Chief investment strategist Ed Yardeni of Yardeni Research issued a bullish note last week predicting a 50% increase in the US Dow Jones Industrial Index.

He thinks it may get there by 2030 – in just six years’ time.

Is FTSE 100 at 12,000 coming?

According to Yardeni, American companies in the index need to increase their earnings by 60%. Then, if those earnings attract a price-to-earnings (P/E) ratio of 20, the Dow will hit the target.

Companies would need to achieve a compound annual growth rate for earnings of about 7.9%. Possible, but not easy. However, Yardeni is using the ‘roaring 20’s scenario’ from his bag of predictive models.

There’s no doubt things look good for stocks and businesses on both sides of the Atlantic right now. With the prospect of interest rate cuts ahead, conditions for consumers and businesses are set to get better.

However, the economic landscape can change fast and we never know when the next shock or disturbance will occur. There’s no such thing as a guaranteed outcome when it comes to investing in stocks, shares, and businesses.

Nevertheless, if Yardeni’s right about his positive predictions, the UK’s stock market will likely join the party and follow America higher. If the FTSE 100 rises by 50% by 2030, it’ll hit about 12,000.

But regardless of potential outcomes for the main indexes, I reckon there’s a lot of good value around among UK-listed shares right now. Many companies have decent prospects for growth, and it looks like a great time to roll up sleeves and get down to some deeper stock research.

Supplying key industries

For example, I’m keen on Luceco (LSE: LUCE). The company supplies electrical vehicle (EV) chargers, light-emitting diodes (LED) lighting systems, wiring accessories, and portable power products.

But it’s not the only business operating in those key markets. So one of the risks for shareholders is that competition could eat into the firm’s market share or profitability.

However, City analysts have pencilled in some robust-looking forecasts for normalised earnings. They expect a rise of about 11% this year and 18% in 2025.

On 14 May, the company released a robust first-quarter trading update declaring a strong start to the year.

Looking ahead, chief executive John Hornby said industry metrics are starting to suggest “more favourable” trading conditions. Meanwhile, the directors are finding new opportunities for growth investments, organically and via potential acquisitions.

I like the strong-looking balance sheet here, which shows net cash rather than net debt. It’s a good back-up for the firm’s growth ambitions.

Meanwhile, with the share price in the ballpark of 178p (21 May), the forward-looking earnings multiple for 2025 is around 13 for 2025.

There’s no guarantee the business will hit its estimates, but I think the valuation is fair given the company’s prospects for growth.

The bullish stock market right now is a good environment for helping growth stocks to flourish. So I’d dig in with deeper research into Luceco now. It has the potential to sit well in a diversified portfolio.

The post If the Dow’s heading for 60,000 by 2030, can the FTSE 100 index hit 12,000? appeared first on The Motley Fool UK.

I can feel it in my water, as my grandad used to say!

General economic conditions appear to be improving, and circumstances may be shaping up well to support progress for businesses and shares.

So I’m working hard to identify promising UK growth stocks for my portfolio.

Robust earnings

For example, in March, Luceco (LSE: LUCE) released a reassuring set of full-year results. The company supplies wiring accessories, electrical vehicle (EV) chargers, light-emitting diode (LED) lighting, and portable power products.

“Profitability at the upper end of expectations despite challenging markets. Continued growth and strong cash generation”, the report trumpets.

Meanwhile, the figures show revenue up by 1.3% during 2023 and basic earnings per share higher by just over 50% — impressive!

The directors said the strong performance of the business continued into 2024, and the order book is ahead compared to a year earlier.

Chief executive John Hornby is upbeat about the outlook. Several “exciting” product developments are in progress providing good medium- and long-term opportunities for growth. On top of that, the company is focused on its bolt-on acquisition strategy.

It recently bought a UK company called D-Line, the supplier of cable management solutions.

Hornby said D-Line’s product range is a natural fit alongside Luceco’s existing categories. The business has built up a strong brand in the UK and internationally. Hornby is “particularly excited” about using D-Line’s North America operation to support Luceco’s growing business there.

City analysts have pencilled in double-digit percentage advances in earnings for 2024 and 2025. So that qualifies Luceco as a growth stock even though it’s not guaranteed the company will make its estimates.

A fair valuation?

Meanwhile, the balance sheet looks robust, with just modest levels of net debt. But one of the biggest risks for long-term shareholders is that the business serves cyclical markets. So there may be plenty of volatility ahead.

