Looking for opportunities in the UK market today? Here are three stocks that could be worth a closer look.

Big dividends on offer

UK investors love big dividends so let’s start with a stock sporting a high yield, Aviva (LSE: AV.). It’s a well-established insurance and investment company.

Its share price has recently fallen to around 620p, versus 700p earlier in the year. At the current share price, the stock is trading on a forward-looking price-to-earnings (P/E) ratio of about 11 and offering a 6.4% dividend yield.

This company has been performing well recently. Last year, for example, group adjusted profit was £2.2bn, up from £1.8bn in 2024.

On the back of this performance, the insurer hiked its dividend by 10% (signalling that management is confident about the future). It also announced a £350m share buyback.

It’s worth noting that if the stock market keeps falling, Aviva’s wealth management revenues are going to take a hit.

Taking a five-year view though (our preferred time horizon here at The Motley Fool), I think Aviva shares should provide attractive returns.

An oversold name

Next we have Marks & Spencer (LSE: MKS). I see this retail stock as more of an oversold name that could rebound.

It’s currently trading near 340p. Back in late February, it was near 410p.

Now, when I talk about this stock being ‘oversold’, I’m not just saying it because the share price has tanked. I’m actually referring to a technical indicator known as the Relative Strength Index (RSI).

This measures the magnitude of share price movements. With this indicator, a reading under 30 signals that a stock is oversold and Marks and Spencer currently has a reading of 29.

I’ll point out that the spike in oil prices is a risk for this company. It could lead to higher transportation and energy costs and also potentially impact consumer demand.

One thing that this company has going for it, however, is that its customer base is a little more affluent. This could shelter it from a consumer slowdown.

A cheap AI stock

My third stock is a little racier. It’s Volex (LSE: VLX), a UK-based manufacturer of power cords, cables, and data connectivity products for ‘mission critical’ applications.

It’s currently trading for about 428p. This time last month, its share price was near 500p.

This company has momentum at the moment, thanks to its strategy of focusing on high-growth markets such as data centres (AI) and electric vehicles. In January, it said that revenue for the first nine months of its financial year was up 15% year on year and that full-year revenue would be ahead of expectations.

Of course, manufacturing tends to be cyclical. So, if we see an economic collapse as a result of high oil prices, this stock could underperform.

With the price-to-earnings ratio now under 15, however, I like the risk/reward set-up. I think it’s worthy of further research.

The post 3 shares to consider buying as the FTSE 100 plummets appeared first on The Motley Fool UK.

But investors could have generated higher returns with shares in a smaller British industrial company (that few people have heard of). This company specialises in manufacturing components for electric vehicles (EVs), medical equipment, and data centres and right now, it’s having a lot of success.

A UK company with momentum

The stock in focus today is Volex (LSE: VLX). It’s a UK-based global manufacturer of power cords, cables, and data connectivity products for ‘mission critical’ applications.

This company can trace its roots back to 1892 when two entrepreneurs started a manufacturing company in Manchester. It has come a long way since then – today it has 25 manufacturing sites across the world and over 13,000 employees.

At present, the company’s share price is around £4.55. That means that £1,000 buys 219 shares (ignoring trading commissions).

In terms of performance, the shares are up about 35% (versus 18% for Rolls-Royce) over the last six months and about 67% over the last year. They still look pretty cheap though, especially compared to Rolls-Royce.

An investment opportunity?

In my view, this stock has a lot going for it right now. For a start, the company is growing at an impressive pace thanks to its strategy of focusing on manufacturing products for structural growth markets (eg, data centres and EVs).

In January, it advised that for the first nine months to December 2025, group revenue was $902.7m, representing year-on-year organic constant currency growth of 14.8%. It noted at the time that it was benefitting from particularly strong growth in its Complex Industrial Technology division, where it makes cables for data centres.

On the back of this performance, management said that full-year revenue (for the year ending 31 March) would be ahead of market expectations. It added that operating profit would be ahead of the Board’s previous expectations.

