Our monthly Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of small-cap recommendations, to help Fools build out their stock portfolios.

Why we like it: “FRP Advisory (LSE: FRP) is a corporate restructuring expert that benefits when economic times are tough, and more businesses need restructuring or enter administration. This is the core of FRP’s business and the area where the majority of its 108 partners practice. FRP started life as an independent company when its former parent Vantis succumbed to high debts it had built up trying to consolidate the UK accountancy market. The 28 partners who bought out the firm have since done well for themselves, expanding revenue from just shy of £28m in 2010 to over £152m last year.

“We think counter-cyclical exposure is valuable In portfolios as a diversifier, especially when paired with the company’s other growth areas from forensic accounting to debt issuance and equity investments. With a proven track record of growth throughout the economic cycle, steady profits and cash flow, and short-term income prospects, now could be an ideal time to look at FRP Advisory.”

Why we like it now: FRP Advisory presents a compelling investment opportunity following its robust full-year results ending 30 April 2025. The company achieved 19% revenue growth to £152.2m, driven by 11% organic growth and 8% from strategic acquisitions, with adjusted EBITDA rising 11% to £41.3m. Its diversified service lines, particularly its leading 13% share in UK administration appointments and a strengthened corporate finance arm, underscore its market resilience. Despite economic and geopolitical uncertainties, FRP’s 21% headcount increase to 795 and net cash position of £33.3m reflect financial stability and growth capacity. The proposed 5.4p dividend (up from 5p) and an 8% rise in adjusted earnings per share to 10.7p further enhance its appeal. 

The post Just released: our 3 top small-cap stocks to consider buying in September [PREMIUM PICKS] appeared first on The Motley Fool UK.

Our monthly Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of small-cap recommendations, to help Fools build out their stock portfolios.

Why we like it: “FRP Advisory (LSE: FRP) is a corporate restructuring expert that benefits when economic times are tough and more businesses need restructuring or enter administration. This is the core of FRP’s business and the area where the majority of its 101 partners practice. FRP Advisory started life as an independent company when its former parent Vantis succumbed to high debts it had built up trying to consolidate the UK accountancy market. A bruising start to life for the independent business and for the 28 partners who bought out the firm. But they’ve since done well for themselves, expanding revenue from just shy of £28m in 2010 to over £128m last year.

“We think in this economic environment that counter-cyclical exposure is valuable, especially when paired with the company’s other growth areas from forensic accounting to debt issuance and equity investments. With a proven track record of growth throughout the economic cycle, steady profits and cash flow, and short-term income prospects, now could be an ideal time to look closer at FRP Advisory.”

Why we like it now: In its recent trading update, FRP Advisory expects to report revenue of £152 million for the financial year ended 30 April 2025, representing a 19% year-on-year increase. During the year, the firm completed five acquisitions, all of which are progressing well in terms of integration. The most recent acquisition—One Advisory—is expected to contribute approximately £4.9 million in annual revenue and £1.1 million in adjusted EBITDA on a forward-looking basis. FRP has established a strong track record of delivering profitable growth across the economic cycle. The outlook for all of its core markets remains positive, and the team is confident in its ability to continue making progress in the new financial year. At present, FRP trades at a price-to-earnings ratio of 12x and offers a dividend yield of 3.9%, which we view as attractive given the company’s consistent performance and growth potential.

The post Just released: our 3 top small-cap stocks to consider buying in May [PREMIUM PICKS] appeared first on The Motley Fool UK.

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FRP Advisory Group

What it does: FRP Advisory Group helps businesses in difficult situations in areas such as restructuring and accountancy.

By Muhammad Cheema. Unfortunately, due to the tough economic times we find ourselves in, businesses are struggling.

According to the Department for Business, Energy and Industrial Strategy, insolvencies increased by 13% year on year (YoY) to 6,342 in the second quarter of this year.

While this isn’t great for most businesses, it is for AIM stock FRP Advisory Group (LSE:FRP).