One recent example is the apparent softening that seems to be happening in the EV market. Who knows how far that trend will go? If EV sales remain suppressed, the situation could affect Luceco’s growth strategy.

Nonetheless, the valuation looks reasonable given the robust estimates for earnings growth. With the share price near 150p (8 April), the forward-looking price-to-earnings multiple for 2025 is around 11.  There’s also an anticipated dividend yield running near 3.6%.

I don’t expect the company to ever attract a racy valuation because of its vulnerability to general economic cycles. But despite the uncertainty, the dividend could be handy income to collect while waiting for the business to hopefully grow in the coming years.

For me, it’s a good time to double-down with deeper research into Luceco’s business. My aim would be to add a few more of the shares to my portfolio to hold for the long term.

The post 1 top UK growth stock to consider buying in April appeared first on The Motley Fool UK.

To find shares that have the potential to double in one year is challenging.

Consider the FTSE 100, which managed to rise by just 1% in 2022. The largest percentage gain came from BAE Systems. Its total return was 60% over the year, boosted by continued fighting in Ukraine.

Most shares in this large-cap index came nowhere close to doubling last year. But I wouldn’t expect them to either.

I’d expect the largest share price gains to come from smaller companies. It’s far easier for a tiny company to double in size. As small-cap investor Jim Slater famously said, “elephants don’t gallop”.

They’re also often overlooked or ignored by big City institutions due to their size. But that’s exactly where I aim to discover these lesser-known UK shares.

Finding the best UK shares

Last year, in the FTSE Small Cap index, a handful of shares managed to double in market value. And that’s where I’d start my search for 2023 top picks.

As a long-term investor, I’m looking for high-quality businesses with strong underlying fundamentals. As such, I prefer well-run and profitable companies. Right now, I’d also consider beaten-down shares that have a chance to recover from 2022 losses. I think this is an approach that would serve many investors well.

Bright idea

So which UK shares have piqued my interest so far? If I had some spare cash right now, I’d buy Luceco (LSE:LUCE). This supplier of LED lighting and EV chargers recently reported record cash generation and profit at the upper end of its previous guidance.

High transportation costs put pressure on this business last year. But in recent months, sea container prices have fallen significantly. This could result in larger profits for Luceco in 2023.

It’s a quality business with double-digit return on capital employed and a reasonable profit margin. That said, as a cyclical business it can be prone to booms and busts. But overall, I reckon its share price has the potential to double this year.

Kettles and toasters

Another small-cap UK share that could benefit from falling shipping costs is UP Global Sourcing Holdings (LSE:UPGS). Its factory in China churns out homeware products that it then sells via supermarkets and discount retailers like B&M European Value Retail.

This business might sound like a low-quality, low-profit business that is easy to replicate. But I’d say it’s the opposite. It focuses on a handful of strong brands. These are well-regarded by consumers and popular enough for retailers to want to stock.

Its products tend to offer good value for money, and they could prove even more popular in an economic downturn.

Post-Covid disruption in China could be an area to watch as much of its manufacturing is in the region.

But with a price-to-earnings ratio of just 10 and a 5% dividend yield, it looks particularly cheap to me. With spare cash, I’d certainly buy these shares today.

The post 2 UK shares to aim to double my money in 2023 appeared first on The Motley Fool UK.

This guide will explain what small caps in the UK are, the advantages and disadvantages of investing in smaller companies like these, and three of the top UK small caps to buy today.

What are small-cap stocks?

A small-cap share can be categorised as a company with low market capitalisation and the potential for strong earnings growth. They tend to be early-stage companies that have scope to improve annual profits faster than more established businesses.

If you’re looking for small-cap stocks in the UK, you’ll need to look further afield than the FTSE 100 and the FTSE 250.

On the London Stock Exchange, the term ‘small cap’ refers to companies with a market capitalisation between £50m and £300m. This is vastly different from the United States, where stocks in this category have much larger market caps, ranging between $300m and $2bn.

Small-cap stocks can be found across a variety of UK stock indexes. There is a dedicated FTSE SmallCap Index, which contains scores of these smaller businesses and forms part of the FTSE All-Share Index.

However, while the FTSE All-Share contains around 600 stocks, small caps make up only a tiny number of the total. The index is predominantly made up of FTSE 100 and FTSE 250 shares that fall outside the £50m to £230m market-cap range.