We also have an attractive valuation. Looking at the earnings forecast for this financial year (38 cents), the price-to-earnings (P/E) ratio is just 16.

That seems very reasonable to me. Note that Rolls-Royce currently has a P/E ratio of about 40.

One other thing to highlight is the fact that in early February, Chief Operating Officer John Molloy bought 31,620 shares in the company at a price of £4.55 (today’s share price). This trading activity suggests that the insider expects the share price to keep rising (no director buys company stock if they expect it to tank).

Worth a closer look

I’ll point out that this company is economically sensitive. If we were to see a major economic slowdown in the years ahead, I’d expect its shares to underperform.

Its fortunes are also tied to certain industries. If, for example, the data centre industry was to experience a slowdown, growth could be compromised.

All things considered though, the risk/reward skew looks attractive to me. I believe this under-the-radar growth stock is worth a closer look right now.

The post £1,000 buys 219 shares of this red-hot UK industrial stock that’s outperforming Rolls-Royce appeared first on The Motley Fool UK.

Many investors worry that these AI shares now command sky-high valuations. They fear this leaves them at risk of price corrections if the stocks’ momentum slows.

But investors don’t need to buy these pricey US stocks to target large returns from the AI boom. Here are two UK shares to consider for the new tech revolution.

Riding the data centre boom

Sophisticated AI models require thousands of chips working in tandem, meaning small server rooms just don’t cut it anymore. This is driving demand for industrial-sized data centres with sophisticated cooling systems and robust power infrastructure.

This provides an enormous opportunity for warehouse operators like Tritax Big Box (LSE:BBOX). Accordingly, the FTSE 250 real estate investment trust (or REIT) — which chiefly rents it large-scale spaces out to delivery companies, retailers, and fast-moving consumer goods (FCMG) companies — is pushing aggressively into data centres.

The company acquired its first data hub site in January, which it predicts will be “one of the largest data centres in the UK“. And it followed this with a second shortly afterwards. The sites — which have a combined potential capacity of 272 MW — are in well-connected locations in London and have scope for long-term expansion.

With a pipeline of another 1 GW, Tritax is positioning itself as a major player in the digital infrastructure boom.

The UK currently has 477 data centres in operation. And construction firm Barbor ABI believes almost another 100 new sites will be needed between now and 2030 to meet demand. This provides a wonderful growth opportunity for the likes of Tritax.

Be mindful, though, that data centre development carries risks. Like its logistics and storage hubs, returns are at the mercy of rising build costs and interest rates.

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.

Another top AI-related stock

Cable maker Volex (LSE:VLX) is another great data centre play to consider. The high-speed cables it manufactures are essential tools in ensuring a reliable and fast-moving data connection.

More specifically, the company is a pioneer in the direct attach cables (DACs) segment. These are especially critical for AI applications, as they facilitate high bandwidth with minimal latency. And they are helping to drive business with both new and existing customers.

Volex sells its cables across the world, leaving it exposed to trade tariff-related pressures. But these troubles haven’t yet derailed its ability to deliver strong revenues growth — organic sales leapt 10.4% at constant currencies between April and June.

The business said its latest sales numbers reflect “continued momentum in the Electric Vehicles and Complex Industrial Technology end-markets, notably among Data Centre customers“.

As well as data centres, Volex has exposure to multiple other growth areas like electric cars, renewable energy, healthcare, and automation. This provides added profit-making opportunities, while simultaneously broadening its sales base and reducing reliance on any single market to drive earnings.

I think it’s a great all-rounder to consider for the booming digital economy.

The post 2 top AI-related stocks for investors to consider buying! appeared first on The Motley Fool UK.

I own a selection of funds and several individual shares that I’ve picked. And although the funds have performed well, it’s the individual stocks that have outperformed.

Striking gold

Investors looking to do the same could consider Caledonia Mining Group (LSE:CMCL). This is a gold exploration and mining company. And right now, it’s enjoying strong profitability due to a sustained high gold price.