Its expertise in helping troubled businesses with services such as restructuring, insolvency, and financial advisory means that it’s likely to thrive in the current environment.

It has been experiencing a surge in growth. In the latest quarter, revenue increased 18.8% YoY. What’s even more impressive is that earnings grew by 49.2% YoY.

My one concern with the company is that it’s trading with a price-to-earnings (P/E) ratio of 21, which is quite expensive.

However, it’s growing very strongly and if the economy continues to struggle, I believe it will provide great returns to investors in 2024.

Muhammad Cheema does not own shares in FRP Advisory Group.

Jet2

What it does: Jet2 is a British budget airline operator, catering to short haul destinations mostly around Europe.

By Jon Smith. The travel and tourism sector is one that I’m bullish about as we start 2024. Therefore, I like Jet2 (LSE:JET) as a way to express this view.

The low-cost airline operator was hit hard by the pandemic, but finally the tide is turning. Over the past year, the stock is up 37%, as company financials improve. The half-year 2023 report showed that operating profit is now back above pre-pandemic levels.

Looking ahead, it commented that “current seat capacity for Summer 2024 at 17.19m seats is approximately 12% higher than Summer 2023”.

I think that there could be good potential for the AIM-listed stock to rally over the coming year. I do note that there’s stiff competition in this sector, particularly in the budget category. This could cause margins to be cut. Yet given the seat capacity for next year is already looking promising, it appears this risk is being contained.

Jon Smith does not own any of the shares mentioned.

Keywords Studios

What it does: Keywords Studios is a leading provider of technical and creative services to the video game industry.

By Edward Sheldon, CFA. Keywords Studios’ (LSE: KWS) share price has taken a huge 50%+ hit recently and I think the AIM stock is oversold.

The share price has fallen because of fears over generative artificial intelligence (AI). Investors are concerned that this new technology (which can do some amazing things) could reduce demand for services Keywords Studios offers such as art design and language translation.

This certainly is a risk to consider. However, I believe the fears are overblown.

Keywords Studios is active in the AI space itself and has been responsibly harnessing the technology for a number of years. Meanwhile, management said recently that it was excited about the opportunities that lie ahead.

With the shares currently trading on a price-to-earnings (P/E) ratio of less than 15, I think the risk/reward proposition here is very compelling as we start 2024. That’s a low valuation relative to the growth the gaming company is generating.

Edward Sheldon has no position in Keywords Studios.

Windward 

What it does: Windward is a software company that operates a predictive maritime analytics platform.

By Ben McPoland. I think shares of Windward (LSE: WNWD) are well worth considering in January. This £72m firm operates a leading AI-powered predictive platform for the global maritime industry. It helps its customers manage risk by providing real-time intelligence relating to things like sanctioned vessels and potential drug smuggling.

Since the EU’s sanctions on Russia (and other regimes), identifying deceptive shipping practices has become increasingly important. This is benefiting Windward. It secured 48 new commercial customers during H1, almost as many as in the whole of 2022. And its revenue jumped 18% to $12.8m while its annual recurring revenue is also building nicely.

Now, I should point out that Windward is based in Israel. It says the tragic events there haven’t affected trading and its offices remain open. But it’s worth noting because the risk of the conflict spreading can’t be ruled out, unfortunately.

That said, I’m very encouraged by the AIM stock’s progress. It expects positive EBITDA  in 2025 and the shares are trading at a reasonable 3.8 times sales. I’m planning to invest.

Ben McPoland does not own shares of Windward.

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

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4imprint Group

What it does: 4imprint Group is a direct marketer of promotional products with operations in North America, the UK and Ireland.

By Ben McPoland. I currently like the look of 4imprint Group (LSE: FOUR). The FTSE 250 stock fell over 10% in November after the promotional merchandise firm noted a bit of softening demand.

