But at a price-to-earnings ratio of 8.6, it’s a risk I’d be comfortable taking.

The post £3k to invest? 3 UK shares I’d buy in an ISA in 2024 appeared first on The Motley Fool UK.

With so much excitement about the impact this technology can and is having on everyday life, many AI stocks have seen enormous boosts to their valuations. In some cases, this stellar performance is justified. In others, not so much.

But while all eyes are on the US tech sector, the UK’s also home to several companies leveraging AI. Yet most seem to have gone unnoticed, especially this small-cap that could be primed for stellar growth over the next 12 months and could be worth further research.

AI-powered solutions

There are a lot of generative AI models floating around today. Yet most companies have failed to successfully monetise these technologies in a profitable way. In fact, OpenAI, the creator of ChatGPT, is currently on track to lose $5bn this year!

The technology’s undeniably impressive, but the business maybe less so. That’s what makes dotDigital (LSE:DOTD) much more interesting. This isn’t a pureplay AI company so isn’t getting a lot of attention from AI enthusiasts. Instead, it’s a digital marketing platform that helps e-commerce businesses improve customer conversion and retention.

However, behind the scenes, dotDigital’s been developing its own AI model: WinstonAI. And so far, it’s proving to be a powerful advantage. Apart from having the usual toolkit for content generation, WinstonAI has an entire prediction engine, enabling businesses to forecast which customers are most likely to purchase again, and when.

That means clients are able to far more effectively deploy their marketing budget on customers most likely to convert rather than the usual approach of throwing money at the wall to see what sticks. And this effectiveness is showing up in the results. Average revenue per customer almost doubled from £1,083 a month to £1,861.

A muted response

Being in the digital advertising industry has been tough in recent years. After all, with the economy going into a tailspin due to inflation and interest rates, marketing budgets haven’t exactly been thriving.

Yet, with inflation seemingly under control and rates starting to tumble, the advertising winter’s come to an end. Or at least, that’s what the return of double-digit revenue and underlying earnings growth suggests. And still shares aren’t budging, remaining flat over the last 12 months.

This lack of response from investors isn’t completely unreasonable. The stock’s previously disappointed investors when it couldn’t keep up its momentum following the surge of e-commerce sales during the pandemic.

At the same time, the shares are still trading at a bit of a premium with a price-to-earnings ratio of 22.3. Although that’s considerably cheaper compared to other AI stocks on the market right now. For example, Nvidia currently trades at 58.8 times earnings.

However, given its long-term potential to disrupt the digital advertising industry, it seems investors aren’t fully appreciating the future value creation dotDigital offers. At least, that’s what I think.

If marketing budgets remain constrained due to worsening economic conditions, dotDigital will likely see growth suffer once more. Yet, in the long run, if management strategy’s successful, these short-term hiccups may become irrelevant.

The post 1 under-the-radar AI stock nobody’s paying attention to! appeared first on The Motley Fool UK.

Airtel Africa

What it does: Airtel Africa operates mobile phone networks and a mobile money business across multiple markets in east and west Africa.

By Christopher Ruane. In March, shares in Airtel Africa (LSE: AAF) were selling for pennies. Within three months they had shot up in price over 33%. The long-term picture is solid too, with a five-year price gain of 69%.

I continue to see large potential here. The company has a well-established business and sizeable customer base in markets where I see ongoing growth opportunities thanks to demographic and economic changes. The mobile money offering could be set for particularly strong growth in my view.

But a key risk – currency devaluation in emerging markets – continues to dog the firm. Last year saw revenues in the reporting currency (US dollars) fall, while a $750m profit the prior year gave way to an $89m loss.

The company has done well battling a chaotic currency situation in Nigeria and I still believe in its long-term potential. But I decided to act on the price rise and take some risk out of my portfolio.

Christopher Ruane does not own shares in Airtel Africa.

dotDigital 

What it does: dotDigital is a technology company that offers digital marketing software. 