Top UK small-cap stocks to buy

Here are three small-cap stocks for UK investors to consider in 2026 in order of market cap as of February 2026:

Luceco

Luceco owns and manages a diversified portfolio of brands specialising in various electrical products operating worldwide. This includes switches, sockets, circuit protection, cable management, commercial lighting, and portable power solutions.

Its brand portfolio includes Luceco LED Lighting, BG Electrical, Masterplug, Ross, and Sync EV. Combined, its solutions have helped bolster revenue and earnings through a combination of organic and acquisitive channels targeting commercial as well as consumer customers.

Looking to the future, management has highlighted its ambitions to further penetrate the home energy management market, with a projected 1.1 million electric vehicle chargers expected to be installed by 2030.

Tristel

Tristel specialises in the prevention of infections through its portfolio of chemicals and healthcare products. The firm’s flagship chemical is its proprietary chlorine dioxide, used for a variety of applications, including the decontamination of medical devices (under the Tristel brand) as well as surface disinfectants (under the Cache brand), serving as an alternative to traditional wet wipes.

Despite being a small-cap enterprise, Tristel is currently the market leader for medical device decontamination across Europe. In recent years, management has been expanding its footprint in North America to attempt to replicate its past success.

However, despite only joining the business in September 2024, CEO Matt Sassone is planning to step down in July 2026, with the board actively looking for a suitable successor. Nevertheless, the group’s financial performance has been impressive, with its latest 2026 fiscal year (ending in June) interim results showing a five-fold increase in revenue from its North American operations.

Atlantic Lithium

Atlantic Lithium traded under the name of IronRidge Resources up until November 2021. The business is involved in the discovery of lithium in West Africa, an important element used in the manufacture of batteries. Demand for the element is tipped to soar as sales of electric vehicles take off.

Atlantic Lithium has described the West Africa region as a “new lithium frontier“. Its flagship asset is the Ewoyaa project, a high-grade source in Ghana. Testing work here has been consistently positive, and recent drilling has revealed the potential to expand the resource. 

The asset currently has a mineral resource of some 30.1m tonnes and an estimated mine life of just over 11 years. And it is located close to critical power and transport infrastructure, including a major highway. It is within 70 miles of the port city of Takoradi.

Through an agreement with Piedmont Lithium, Ewoyaa is funded all the way through to production. In exchange for the funds to fast-track the asset, Piedmont — which owns a 22.5% stake in the Ewoyaa project — could earn up to 50% of the small-cap’s lithium portfolio in Ghana.

However, despite an initial production target being set for 2025, the project has encountered a few setbacks, resulting in this target being missed. While this delay is frustrating, the project remains in the development stage with permits being actively pursued for production to eventually get started.

Advantages of small-cap stocks

There are multiple advantages to investing in small-cap shares.

• Larger Growth Potential – Since these businesses are far smaller, they can offer investors greater growth potential compared to mature large-cap enterprises.
• Lower Stock Prices – Small-cap shares often trade at a much lower share price, which can eliminate barriers to entry for investors with smaller sums of capital.
• Greater Diversification – There are more publicly listed small-cap stocks than mid-cap and large-cap shares, granting investors more choices and variety in diversifying their portfolios.
• Undiscovered Opportunities – Due to regulatory restrictions, most small-cap shares don’t have a high level of institutional ownership. As such, they’re typically not as widely followed by the financial media, enabling prudent investors the ability to discover terrific buying opportunities before everyone else notices, maximising long-term returns.
• Tax Advantages – In the UK, some small-cap stocks aren’t large enough to be listed on the Main Market and are instead listed on the Alternative Investment Market (AIM). Whenever investors buy shares on the AIM, there is no stamp duty tax to be paid, reducing transaction costs.

Disadvantages of small-cap stocks

There are a few risks related to small-cap shares to be mindful of.

• Weaker Financials – Many also don’t generate any profits. This means they have less financial clout to use to pursue growth opportunities. They often also lack the economies of scale that large-cap stocks can benefit from.
• Higher Volatility – They can soar when good news comes in, but sink when times get tough. Therefore, investing in small caps may not be suited to individuals who either can’t or don’t want to own a stock for several years at least.
• Lower Liquidity – Due to lower levels of media coverage, the average trading volume for small-cap stocks can be relatively low, making shares far less liquid. This translates into wider bid-ask spreads that can harm investment returns.
• Less Regulatory Oversight – Companies listed on the AIM are subject to a less strict set of rules when it comes to regulatory filings compared to firms listed on the Main Market. While still rare, this increases the odds of a fraudulent company.
• Less Analyst Coverage – Since institutional investors don’t often explore the small-cap space due to regulatory ownership constraints, the amount of analysis and research available on small-cap stocks is often far more limited compared to large-cap stocks.