That was hardly a bombshell to me, though. Businesses are cutting spending left, right and centre. So I’d imagine logo-embossed gift bags, stationary and T-shirts (the sort of stuff 4imprint sells) could well be sacrificed. There’s a risk the slowdown could continue for a bit longer.

That said, the firm still expects to pull in over $1.3bn in annual revenue, with a record pre-tax profit of at least $130m. That’s higher than its previous $125m guidance.

Another positive is the company’s strong financial position. It had a cash balance of $95m at the end of October and management remains bullish: “Our experience is that a less buoyant economic outlook represents a market share opportunity for 4imprint as our financial strength allows us to keep investing in the business and to take full advantage of a market recovery.”

Meanwhile, the shares are trading at 16 times earnings. They’re on my early 2024 buy list.

Ben McPoland does not own shares of 4imprint Group.

Burberry

What it does: Burberry is a global manufacturer, retailer and wholesaler of luxury goods.

By Paul Summers. Shares in FTSE 100-listed Burberry (LSE: BRBY) recently plunged on news of slowing sales as the cost-of-living crisis continues to impact discretionary spending.

Personally, I see this as an opportunity to buy in before the stock – down 30% in 2023, as I type – becomes fashionable again. 

To me, there’s nothing to suggest the brand is any less coveted. Indeed, rising middle classes in regions like Asia should continue to act as a huge tailwind going forward. 

On a more fundamental level, the company also consistently generates better-than-average margins and returns on the money it invests. 

Yes, inflation could still take a while to return to more desirable levels. But unless one believes that this tricky economic period has removed all desire to show status, I reckon Burberry shares are surely primed for a significant bounce eventually.

Paul Summers has no position in Burberry.

FRP Advisory Group 

What it does: FRP Advisory Group provides troubled businesses with help with issues such as restructuring, accounting and insolvency.

By Royston Wild. Investing in classic counter-cyclical stocks could be a good idea ahead of what looks set to be a tough 2024. Support services business FRP Advisory Group (LSE:FRP) is one company that analysts expect to thrive even as the UK economy toils. 

British businesses are being squeezed by higher borrowing costs and weak consumer demand. And as a result, corporate failures are shooting through the roof. The number of insolvencies in England and Wales jumped 10% year on year to 6,208 during quarter three, according to the Insolvency Service. This was also a 14-year high. 

FRP is an expert in restructuring and insolvency, corporate finance, forensic accounting and provides advice on debt, pensions, and tax. Its skills are in high demand during downturns like this and should remain so: revenues rose 19% during the six months to October, to £58.7m. 

The AIM company is ramping up its headcount to meet demand for its services, too. It had 622 people on its books as of October, up 16% year on year. I’m expecting it to perform strongly despite industry competition.

Royston Wild does not own shares in FRP Advisory Group. 

Rightmove

What it does: Rightmove operates a property portal that allows users to search for properties to buy or rent.

By Edward Sheldon, CFA. Rightmove (LSE: RMV) shares have come down in price lately and I think they look attractive at current levels.

This is a high-quality company with a strong brand, a high market share, an excellent growth track record, and a solid balance sheet.

And it’s performing well right now. Recently, the company advised that it expects revenue growth of 8-10% for 2023. There are not many businesses in the FTSE 100 index generating that level of top-line growth at the moment.

One risk here is that in the future, Rightmove could see more competition from OnTheMarket, which was recently bought by a large US company.  

I like the risk/reward skew at current levels, however, and I’ve been buying the shares for my portfolio lately.

And I’m not the only one who has been buying. Recently, portfolio manager Nick Train added Rightmove to his UK Equity fund.

Train doesn’t buy new stocks very often so I think his investment here is notable.

Edward Sheldon owns shares in Rightmove

Scottish Mortgage Investment Trust  

What it does: Scottish Mortgage Investment Trust invests in growth stocks from public and private markets around the world.

By Charlie Carman. It’s been a difficult two years for Scottish Mortgage Investment Trust (LSE:SMT). 