The company estimates profitability for 2025 will be “materially ahead of market expectations”. That’s a phrase that frequently makes me smile.

If profits are up due to a high gold price, then the big question is whether it can remain elevated. There are several reasons why prices have risen over the past few years. Among them is a combination of geopolitical risks, global trade tensions, and a weakening US dollar.

Where next for gold?

Global economies have experienced many shocks in recent years and gold is often used as a hedge against this kind of risk.

I think uncertainties could persist, which should keep gold prices elevated. The World Gold Council agrees, forecasting some possible upside for the rest of the year.

This could bode well for Caledonia Mining. That said, bear in mind that there are factors that could cause gold prices to fall and temper profitability for this business. For instance, if global conflicts ease, it could lead to a dramatic fall in gold prices.

Finally, I like that this share offers several appealing financial metrics. For instance, it has a price-to-earnings ratio of just 10, a return on capital employed of 18%, and a 30% profit margin.

This is exactly the kind of UK share that could potentially supercharge an investor’s Stocks and Shares ISA.

Idea for a winning Stocks and Shares ISA

Another cheap share with strong fundamentals is Volex Group (LSE:VLX). It’s a manufacturer and supplier of power and data cables. It might not be a FTSE 100 household name, but this UK business achieved over $1bn of sales this year.

It operates across a diverse range of sectors that includes electric vehicles (EVs), data centres, and medical equipment.

Volex is experiencing strong growth in EVs, where sales grew by 40% this year.

Global sales of EVs are projected to grow from 17m in 2024 to over 30m in 2030. This could bode well for Volex cables.

Strong earnings despite pressures

Despite tariff uncertainty and inflationary pressures, it reported an outstanding year of growth for the company.

And, although it operates in some strong markets, it’s important to note that it’s not immune to wider economic downturns. Also that it sells its cables across several borders, so any escalation of tariffs between countries could raise its costs.

Given strong earnings growth, its price-to-earnings ratio of 14 appears attractive. I also like that it’s a well-managed business with a well-respected CEO.

I’d also note that its Chief Operating Officer bought around £150,000 of shares earlier this year. And although purchases by management don’t always cause share prices to jump, it’s a further encouraging factor.

The post Meet the 2 UK shares that could help double a Stocks and Shares ISA appeared first on The Motley Fool UK.

Interested in this? Here are three growth stocks at the heart of this revolution that could be worth considering.

Powering the AI industry

It’s impossible to talk about AI and not mention Nvidia (NASDAQ: NVDA). That’s because its ‘accelerated computing’ GPU (graphics processing unit) technology is powering the majority of AI applications today.

Without its technology, we wouldn’t have ChatGPT. To train this application, it took tens of thousands of Nvidia GPUs (these cost around $40k each).

Now, Nvidia shares have had an amazing run so they could pull back in the short term. However, taking a long-term view, I remain bullish.

In the near future, the company’s going to launch its new AI chip platform Blackwell. And in the words of CEO Jensen Huang, demand for these chips is ‘insane’:

We are at the beginning of a new industrial revolution

Nvidia CEO Jensen Huang

It’s worth noting that Nvidia’s a volatile stock. If there’s news a competitor’s developed a powerful new AI chip, it could fall.

I expect significant growth in the years ahead however. I plan to buy more shares for my portfolio on the dips.

The key to chip production

Taking a step back, computer chips in general are going to play a major role in the digital revolution. That’s because they’re essentially the ‘brains’ of all electronic devices.

One stock I like for exposure here is KLA Corp (NASDAQ: KLAC). It plays a vital role in the industry as its technology helps to ensure chip quality and production efficiency.

The way I see it, this is a great ‘picks-and-shovels play’ on the semiconductor industry. In the same way that those selling picks and shovels did well in the gold rush, this company should do well as the world becomes more digital in the years ahead (no matter which chip companies dominate the market).