Are small-cap stocks right for you?

The rewards of investing in small market-cap stocks can be huge if a company can identify a market opportunity and exploit it effectively.

Many other small caps have exposure to industries and trends that could lift their value through the roof in the coming decades. Some of the predicted hot growth industries of tomorrow are:

• Automation and robotics
• Green technologies (including electric vehicles and renewable energy)
• Healthcare
• Management consultancy

Smaller companies can be an excellent choice for investors who are happy to hold them for the long haul. But the high rate of failure of these companies — and the extreme choppiness of their share prices — mean that investors need to tread carefully before splashing the cash.

The post Investing in Small Caps: Top UK Small-Cap Stocks of 2026 appeared first on The Motley Fool UK.

Lighting products

As a quick reminder, Luceco is best known as a manufacturer and supplier of lighting products for both commercial and domestic use. It also creates and supplies wiring accessories as well as portable power solutions too.

It is worth remembering that a penny stock is one that trades for less than £1. So what’s happening with Luceco shares currently? Well, as I write, they’re trading for 88p. At this time last year, the stock was trading for 373p, which is a decline of 76% over a 12-month period.

I believe macroeconomic headwinds, as well the stock market correction caused by geopolitical events, have hampered the performance of Luceco shares.

Interim results and the bull case

Since Luceco released results for the six months ended 30 June 2022 yesterday, the shares have climbed 10%. So let’s dig deeper into the results. I see that revenue, profit, margin, and dividend per share all dropped compared to 2021. This is because 2021 was a record year for Luceco. It benefitted from last year’s DIY boom linked to the pandemic and stay-at-home guidance. It said that results posted for these six months were in line with expectations, due to normalised trading conditions.

I believe the shares rallied due to the comparison between 2022 interim results and the company’s pre-pandemic results. Revenue and margins were both up significantly. Furthermore, Luceco said it is undergoing a “strategic improvement process“. This will help it draw a line under the pandemic period, which hindered it massively. Based on these results, it said this strategy was working.

Next, I note that Luceco has entered the electric vehicle (EV) charging market by purchasing Sync EV in March. This will help diversify its business and boost performance. It is estimated that the EV changing market is to surge by close to £500m by 2025. Sync currently has 2% of market share. Luceco believes it can boost this figure and benefit due to its profile and infrastructure already in place.

Finally, I’m buoyed that Luceco pays a dividend that would boost my passive income stream, although I am conscious that dividends are never guaranteed.

Risks and my verdict

Despite Luceco shares rallying, macroeconomic headwinds could continue to cause issues. Rising costs could put pressure on profit margins. Supply chain constraints could affect its ability to deliver to its clients and hamper its overall sales figures. This could have a material impact on performance and returns.

In conclusion, I have decided that Luceco is not a penny stock I would add to my holdings. The pandemic affected the business negatively, and although it bounced back well due to heightened demand for DIY products, macroeconomic issues currently present yet another challenge for the business. I believe there are better stocks out there for me to buy for my portfolio.

The post This penny stock is up 10% after releasing interim results! Should I buy shares? appeared first on The Motley Fool UK.

Lockdown beneficiary

In retrospect, the time to pick up stock in online casino and gaming operator 888 Holdings (LSE: 888) was just before Boris Johnson announced the first national lockdown. Back then, the share price was around 80p. A couple of months ago, 888 achieved a 52-week high of 494p. 

Unfortunately, I didn’t act on my own bullish call in 2020, due to the sheer number of attractively-priced options out there during the market crash. Even so, I’d still be prepared to buy now, especially as 888’s valuation has now fallen back below the 300p mark.  

Aside from general market skittishness, some old-fashioned profit-taking is probably behind this selling pressure. Some investors may have taken the 15% reduction in business-to-consumer betting revenue in Q3 as a sign that trading momentum is now slowing. A more likely catalyst, however, is the recent legal shake-up in the Netherlands that requires online betting firms to obtain a licence. In response, 888 has ceased to operate there — a decision that’s expected to hit profit by $10m. 