Baillie Gifford’s flagship growth-oriented fund has suffered amid high interest rates across the developed world, with the share price shedding over half its value since November 2021.

Faith in the management team has been tested following the departure of star stock-picker James Anderson last year. This is perhaps reflected in the trust’s 14% discount to its net asset value.

However, one major factor that could boost Scottish Mortgage’s performance is the trust’s unlisted equity exposure, which currently accounts for around 30% of the portfolio.

Rumours of potential IPOs in 2024 for Northvolt and SpaceX’s Starlink business are circulating. These companies both feature in the trust’s top ten holdings.

In that context, I think there’s a good chance the fund’s private equity positions could spur a recovery in the Scottish Mortgage share price next year. 

Charlie Carman owns shares in Scottish Mortgage Investment Trust. 

The post Best British growth stocks to consider buying in December appeared first on The Motley Fool UK.

Selecting companies with extensive operations outside Britain could help investors lessen this problem. But predictions of weak overseas growth also makes it a difficult task. The International Monetary Fund reckons GDP growth will slow to 3% next year, from 3.5% in 2023.

That said, it’s not impossible to dig out brilliant growth shares for the coming year. Here are three I expect to thrive in this tough landscape.

FRP Advisory Group

AIM-listed consultancy FRP Advisory Group (LSE:FRP) is a classic counter-cyclical buy. It specialises in areas including bankruptcy, restructuring, capital raising and insolvency, fields that experience high demand during downturns.

This is why City analysts expect earnings here to rise 18% year on year in 2024. Such optimism is perhaps no surprise given the strength of recent trading.

Revenues and underlying adjusted EBITDA soared 19% and 34%, respectively, between January and June as interest rate hikes boosted the number of restructuring cases. The persistence of higher-than-normal rates next year should keep the company busy too, as businesses roll off cheaper credit arrangements.

Regulatory changes could dent profits, while heavy competition is another threat to the company. But, on balance, I’m expecting it to perform strongly in 2024.

H&T Group

Tough economic periods also bode well for pawnbrokers such as H&T Group (LSE:HAT).

In a sign of the stress facing the UK economy, the Office for Budget Responsibility has just slashed its 2024 GDP growth forecasts to 0.7%. That’s less than half the 1.8% predicted in March. In this environment the number of people pawning items to make ends meet should remain robust.

Latest financials from H&T showed gross lending rose 22% during the six months to June. Meanwhile its pledge book rose £28m from the same 2022 period, to £113m, thanks to growth across all its regions.

City analysts expect annual earnings at the AIM-listed company to jump 23% year on year in 2024. I’d buy the UK share even though profits could take a hit if gold prices recede.

B&M European Value Retail

Value retailers like B&M European Value Retail (LSE:BME) could also be shrewd stocks to buy as under-pressure consumers try to stretch their budgets as far as possible.

City analysts certainly expect earnings at the FTSE 100 firm to accelerate over the short term. They predict growth of 2% for the current financial year (to March 2024) and improve to 8% for the following 12-month period.

Sales and revenues will be boosted by the retailer’s aim to supercharge its store portfolio. It opened 28 gross new stores in the UK and France between April and September. B&M hopes to eventually have 1,200 stores in operation, up from around 950 today.

Rising energy and labour costs may strain B&M’s bottom line. However, I still think there’s plenty of scope for strong and sustained earnings growth.

The post 3 growth stocks I’d buy to try and build wealth in a tough 2024! appeared first on The Motley Fool UK.

The consumer price inflation (CPI) numbers for June are due for release on 19 July. They’re expected to show that inflation remains elevated at 8.2%. It’s possible that CPI could again come in higher than broker expectations, as it has regularly done since the start of 2023.

So which UK stocks should I buy for dividends in this landscape? Here are two on my radar today for when I have cash to spare.

FRP Advisory Group

Corporate restructuring expert FRP Advisory Group (LSE:FRP) can expect hope strong trading will continue as Britain’s economy struggles and interest rates increase.