By Edward Sheldon, CFA. Recently, I had a bit of a portfolio cleanout and dotDigital (LSE: DOTD) was one stock I offloaded. 

Why did I choose to sell this particular stock? Well, there were a few reasons. 

The main reason was simply that it had become a really small position (less than 1%) in my portfolio. So, it wasn’t likely to have much of an impact on my overall returns going forward. 

Of course, I could have added to my position. But I decided that it was no longer one of my best ideas, so my view was that I was better off selling it and freeing up some cash for other investment opportunities. 

As for why it’s no longer one of my best ideas, I’m a little concerned that generative artificial intelligence (AI) could disrupt the company’s business model. This wasn’t a major risk when I first bought the stock around a decade ago. 

Now, knowing my luck, the shares will soar from here. I still think they have plenty of potential. The company could even be a takeover target. 

I’m seeing a lot of other exciting opportunities in the market, however. So, the cash from this sale is likely to come in handy in the months ahead. 

Edward Sheldon has no position in any shares mentioned.

Nike

What it does: Nike is the world’s largest sportswear brand.   

By Ben McPoland. I sold my shares in Nike (NYSE: NKE) earlier this summer. Thankfully it was before the firm’s fiscal fourth-quarter results, which sent the stock down 20% – its biggest ever one-day drop.

The company is suffering from slowing sales due to weak consumer demand. For FY25 (which has just started), it’s forecasting a mid-single-digit decline in revenue. Its China business remains tepid while sales of its Converse brand slumped 18% during the quarter.

My fear here is that Nike’s best days may be in the rear-view mirror. A lack of product innovation suggests it’s not the same beast that saw off the challenges of Under Armour and others in years gone by. A whole raft of competitors, from Lululemon to Hoka and New Balance, are appealing to consumers and stealing market share.

Nike is rolling out new $100-and-under trainers around the world to try and get sales back on track, so perhaps this can help. However, there seems very little to be excited about, while the stock isn’t particularly cheap at 23 times forward earnings.

I see more attractive opportunities elsewhere.

Ben McPoland does not own shares of any company mentioned.

Nvidia

What it does: Nvidia is an artificial intelligence company best known for producing graphics processing units.

By Charlie Keough. I recently felt it was the right time to lock in some of the profits I’d made from Nvidia (NASDAQ: NVDA).

Although I still own some shares, after rising 160.1% in the last 12 months, I’m cautious that the stock could be overvalued right now.

Firstly, it currently trades on 70.7 times earnings, way above the S&P 500 average of 23. Furthermore, its price-to-sales ratio is 39.5.

Those sorts of readings could prompt a share price correction. While the stock has been soaring, I’m worried we could see its share price recoil at the first sign of a slowdown in growth.

I’m in no rush to offload the remaining shares I own. I’m bullish on Nvidia for the long run. The artificial intelligence sector will continue to expand and Nvidia is a major player in the space.

But I think it’s a smart move to take some of the money I’ve made and reinvest it elsewhere. If its share price takes a tumble, maybe at that point I’ll reconsider buying some more stock at a cheaper price.

Charlie Keough owns shares in Nvidia.

Spire Healthcare Group

What it does: Spire Healthcare Group runs 39 hospitals and over 50 clinics, medical centres and consulting rooms in the UK.

Private healthcare group Spire Healthcare Group’s (LSE:SPI) has fallen sharply since 22 May. On this date, Conservative prime minister Rishi Sunak shocked the nation by announcing a general election in early July.

Why was this significant? At that time, Labour had a gigantic lead in the polls, one which it maintained up to polling day. So expectations of Keir Starmer imminently entering Downing Street and shaking up the NHS spooked investors.

Strain on the public healthcare system has driven revenues sharply higher at Spire in recent years. They rose 13.4% in 2023 as patients used private medical insurance or self-paid to sidestep long NHS waiting times.

Look, there’s no guarantee that the NHS will improve immeasurably following Labour’s victory. Parties often break manifesto pledges. What’s more, overall NHS service levels may remain poor as the UK’s elderly population rapidly grows. Either scenario could continue to support the private healthcare sector.