I’d snap up this cheap UK share

Since this is a temporary measure, I think the fall may be overdone. Shares in 888 now trade at just 14 times forecast FY22 earnings. That looks great value, considering 888’s agreement to buy William Hill’s non-US assets could put a rocket under profits in time. What’s more, the stock comes with a potential 12p per share dividend next year (or 4.1% yield at the current share price).

All this before we’ve even considered the increase in business 888 could see if there’s a fourth national lockdown.

Buy the dip?

Another cheap UK share I’m interested in buying would be commercial and domestic lighting firm Luceco (LSE: LUCE). Despite staging a brief comeback in November, shares in the mid-cap were back to 337p by last Friday. That’s a significant drop from the 52-week high of 513p it hit back in September. 

This fall leaves Luceco’s forecast P/E at a little under 16. This may not look like a screaming bargain initially. However, this number should never be looked at in isolation, especially if the company scores well on quality metrics.

While past performance is definitely no guide to the future, Luceco has long generated high returns on invested capital. It’s this, according to UK top fund managers like Terry Smith, that plays a significant role in great long-term returns. Luceco could therefore prove to be a steal at current levels.

I must emphasise the word could here. There is a chance that recent cost pressures may not peak in early 2022 as the company expects. The fact that less than half of the company is available to buy on the market (i.e. a low ‘free float’) may also mean the share price lurches rather than drifts lower.

Still, I’m not concerned with trying to time the market exactly. What’s more important to me is buying a decent business at a sane price and holding on. I remain bullish on Luceco.

The post I’d buy these cheap UK shares today appeared first on The Motley Fool UK.

Rupert Hargreaves: Drax

Power generation group Drax (LSE: DRX) used to operate one of the largest coal power stations in Western Europe. It has since reduced emissions by over 90%. 

It is not stopping there. By introducing Carbon Capture and Storage technologies, management believes the company can deliver “millions of tonnes of negative emissions” annually from 2030. 

This path is unlikely to be risk-free. Challenges the company may face include additional regulations and rising costs. 

Nevertheless, considering Drax’s growth potential, I would buy the stock today. 

Rupert Hargreaves does not own shares in Drax.

Charlie Keough: BP 

My best stock pick for November is BP (LSE: BP). At the time of writing, the last 12 months have seen returns of 75% – and I can only see this continuing.  

What excites me about BP is that the firm is clearly looking towards the future. It has adopted a clear strategy to increase renewable production through attainable targets. It estimates it will be generating 50GW by 2030. That’s enough to power 15 million homes. 

While the switch from gas and oil to renewable could cause some short-term issues, I think BP is a great long-term addition to my portfolio.  

Charlie Keough does not own shares in BP.

Zaven Boyrazian: Games Workshop

Games Workshop (LSE:GAW) is the mastermind behind the immensely popular Warhammer franchise. What started out as a fun tabletop adventure has evolved into a fully fletched world, sprawling into video games, books, tv shows and even films.

The bulk of income is generated from selling figurines to play the classic tabletop game. However, additional revenue originates from IP licensing agreements and a recently launched streaming service called Warhammer+.

The stock was hit hard in September following rising freight costs triggered by the pandemic. But these appear to be short-term problems. So, personally, I think the recent decline presents an excellent buying opportunity this month.

Zaven Boyrazian does not own shares in Games Workshop.

Edward Sheldon: ASOS

My best British stock pick for November is online fashion retailer ASOS (LSE: ASC). Its share price has fallen recently and I think this has created a good entry point for long-term investors like myself.

ASOS does have a few challenges to work through right now. Firstly, it looks set to face higher input costs and supply chain challenges in the near term. This could hit profits. Secondly, the company needs to find a new CEO. Recently, Nick Beighton announced that he would be stepping down.

I’m not overly concerned by these challenges, however, as I think ASOS will overcome them. I expect the stock to recover in the medium term as the growth story associated with the e-commerce boom is still very much intact.

Edward Sheldon owns shares in ASOS.

Paul Summers: Luceco

After a brutal couple of months for its share price, I think LED lighting firm Luceco (LSE: LUCE) now looks great value. 

Sentiment around the company has soured due to concerns over supply chain holdups and significant cost inflation. As problematic as these are, I question whether either should trouble a long-term Foolish investor. A P/E of 17 at the time of writing takes at least some of this into account and looks very reasonable for a company generating great returns on capital in a niche area. There’s even a 2.2% yield to comfort holders while they await a recovery. 