Following the pandemic there are vast numbers of debt-laden businesses in the UK. These so-called zombie companies are in serious peril as their borrowing costs rise and consumer spending splutters.  

Last week insolvency specialist Begbies Traynor’s executive chairman Ric Traynor told Bloomberg that “over the next 18 months, we’ll see virtually all of them finally come to an end.” This suggests that companies like FRP will remain extremely busy over the short-to-medium term.

Therefore this AIM share could be a rock-solid buy for dividend income. The company also has a well-capitalised balance sheet it can use to deliver shareholder payouts if earnings disappoint. It had a net cash balance of £22.9m as of April.

It’s worth noting that predicted dividends aren’t well covered by expected earnings for this financial year (to April 2024). Dividend cover sits at 1.4 times, some way below the safety watermark of 2 times.

But on balance I think there’s a good chance of FRP meeting current dividend forecasts. And particularly given its recent history of producing better-than-expected earnings.

For this financial year the firm carries a healthy 4% dividend yield.

Grainger

Build-to-rent specialist Grainger (LSE:GRI) is another attractive safe-haven stock to buy in these difficult times, I feel.

Property stocks like this can usually raise rents in line with inflation in an effective manner. This in turn protects profits from the scourge of high inflation.

Residential property businesses like this can also expect rent rolls to remain stable during downturns. We all need somewhere to live, after all. In fact latest financials showed record occupancy of 98.7% in the financial year to date. It also showed like-for-like rents up 7.1% over the period.

This is why City analysts expect dividends at Grainger to rise strongly over the next few years at least. Consequently the FTSE 250 company carries a solid 2.8% dividend yield for this year (to September 2023).

Like FRP Advisory, dividend cover isn’t ideal. It also comes in at just 1.4 times. But the defensive nature of its operations mean it should still be in good shape to make that predicted payout.

I’d buy Grainger shares even though high costs and labour shortages could weigh on profits growth.

The post 2 dividend-paying shares to buy as high inflation drags on appeared first on The Motley Fool UK.

NatWest Group

Sky-high inflation in the UK poses dangers to swathes of London Stock Exchange shares. It means that the Bank of England (BoE) might have to keep increasing interest rates in the coming months and maintain its benchmark higher for longer.

However, Britain’s retail banks like NatWest Group (LSE:NWG) stand to gain from further BoE action. This FTSE 100 share’s revenues leapt 26% in 2022 to £13.2bn as higher rates boosted the margin between the interest it charged borrowers and offered savers.

The City had been expecting another modest rise to 4.25% next month. However, following news that consumer price inflation (CPI) remained elevated at 10.1% in March, the BoE is tipped to raise rates much higher. Former BoE ratesetter Andrew Sentance even told the BBC that a hike close to 6% could be needed.

Yet despite the possibility of higher-than-expected interest rates, I won’t be buying NatWest shares. The benefit of extra BoE rate increases could be more than offset by a surge in bad loans as the domestic economy struggles.

As the country’s second-biggest mortgage lender, NatWest is especially vulnerable to a surge in home loan defaults as interest rates head higher. Across the business, the bank endured £337m worth of loan impairments in 2022.

With the company also facing tough competition from digital banks, I think the risks of owning NatWest shares are too great. Not even a 6.6% dividend yield and forward price-to-earnings (P/E) ratio of 5.8 times are enough to tempt me to invest.

FRP Advisory Group

Further interest rate rises could crush UK businesses struggling to raise finance and repay loans. The number of companies experiencing severe financial distress is already growing rapidly, as Insolvency Service data shows.

There were 2,457 corporate insolvencies in March, it announced this week. That was up 16% year on year and the highest level since the Covid-19 crisis.

Against this backdrop, I think buying FRP Advisory Group (LSE:FRP) shares is a good idea. This AIM share provides a wide range of services to troubled companies including advice on restructuring, debt and pensions.