I’ll point out that the chip industry can be cyclical at times. And concerns about market weakness can send this stock down.

We’re looking at a powerful long-term growth story here though. So I recently bought some shares in the company for my portfolio.

A UK data centre stock

Another area of technology that’s key to this digital revolution is data centres. These store and process the massive amounts of data used in AI applications.

One company I’ve invested in for exposure here is Volex (LSE: VLX). It’s a UK manufacturing company that specialises in data transmission cables. Recently, it’s been having success on the back of the global data centre boom. For the six-month period to the end of March, revenue growth in its Complex Industrial Technology division came in at 32%.

I have to remember that Volex also makes power products for other industries (electric vehicles, consumer electricals etc). And these industries can experience weakness at times.

I’m backing this company to do well on the back of the growth of the data centre industry though. Currently, it has a low valuation (the price-to-earnings (P/E) ratio is just 13) so I believe it has the potential to generate strong long-term returns.

The post The next industrial revolution has begun. Here are 3 growth stocks at its heart appeared first on The Motley Fool UK.

Here, I’m going to highlight three UK small-caps that I reckon are in bargain basement territory at present. I think these shares are worth considering today as the value on offer could quickly disappear if investor sentiment picks up.

A P/E ratio of 7.4

First up we have Renold (LSE: RNO). It’s an international supplier of industrial chains and related power transmission products.

This stock looks very undervalued to me. Currently, it trades on a forward-looking price-to-earnings (P/E) ratio of just 7.4.

Given that this company generates a large chunk of its revenues from the US (where construction activity is likely to be buoyant in the years ahead due to government spending on infrastructure) and that it has a strong order book, I reckon that earnings multiple is too low.

Now, it’s worth pointing out that Renold has a bit of debt on its balance sheet. This is a risk.

At the current valuation, however, I like risk/reward skew. It’s worth noting that the company just resumed paying dividends, which suggests that management is confident about the future and not so worried about the debt.

Growth at an attractive price

Next we have Team17 (LSE: TM17). It’s a British video game and educational app developer.

Currently, the P/E ratio here is about 12. I think that’s great value.

This is a company with an excellent growth track record. Over the last five years, its revenues have climbed by a whopping 270% to £159m.

Meanwhile, management is optimistic about the future. “Looking ahead, there is significant growth potential in our core markets,” said CEO Steve Bell in the company’s recent H1 results.

Of course, video gaming is a dynamic market and there’s no guarantee that Team17 will continue to have success with its games (which include Monster Sanctuary, Worms, and Overcooked: All You Can Eat).

Again though, at the current valuation, I think the risk/reward proposition here is attractive.

Significant long-term potential

Finally, check out Volex (LSE: VLX). It’s a manufacturer of critical power and data transmission products.

I hold this stock myself and one reason for this is that I reckon it’s undervalued. Currently, the P/E ratio here is just 12.9.

Given that Volex makes products for the fast-growing electric vehicle (EV) and data centre markets, and is enjoying strong growth itself (helped by key acquisitions), I reckon that multiple is on the low side.

It’s worth noting that the company recently advised that it’s performing well. In the first quarter of its financial year that ends on 31 March 2025, it registered year-on-year constant currency organic revenue growth of 9%, driven by “particularly strong performances” in the EV and data centre sectors.

Now, one issue with this company is that some of its markets can be a little cyclical at times. For example, last year, the EV market was quite weak.

Given this cyclicality, I think the key here is to take a long term view. Over the next decade, the EV and data centre markets are poised for significant growth, so Volex is well placed to do well.

The post 3 dirt cheap small-cap UK shares to consider buying this month appeared first on The Motley Fool UK.

I’m not saying that Rolls-Royce’s share price won’t continue ascending. But right now I’d rather look for other growth stocks to buy.

Sure, the FTSE 100 company’s rebound from the Covid-19 lows has been incredible. The airline industry is firing again, defence spending is robust, and its balance sheet’s in much better shape, helped by a successful restructuring under its no-longer-so-new CEO.