Paul Summers has no position in Luceco

Harshil Patel: Future 

My best stock pick for November is magazine and website publisher Future (LSE:FUTR). It’s a US-focused and digital media platform.  

Future owns over 200 brands, including Techradar, Digital Photographer and Marie Claire.  

It had a string of encouraging trading updates this year and I reckon the positive trend could continue. As a content creator, it earns from digital advertising. This space could thrive over the coming months as we approach Black Friday sales and the Christmas holidays. 

Economic uncertainties and pandemic concerns remain, but overall, I reckon it’s a decent growth company with momentum on its side.  

Harshil Patel does not own shares in Future.

Roland Head: Kingfisher

B&Q and Screwfix owner Kingfisher (LSE: KGF) has had a bumper two years. Demand for DIY products surged during the pandemic, as many of us spent more time at home.

In my view, the events of the last 18 months have accelerated the group’s much-needed turnaround and clarified its strategic direction.

Home improvement is a lifelong habit for most homeowners and a growing number of renters. But demand could slow as life returns to normal, so Kingfisher needs to show it can retain its new-won customers. If it does, I think it could do well.

Roland Head does not own shares in Kingfisher.

The post Best British stocks for November appeared first on The Motley Fool UK.

Victorian Plumbing

I took an initial look at Victorian Plumbing (LSE: VIC) back in June. At the time, the UK’s leading online retailer of bathroom products and accessories had just enjoyed a successful IPO. The shares had jumped from 262p to as high as 341p. Today, the very same stock trades 44% below that peak. What’s going on?

Well, as I noted back then, the company was coming to market during a DIY and home improvement boom. Many of us had used the multiple UK lockdowns to get our properties in order and/or prepare for more home-working in the future.

Unfortunately, last week’s trading update for the year to 30 September suggested this purple patch might be coming to an end. Despite growing revenue by 29% over the financial year, news of “more subdued market conditions” as Covid restrictions were lifted didn’t impress investors. This is despite the company emphasising that margins “remained strong“ and EBITDA for FY21 would likely be “ahead of market expectations“.

Jitters over global supply chains may also have contributed. Having said this, VIC didn’t help itself here. Reflecting that it had been “proactive” on this issue but providing very little in the way of detail wasn’t really satisfactory.

Even so, the market’s treatment of Victorian Plumbing has been a little too brutal, in my view. I guess this is what happens when a highly-rated growth stock doesn’t execute to perfection.

As things stand, VIC stock trades on 21 times earnings. With global headwinds unlikely to disappear anytime soon, I’m inclined to think that the valuation may still have further to drop. As such, I’m keeping my powder dry. It definitely won’t lose its place on my watchlist though.

Luceco

If Victorian Plumbing’s valuation still appears a little too rich, lighting specialist Luceco (LSE: LUCE) is looking far more palatable. Right now, the near-£500m cap company’s stock changes hands for a little over 15 times earnings. 

Sadly, my bullish call on LUCE just over one month ago wasn’t shared by the market. Despite reporting very decent numbers and raising the interim dividend by 73%, investors have elected to abandon the stock en masse. All told, LUCE shares were down 41% before markets opened today since hitting an all-time high in early September. Then again, they’re still up 41% in the last 12 months. 

In my defence, I questioned whether the lack of buying activity on the day did suggest investors were concerned by the firm’s comments relating to significant cost inflation and supply chain setbacks. Even so, I underestimated just how great this concern was. Some director selling hasn’t helped matters.

Of course, short-term setbacks may be regarded as opportunities for long-term investors such as myself. This remains a quality business, in my opinion. Bar the odd blip, margins and returns on capital have been consistently great. The aforementioned cash returns should also be sufficient compensation while investors await a recovery. How long that recovery takes is debatable, of course. 

Far from switching off from this growth stock, I’d be comfortable starting to build a position today.

The post These growth shares have tumbled over 40%! Time to buy? appeared first on The Motley Fool UK.

I’m also going to take a look at a second unloved stock that’s caught my eye this week. This industrial group’s lost 25% in under one month, but I think it could be a good long-term buy.

What’s gone wrong?

But back to CMC. On 2 September, the business cut its revenue guidance for this year by around 20%. The company says calm conditions in the stock market during July and August caused client trading activity to slump.

It’s not good news, but I don’t think it’s a big surprise either. CMC and its rivals have enjoyed record trading conditions over the last year, due to volatile markets and fast-rising share prices.