However, I sold just over half of my Spire Healthcare shares (which I’d held since mid-2022) in response to this fresh risk. And I’ve subsequently reinvested my profits elsewhere to rebalance my portfolio.

Royston Wild owns shares in Spire Healthcare Group.

The post 5 shares that Fools have been selling appeared first on The Motley Fool UK.

In fact, looking at the FTSE All-Share index, there’s a grand total of 16 companies operating within the technology industry. That’s just 1.4% of the total index. By comparison, in the S&P 500, technology represents almost 34%.

However, even with this lack of choice at home, British investors still have some interesting potential AI investments to explore. And one company I’ve added to my portfolio is dotDigital (LSE:DOTD).

Using AI to power e-commerce

Using its Customer Experience and Data Platform (CXDP), businesses are able to automate and personalise the creation of multi-channel marketing campaigns. For the most part, it’s a solution that’s being used by e-commerce enterprises to drive repeat purchases from customers through email, text, social media, etc.

dotDigital’s hardly short on competition in this space. After all, there are plenty of similar services, some of which are considerably larger with far deeper pockets. Yet, despite these intense rivalries, dotDigital has managed to carve out a steadily increasing portion of market share.

With an estimated £42 of value created for every £1 spent by customers on email campaigns, the average revenue per user each month now stands at £1,709 a month compared to £966 five years ago. And this upward trend looks primed to continue now that AI’s entering the picture.

Using its WinstonAI model, the CXDP platform is able to analyse the customer data of a business and generate a profile. This is then used to start making predictions about future behaviour, determining which customers are most likely to place another order, what items they’re most likely to buy, and when a purchase is most likely to occur.

Apart from extrapolating critical metrics like customer lifetime value, this added level of insight enables companies to allocate their marketing budgets to maximise conversion and effectiveness. Needless to say, that’s a powerful competitive advantage.

Every opportunity carries risk

From a technological standpoint, dotDigital seems to have its bases covered. WinstonAI is proprietary, making it far harder for competitors to replicate a similar solution. But that doesn’t mean they won’t try. And should a rival firm create a superior prediction model, dotDigital’s value-creation proposition may start losing its thunder.

The reliance on user data also makes the platform a prime target for cyber attackers and ransomware. So far, the firm’s kept its platform secure. But should the group fail to maintain and evolve its cyber security solutions, a breach could be immensely problematic, both financially and reputationally.

The bottom line

Even with these challenges, dotDigital continues to be a stand-out business, in my opinion. The downturn in the e-commerce sector in 2022 wreaked havoc with its stock price. Fortunately, economic conditions have since improved, and growth has returned. Yet, the small-cap growth stock has yet to make a comeback. That’s why I think a potential buying opportunity has emerged for my portfolio.

The post Is this the best AI growth stock in the UK today? appeared first on The Motley Fool UK.

With that in mind, here are three stocks from my portfolio that I’m targeting for a top-up.

Rebounding e-commerce

One of the many sectors hit hard by surging inflation and interest rates is online retail. With a few exceptions, the drastic fall in consumer discretionary spending led to a sharp downturn in online orders. This slowdown was only emphasised further thanks to the previously explosive performance of the sector during the pandemic lockdowns.

Consequently, shares like Shopify (NYSE:SHOP) and dotDigital (LSE:DOTD) were obliterated. But since then, economic conditions have improved. And the latest results from both companies revealed encouraging trends.

Shopify — the e-commerce platform giant — enjoyed a 24% jump in sales to $2.1bn on the back of more subscriptions and higher merchandising volumes moving through its system. Meanwhile, dotDigital – the digital marketing platform – also saw double-digit growth across its top and bottom lines.

What’s more, with the dotDigital’s technology able to plug directly into Shopify’s ecosystem, the UK business is piggybacking on the US firm’s success in addition to industry tailwinds.