But it’s my opinion that these factors are now baked in to its full-fat valuation. At 28.1 times, Rolls-Royce’s forward price-to-earnings (P/E) ratio is more than double the Footsie average of around 11 times.

What’s more, significant threats exist that could derail its performance looking ahead. Company chief Tufan Erginbilgic continues to bemoan its “prolonged supply chain challenges“. Revenues could also tank if a US recession hits and the global economy cools down.

And in recent days, Cathay Pacific has grounded a number of planes owing to problems with their Rolls-Royce engines. Could the Footsie firm also be facing huge financial liabilities?

A better buy?

With this in mind, here’s a growth hero on my radar today. Like Rolls-Royce, it’s also experienced substantial share price growth in recent years.

Yet it offers far better value for money, as well as a chance for investors to profit from the artificial intelligence (AI) revolution.

Who wouldn’t want to give that a look?

Cable giant

As the digital revolution rolls on, cable manufacturer Volex Group (LSE:VLX) has plenty of earnings potential in the years ahead. It makes high-speed data cables that are used in telecommunications, data centres, and other applications that require fast and reliable data transmission.

More specifically, it’s also a leader in the manufacture of Direct Attach Cables (DACs). Why is this important? These cables provide high bandwidth with minimal latency, and as a consequence they deliver rapid and efficient data transfer. This makes them critical for AI applications.

And the business is on a roll right now. Thanks to strong demand from the electric vehicle and data centre sectors, organic revenues rose 9% at constant currencies in the three months to June, latest financials show.

A bargain growth share

At 366p per share, Volex’s share price has also detonated in recent times. It’s up more than 300% in the past five years.

However, it also provides decent value for money in my book. Its forward P/E ratio of 17.6 times doesn’t look that expensive for a growth-focused tech share.

Indeed, compared with other AI stocks like Nvidia (42.3 times), Microsoft (31.6 times) and Alphabet (21.4 times), Volex is terrifically cheap.

It also looks much better value than Rolls-Royce shares, as I mentioned above. A potential US recession might impact earnings in the short term, but If I had money to spend on a hot growth stock, this is the one I’d buy right now.

The post Forget Rolls-Royce shares! I’d rather buy this red hot growth stock appeared first on The Motley Fool UK.

Alphabet

What it does: Alphabet owns and operates a variety of digital services, from Googleto YouTube

By Christopher Ruane. Compared to the five-year gain in Nvidia stock (2,703%), the 223% increase in Alphabet (NASDAQ: GOOG) over that period may look weak.

In fact, few companies of Alphabet’s scale more than triple in value over five years.

Compared to Nvidia, it benefits from having a widely diversified range of businesses used daily by billions of people and corporate clients.

AI has helped turbocharge Nvidia’s valuation. While AI presents opportunities for Alphabet too, it also poses risks. The core search business could see demand slump, hurting the cash cow.

But Alphabet had proven its business model and enormous profitability before AI became a hot topic and I expect that to continue.

The company has always thrived on disruptive innovation, owns large brands and has sticky products with huge customer bases. I see those as long-term strengths.

Revenues last year topped $300bn, while net income was a whopping $74bn, two and half times higher than Nvidia’s.

Christopher Ruane owns shares in Alphabet.

Raspberry Pi

What it does: Raspberry Pi makes cheap Linux computers that are ideal for control and robotics applications.

By Alan Oscroft. Since IPO, the Raspberry Pi (LSE: RPI) share price has shown almost no overall movement. That’s a bit of a disappointing start.

It’s all about artificial intelligence (AI) these days, and the robotics side of that surely offers great potential for small, cheap computers designed for control applications.

Raspberry Pi computers are tiny, and just think of the computing power you could get from a few dozen of those tucked in the nooks and crannies of a Tesla robotaxi, or a competing vehicle.