In February’s most recent trading statement, FRP said the number of restructuring assignments it had received continued to rise. I’m expecting news of further progress when the company releases a full year update in mid-May. It’s an event I think could prompt a positive re-rating of the company’s shares.

Following recent price weakness the company’s shares trade extremely cheaply. They change hands on a forward price-to-earnings growth (PEG) ratio of 0.9. A reminder than any reading below 1 indicates a share is undervalued.

FRP shares also carry a healthy 4.2% dividend yield at current prices. I’d buy the business even though changes to the regulatory landscape might damage future earnings.

The post Are these dividend-paying value stocks too good to miss? appeared first on The Motley Fool UK.

City Pub Group

High operating costs are a significant problem across the UK leisure sector. Wagamama owner The Restaurant Group’s decision earlier this month to close dozens of sites illustrates the huge pressure of elevated labour and energy costs on companies’ bottom lines.

Yet I still believe The City Pub Group (LSE:CPC) is an attractive share to buy. The pub industry is steadily recovering following the earthquake of Covid-19 and is tipped for sustained growth.

Auditors Gerald Edelman expect revenues across the pubs and bars industry to rise at a compound annual growth rate of 2.2% between 2023 and 2028. However, I think City Pub could grow sales faster than this.

This is thanks to its focus on the faster-growing premium end of the sector. Gerald Edelman also notes that there has been “a shift in consumer preferences towards premium products such as craft beers and premium lagers” in Britain.

The firm’s hybrid model of drinks and food could also help it to enjoy robust revenues growth. Market research firm IBISWorld says that food accounts for 29% of total industry revenues, just behind first-placed beer at 29.1%.

Investing in leisure shares could be risky in the near term as consumers tighten their belts. Yet I believe City Pub could be well protected from the cost-of-living crisis.

This is because of its focus on market towns and cathedral cities in Southern England. Spending levels in these more affluent areas tend to be less affected by broader economic conditions.

Today this AIM share trades on a price-to-earnings growth (PEG) ratio of just 0.3. Any reading below one indicates that a stock is undervalued. This makes it one of the best cheap leisure shares out there in my opinion.

FRP Advisory Group

As the UK economy toils, the number of businesses experiencing financial difficulties is unfortunately booming.

Latest data from the Insolvency Service showed corporate insolvency cases soar 17% year on year in February. The Federation of Small Businesses predicts that 370,000 small companies could close or be forced to downsize or restructure when help for energy bills is reduced in April, too.

Firms of all shapes and sizes are struggling in the current climate. One way that investors can protect themselves today is to buy FRP Advisory Group (LSE:FRP) shares. The business provides a range of financial services in fields including restructuring and administrations.

Revenues here rose during the six months to October. And the AIM firm said last month that “the medium-term outlook for all of our markets remains positive“, illustrating the momentum it is currently enjoying.

Today FRP shares trade on a forward PEG ratio of 0.9. It also carries a meaty 4% dividend yield, cementing its place as an attractive value stock to buy.

The post 2 cheap UK shares I’d buy for my Stocks & Shares ISA today! appeared first on The Motley Fool UK.

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FRP Advisory Group 

What it does: FRP provides restructuring services and other financial help for distressed companies across the UK. 

By Royston Wild. The British economy looks set for a prolonged period of turmoil. In recent days Handelsbank downgraded its already-gloomy forecasts for zero growth in 2023. It now expects “a full-blown recession” with a 1.3% contraction in national GDP. 

Against this backcloth, I think buying counter-cyclical shares could be a good way for me to protect my wealth. I’d do this by building a position in FRP Advisory Group (LSE:FRP). In fact, City analysts expect earnings to grow here each year through to 2024.

FRP provides a range of financial services for businesses in distress. And its latest trading update showed “a continued growth in revenues and profits” between May and October. 

The AIM-listed company has plenty of financial headroom to boost earnings through acquisitions, too. It carried out a £39m share placing over the summer designed for it to target further bolt-on buys. This could deliver significant long-term benefits.