Of course, neither enterprise is without its risks. Both continue to face rampant competition from peers with far deeper pockets. And even after their share prices have tanked, the market capitalisations are a bit lofty inviting higher volatility to a portfolio. Yet in my opinion, the current valuations still don’t appreciate these companies’ long-term potential.

Profiting from volatile real estate

Despite having a reputation for being a ‘safe’ investment, shareholders of real estate companies were once again reminded of the cyclicality of this sector. With higher interest rates sending the cost of mortgages through the roof, property values across the country have largely tumbled, especially in areas like London.

As such, my portfolio positions in real estate companies haven’t exactly been stellar performers these last couple of years. But while the share prices have suffered, tenants continued to pay rent. Therefore, with undisrupted cash flows, dividends have kept flowing – something that doesn’t seem likely to change any time soon.

With inflation moving closer to the Bank of England’s 2% target, interest rate cuts could emerge later this year. This would likely be the spark that triggers the UK property market’s recovery, sending valuations back in the right direction and making a company like Safestore (LSE:SAFE) an attractive proposition.

The self-storage enterprise has seen some of its customer stickiness wear off as occupancy falls to 77%. However, this seems to be an industry-wide trend triggered by current economic conditions rather than a problem with Safestore specifically. In other words, this lull in performance appears temporary.

Meanwhile, remaining tenants are happy to pay a higher rate, resulting in stable cash flow, which continues to support a chunky dividend that’s been hiked 14 years in a row. That’s why I think it could be one of the best income stocks to buy now.

The post My top 3 stocks to consider buying before April appeared first on The Motley Fool UK.

Analysts from the investment bank Morgan Stanley recently revamped their expectations for a stock market recovery in 2024. And other forecasts surrounding the FTSE 100 and the London Stock Exchange, in general, are becoming increasingly bullish as well.

Obviously, there’s still a giant question mark regarding the timing of such a rally. Perhaps it’s already started, or may still be months away. It’s possible a sudden decline in economic health could postpone it into 2025.

Regardless, investors can still take action today to prepare their portfolios, positioning themselves to try and reap larger returns in the long run. Here’s how.

Snapping up crushed stocks

It’s no secret that buying undervalued shares when the stock market is in a state of panic can be lucrative. After all, arguably, the most common piece of investment advice everyone gives is to “buy low and sell high”. But just because the market capitalisation of a business has been thrown into the gutter doesn’t necessarily make it a bargain.

The shift in interest rates has created a very different operating environment for businesses. Gone are the days of “growth at any cost” since both debt and equity are now significantly more expensive to acquire.

In other words, firms that have grown complacent, relying on cheap loans to keep the lights on, are most likely to struggle in the future. This is especially true if competitors targeting the same customers are able to operate at much lower levels of leverage. Why? Because a smaller portion of cash flow is being gobbled up by interest expense, resulting in more organic funding to reinvest and grow.

However, suppose a business has been sold off on short-term concerns, but it remains a cash-generating machine with significant competitive advantages? In that case, investors may want to pay closer attention.

A stock primed to bounce back?

Looking at my portfolio, a number of growth stocks have lost their darling status among investors. And in many cases, my positions have yet to recover. But one company in particular that’s looking primed for a comeback is dotDigital (LSE:DOTD).

The digital marketing platform helps businesses increase engagement with their customer bases to generate sales, especially in areas like e-commerce. With the cost-of-living crisis taking a firm grip on most households, it’s not too surprising that performance saw a rapid slowdown in 2022. Yet, these headwinds seem to be losing steam.

Looking at the latest results, organic revenue growth is back in double-digit territory. And excluding one-time expenses, operating profit is following suit. That’s not too surprising, given that advertising titans Alphabet (Google) and Meta Platforms (Facebook) enjoyed a massive rebound in the second half of 2023.

These factors point towards the thawing of the digital advertising winter that’s plagued dotDigital over the last two years. And while the company has no shortage of competition, its newly-launched CDPX platform is proving to be a popular tool among customers. Combining that with chunky free cash flow margins makes it a stock worth buying more of, in my opinion.

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