Valuing the stock is so tricky that I’m not going to try. But it has to be cheap compared to those soaring Nasdaq stocks, surely? Valuation is also the big risk. If I buy some Raspberry Pi shares, I’ll essentially be buying blind on that score, and hoping.

So it would only be a small purchase for me. But I might go for it with my next batch of investment cash.

Alan Oscroft has no position in Raspberry Pi or Tesla.

Scottish Mortgage Investment Trust

What it does: Scottish Mortgage Investment Trust aims to identify, own, and support the world’s most exceptional growth companies.  

By Paul Summers. It’s hard not to be positive on the long-term outlook for Nvidia stock. The trouble is that market expectations are astronomically high. I reckon this makes it likely that the shares will have a sustained wobble before long.

I’d rather invest my hard-earned cash into a fund that contains some, but not too much, exposure to the chip maker. 

Scottish Mortgage (LSE: SMT) seeks to own the best growth stocks going, many of which are tech-related. At almost 10%, Nvidia is its largest holding. But should the latter tank as a result of missing earnings estimates, the rest of its portfolio should help to limit the damage. Naturally, a whole-sector sell-off would be more painful.

Having struggled for momentum in recent years, the trust trades at a discount to net assets. I’m not sure this will remain the case as interest rates are cut.

Paul Summers owns shares in Scottish Mortgage Investment Trust

Volex

What it does: Volex manufactures electrical cords and cables, including those used extensively in data centres.

Nvidia isn’t the only ‘pick and shovel’ stock that investors can buy to profit from the AI revolution. While the US company supplies microchips, London-listed Volex (LSE:VLX) provides the cables that keep data centres up and running.

The data-intensive nature of AI means that demand for high-speed Direct Attach Cables (DAC) is flying. Thanks in part to this new tech phenomenon, revenues from Volex’s Complex Industrial Technology division soared 35.4% in the 12 months to March (to $213.4m), with sales to data centres increasing 131% year on year.

The AIM business is currently embarked on a five-year growth strategy to turbocharge revenues, too. It hopes to print group revenues of $1.2bn by 2027, up from $912.8m last year. Plans include building 800 gigabit-per-second cables that improve power efficiency, reduce data loss and boost signal integrity, all of which are essential for AI applications.

Volex operates in a highly competitive market. But the pace of industry growth — combined with the firm’s robust relationships with leading tech companies — still makes it a top AI stock to consider, in my opinion.

Royston Wild does not own shares in Volex.

The post 4 tech shares Fools would buy before Nvidia stock appeared first on The Motley Fool UK.

Instead of the burgeoning Nvidia (NASDAQ: NVDA) shares, I’d love to buy Volex (LSE: VLX) shares when I next have some investable funds.

Here’s why!

Nvidia shares continue their great run

I’m not saying Nvidia’s recent performance and share price ascent isn’t worth taking a closer look at.

The business seems to be the hot AI stock of the moment, and continues to churn out excellent results consistently.

However, for me, I’m looking for stocks that offer a better entry point, and a different play on the AI revolution.

Nvidia continues to be a popular stock among investors, but for me, it could be a victim of its own success. For example, the shares now trade on a price-to-earnings ratio of 46! This is higher than more established tech firms including Alphabet and Meta!

Is growth already priced in? Plus, if sales were to drop, could the share price fall off a cliff? I’ll be watching with interest, but I won’t be buying the shares any time soon.

The grunt work behind the magic of AI

It may not be instantly apparent where Volex can capitalise on the AI boom. After all, the business is a manufacturing business specialising in interconnect solutions. These include high-speed copper, fibre optic, and other cables. However, it is an industry leader in data centre cables.

Data centre cables are key to run, you guessed it, data centres. These data centres play a crucial role in AI as huge amounts of data is needed to configure and execute AI.

Volex shares are up 21% over a 12-month period from 287p at this time last year, to current levels of 348p.

Data cables may not be the most direct, or glamorous, route to capitalise on the AI revolution, but I reckon this is a great way to gain exposure, at least for me and my holdings.