Royston Wild does not own shares in FRP Advisory Group. 

Volex

What it does: Volex is a manufacturer of power cords and cables with a focus on high-growth industries.

By Edward Sheldon, CFA. There are several reasons I’m bullish on Volex (LSE: VLX) right now. One is that the company is growing at a healthy rate. For the 26 weeks to 2 October, the group posted year-on-year revenue growth of 22.1% along with 14.1% growth in underlying profit before tax. Results were boosted by 53% organic revenue growth in its electric vehicle division.

Another reason is that management has ‘skin in the game’. Both executive xhairman Nat Rothschild and COO John Molloy own a ton of Volex stock. So, it’s in their interests to get revenues, profits, and the share price up.  

Finally, the stock is dirt cheap. With analysts forecasting earnings per share of $0.27 for the year ending 5 April 2023, the forward-looking P/E ratio is only about 13.

Risks here include debt levels, which have risen on the back of acquisitions, and excess inventory issues. I like the risk/reward proposition at current levels, however. 

Edward Sheldon owns shares in Volex.

Hargreaves Lansdown

What it does: Hargreaves Lansdown operates an investor services in the UK, such as managed funds and support services.

By Gabriel McKeown. Despite Hargreaves Lansdown‘s (LSE: HL) poor share-price performance over the last year, the strong underlying fundamentals are certainly appealing. This is a company with very high-profit margins, an impressive return on invested capital (ROCE), and almost zero debt.

Additionally, after falling nearly 40% in 2022 alone, it now has a P/E ratio of just 16, which is fairly low for a growth company. This appears to be a prime example of where the market begins to overreact in the short term, and the price disconnects from the fundamentals.

Furthermore, Hargreaves offers a dividend yield of nearly 5% and has been paying out for the last 15 years. When the income-generating benefits are combined with double-digit earnings forecasts for 2023, it certainly appears to be an appealing investment opportunity. Therefore I think this is a great high-quality stock to buy in December.

Gabriel McKeown does own shares in Hargreaves Lansdown.

Keywords Studios

What it does: Keywords is a leader in video game development services providing critical talent to AAA game studios worldwide.

By Zaven Boyrazian. Keywords Studios (LSE:KWS) is a video game development services business. It helps some of the largest studios in the world create their blockbuster titles by providing the unique skilled talent required.

The firm’s ecosystem of services covers every aspect of the development cycle from conceptualisation to commercialisation. The list includes 3D modelling, 2D art, audio design, programming, quality assurance, player testing, and translation services, among others.

With the video game industry expanding rapidly, Keywords has had little trouble securing growth opportunities. By the end of 2022, management expects revenue and pre-tax profits to be 32% and 28% higher than a year ago, respectively.

Needless to say, that’s some fairly impressive growth rates. The group is a highly acquisitive enterprise which does introduce risks. After all, a poorly executed buyout could compromise the firm’s financial health and growth rates. But given its track record of success to date, that’s a risk worth taking for my portfolio.

Zaven Boyrazian owns shares in Keywords Studios.

Scottish Mortgage Investment Trust

What it does: Managed by Baille Gifford, Scottish Mortgage Investment Trust is one of the UK’s most popular funds with total assets of almost £14bn.

By Paul Summers: As I type, the share price of FTSE 100 member Scottish Mortgage Investment Trust (LSE: SMT) is down over 40% in 2022. To a point, this makes perfect sense. SMT looks for ‘disruptive’ growth companies – just the sort of stocks that are likely to be firmly out of favour as interest rates rise.

As a long-term Fool, however, this short-term ‘pain’ suits me fine. We can be sure that investors’ risk appetite will return eventually. And when it does, I want to be owning game-changing firms like Moderna, ASML and Tesla. So,what better time to buy this low-fee (0.32%) active fund than when it trades at a discount to net asset value? The cherry on top is that SMT also gives me exposure to highly-promising private companies that might become the titans of tomorrow.