Those conditions were never going to last forever. But with the shares now trading 16% lower than one year ago, I think there’s an opportunity here.

Are CMC shares a best buy now?

Broker consensus forecasts for CMC’s earnings this year have now been cut by around 20%. However, the shares have now fallen by almost 50% from the record high seen in April and are 30% lower than at the start of September.

The main risk I can see is that the group’s profit slump will be worse than expected. CMC’s headcount has risen over the last year as the group’s expanded. If market conditions stay calm, the company might need to cut back.

However, CMC’s share price crash has left them trading on just nine times earnings, with a dividend yield of 5%. I reckon that’s too cheap.

Indeed, I think these reduced profit forecasts could turn out to be too low. If we get a bout of volatility or a market correction this autumn, profits could bounce back. Overall, I’d be very happy to buy CMC shares for my portfolio at current levels.

A long-term bargain?

And now for that second unloved stock. Luceco (LSE: LUCE) isn’t a household name, but many of us probably have some of its products installed in our home or workplace. This industrial group makes LED lighting and electrical fittings widely used by electricians.

Luceco’s performance has been stunning in recent years — profits doubled last year and are expected to rise by a further 10% this year. However, rising raw material costs and supply chain difficulties are having an impact on profit margins.

Management hopes these cost pressures will be offset by higher sales, but the market seems to have taken a different view.

Luceco’s share price has fallen by more than 20% since the company’s half-year results were published last week. Investors appear to be pricing in a slowdown.

In the short term, I agree this business faces some headwinds. But as a long-term investor, I can see an opportunity here.

Luceco enjoys high profit margins and strong demand for its products. The group is also expanding into new areas, such as electric vehicle charging. I think this stock’s slump could make it one of the best shares to buy now. I’m certainly considering adding a starter position to my portfolio.

The post This UK stock just fell 33%! I think it’s one of the best shares to buy now appeared first on The Motley Fool UK.

Market share gains at this growth stock

Thanks to a “generally favourable” trading environment, the mid-cap announced some very decent interim numbers today. A buoyant residential Repair, Maintenance and Improvements (RMI) market in the UK allowed the lighting manufacturer and distributor to announce a 51.8% rise in revenue over the first half of 2021. Importantly, the £108.2m logged is far higher than that achieved in 2019 (£82.7m). This backs up the company’s belief that it is gaining market share. 

All told, pre-tax profit pretty much doubled to £16.6m over the period. As impressive as this is, the thing that really caught my eye was the 42.5% return on invested capital. In 2020, this was 24.5%. In 2019, this was a little over 18% (which is still impressive). This is great to see. 

Can all this continue?

I suspect it can. New business wins coupled with more people wanting to work from home should do no harm to its chances of continuing to increase revenue and profits. The forthcoming launch of a new EV charger range is another exciting development.

Importantly, Luceco also seems to have the financial firepower to support its growth strategy. Net debt stood at just £24.3m at the end of June.

As a further sign of just how confident management is, there was a 73.3% jump in the interim dividend from 1.5p to 2.6p per share today.

Cost pressures

Given the share price gains over the last year and change, it would be easy for me to assume there’s limited downside with Luceco. However, I certainly don’t think investing here would be risk-free.

As the company itself mentioned today, the pandemic has “brought severe supply chain disruption” and generated “significant cost inflation“. So far, it looks like it’s managed to navigate these choppy waters. However, Luceco did warn that cost pressures would likely continue for a while. This, in turn, could impact margins and may help explain why the share price was flat in early trading. 

Another potential thing for me to be aware of is the possibility that those already invested may decide to bank some profit. This is to be expected. That said, the relative illiquidity of this growth stock (less than 50% is actively traded on the market) could exacerbate any moves downwards. 

Long term winner

The near 150% rise in the Luceco share price over the past year is great evidence to support my belief that snapping up stakes in great businesses for the long term can bring me rich rewards. It certainly feels a lot less stressful than buying a ‘bargain’ stock with weak fundamentals and crossing my fingers!

Speaking of valuation, I’ll need to shell out 24 times forecast earnings for the current year to buy Luceco today. That’s high but not excessive, in my opinion, especially for such a quality operator.

There’s arguably (far) more risk to investing now than last year. However, I do think there are plenty of worse options for my portfolio than this growth stock. 

The post I’d invest £1,000 in this quality UK growth stock today! appeared first on The Motley Fool UK.