The shares trade on a price-to-earnings ratio of 16, which I consider decent value for money. Plus, a small dividend yield of 1.2% could grow. However, I do understand that dividends are never guaranteed.

Finally, Volex’s most recent FY results for the year ended March 2024 made for good reading. The key takeaways for me were increases in revenue, operating profit, and its final dividend. However, the firm’s net debt did rise, which could have an impact on its balance sheet.

From a bearish view, the firm is rather small, which means it could be prone to more volatility, and even takeover bids from larger firms out there. Plus, Volex has a track record of acquisitions. These are great to boost growth when they workout. However, only one bad one could have untold financial and reputational damage, not to mention hurting investor sentiment.

Overall, for a cheaper, alternative option to access the AI revolution, Volex is a stock I’m firmly eyeing up.

The post Forget Nvidia shares, I’d rather buy this FTSE AI stock instead appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Ashtead Technology Holdings

What it does: Ashtead Technology is a subsea equipment rental company operating globally in both offshore wind and oil and gas markets.   

By Ben McPoland. Given its double-digit dip since May, Ashtead Technology (LSE: AT.) stock now looks attractive to me. In 2023, the firm’s revenue surged 51% year on year to £110m, with growth across all its geographic markets. Adjusted earnings per share (EPS) rocketed 73% to 33.4p.

It also acquired ACE Winches in November, bolstering its vast offerings of offshore rental equipment. That said, acquisitions have increased its net debt over the last few years, which is worth keeping an eye on.

As I write, the stock’s forward price-to-earnings (P/E) ratio is about 19. I think that looks attractive, especially as The City sees the company’s revenue nearly doubling to £200m by the end of 2026.

Looking further ahead, the firm appears to be in the sweet spot. Not only are companies increasingly opting to rent equipment to lower capital expenditure, but the energy transition means both the decommissioning of oil and gas infrastructure and offshore wind markets are tipped for strong future growth.

Ben McPoland owns shares of Ashtead Technology.

James Halstead

What it does: James Halstead is a manufacturer and international distributor of floor coverings

By Paul Summers. The AIM isn’t exactly overburdened with high-quality companies but there are a few diamonds in the rough. One example, in my view, is floor covering specialist James Halstead (LSE: JHD). 

Having generated consistently excellent returns on the money it puts to work, this firm has delivered great gains for long-term holders.

That said, the last two years have been tough for the share price as inflationary pressures have kicked in.

But I think we’re past the worst. Supporting this, the company announced in March that pre-tax profit had climbed 18% to £27.4m for the second half of 2023.

At a pretty expensive valuation of 19 times forecast FY25 earnings, things could get nasty if I’m wrong.

Then again, a strong balance sheet suggests Halstead should be able to weather any further storms. There’s a chunky 4.5% dividend yield too. 

I reckon this is one to consider tucking away.

Paul Summers has no position in James Halstead

Volex

What it does: Volex is a manufacturing company that specialises in power cords and data transmission cables. It serves customers in the data centre, consumer electronics, healthcare, and electric vehicle (EV) markets. 

By Edward Sheldon, CFA. One investment theme I’m really excited about right now is the global data centre buildout. Across the world, large technology companies are building data centres everywhere to handle the huge amount of data being generated today (and use it for things like artificial intelligence). 

Volex (LSE: VLX) strikes me as a great way to play this theme. A manufacturing company, it generates a decent chunk of its revenues from the production of power cords and data transmission cables for data centres.

And sales from this side of the business are growing fast. In H1 FY2024, for example, revenues in its ‘Complex Industrial Technology’ division grew by a huge 30.1% on an organic basis to $101m (about 25% of total revenues). 

It’s worth noting that sales in its other divisions have not been growing as quickly. In H1 FY2024, revenues from its EV division actually declined. Low or negative growth from these divisions could be a risk going forward. 

With the stock trading at a low earnings multiple, however, I like the risk/reward setup. 

Edward Sheldon owns shares in Volex 

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