I will continue adding to my stake in December and beyond.

Paul Summers owns shares in Scottish Mortgage Investment Trust.

ITV

What it does: ITV is a UK broadcaster that also produces content and offers production facilities for third parties

By Christopher Ruane. Some investors think of ITV (LSE: ITV) as an income stock. With a dividend yield of 6.5%, that is understandable.

But there is also a growth story here. The company continues to do well selling advertising on terrestrial television while scaling up its digital offering. Over the long term, I think that could help it continue to grow advertising revenues. In the coming couple of years, though, they may suffer as part of a wider marketing downturn.

ITV’s facilities and expertise in making content strike me as a growth driver at a time when demand for drama shows continues to outstrip demand. In years to come I think that could help power both revenues and profits.

Yet the ITV share price remains beaten down. With the shares 30% lower than a year ago, the price-to-earnings ratio is now below 7. If I had spare cash to invest, I would buy more ITV stock for my portfolio in December.

Christopher Ruane owns shares in ITV.

Integrafin Holdings 

What it does: Integrafin owns a leading digital investment platform, called Transact, serving UK financial advisers and their clients. 

By G A Chester. The revenue Integrafin Holdings (LSE: IHP) generates from Transact is linked to the market value of funds on the platform. This value is driven by fund inflows/outflows and market movements. 

For the year to 30 September, Integrafin continued its long record of attracting net inflows. A new £4.4bn came in. However, negative market movements of £6.3bn saw the value of funds on the platform fall 4% to £50.1bn. 

Despite this, Integrafin expects to report an 8% increase in revenue when it announces its full results on 14 December. And continuing strong numbers of new advisors and clients joining the platform provide a solid basis for ongoing growth. Substantial investment is also being made to efficiently scale the business for enhanced future profitability. 

There’s a risk volatility in financial markets could further impact investor sentiment (Integrafin’s shares are down 50% over the last year), but I see exciting long-term growth prospects here. 

G A Chester does not own shares in Integrafin. 

Keywords Studios 

What it does: Keywords is an art, audio, development, marketing, translation, testing and player support service outsourcer for video game studios and publishers. 

By James J. McCombie: Keywords Studios (LSE: KWS) offers a unique way to get exposure to the growing video games industry. It is not exposed to the risk of a game flopping as it takes payment for its services before release. Its business model has delivered handsomely on the top line. Full-year revenue for 2022 is expected to be at least €675m, which would be 32% year-on-year growth and a stonking 346% over five years.

The company is profitable, and its net income has increased over the years, although it is more volatile than revenues. To keep growing, the company needs a steady pipeline of new games. There is some concern that after a recent splurge to capture the attention of eyeballs during the pandemic years, a lot of players are now focusing on cash flow and return on investment, which might see Keywords revenue rise start to slow.  

James J. McCombie does not own shares in Keywords Studios.

John Choong: Wise

What it does: Wise is one of London’s biggest fintech companies. It mainly facilitates the transfer of money across international borders.

By John Choong. When buying growth stocks, I look for solid double-digit growth in a company’s top and bottom lines. Wise (LSE: WISE) fits the bill perfectly as its past couple of quarters have seen strong revenue and income growth. I’m also a huge fan of the firm’s ability to acquire customers generously despite having to increase prices in the ongoing economic backdrop.

Additionally, the firm’s plans to venture into new markets is something that excites me tremendously as it continues to take market share from giants such as PayPal. Moreover, the company’s balance sheet indicates that it’s well equipped to continue expanding without too much hinderance given its healthy debt-to-equity ratio of 19.2%. Most importantly, its free cash flow continues to grow at a rapid pace.

Nonetheless, it’s worth noting that Barclays has an average price target of £5.50 on the stock, which is lower than the Wise’s current share price. This may indicate that the stock is overvalued and is something I’m closely monitoring.

John Choong has no position in Wise.

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