Begbies Traynor

Investing in UK-focused shares can be risky as economists tip prolonged weakness in the domestic economy. Yet Bebgies Traynor (LSE:BEG) is a stock that could thrive in this landscape.

You see, this company’s operations are about as counter-cyclical as it gets. Demand for its insolvency services is currently soaring as the number of firms experiencing financial distress unfortunately balloons. The AIM share recently announced that “we continue to take an encouraging level of new insolvency appointments across all market segments”.

This week, web-hosting business GoDaddy predicted that as many as 630,000 small and micro businesses could go bust this year. Companies of all sizes are struggling as consumers cut spending, and rising energy bills from April will heap extra pressure on British firms.

Naturally, trading activity at Begbies Traynor could fall as economic conditions improve. But I believe the firm’s aggressive expansion strategy should still deliver excellent long-term earnings growth. Just this month, it paid £400,000 to acquire chartered surveyors Mark Jenkinson & Son.

Frontier Developments

Games developer Frontier Developments (LSE:FDEV) has been having a tough time of late. Its share price slumped in January when it downgraded revenues and profits forecasts due to disappointing festive trading.

Weak sales remains an ongoing danger for the small-cap share too. Not only could turnover suffer as the cost-of-living crisis endures. Intense competition in the video games market is a threat that will never go away.

Frontier shares however, still appeal to me as a long-term investor. The video games market is already bigger than the movie and music industries combined and tipped for further stratospheric growth.

Frontier has shown it has what it takes to make a splash in the industry too. Popular titles include the Jurassic World, F1 Manager and Elite Dangerous, and the business is rapidly increasing its headcount to grow its games portfolio.

Vertu Motors

Demand for big-ticket goods often sinks when economic conditions worsen. So profits at car retailer Vertu Motors (LSE:VTU) are in danger of sustained weakness as the cost-of-living crisis endures.

Despite this, the business could be supported by a surge in demand for electric vehicles (EVs). The Society of Motor Manufacturers and Traders believes 500,000 of these vehicles will be sold in 2022. That’s up from the record 452,527 that hit the road last year.

Consumers are more likely to buy these new-age vehicles from showrooms as well. As a result, Vertu — which has almost 200 sales outlets across the country — is well positioned to win plenty of customers.

There are signs that the EV market is set for strong and sustained growth in the future. I’m expecting this small-cap share to make big profits in the process.

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Here are two income-producing AIM stocks that have caught my attention. I’ll be looking to add them to my own investment portfolio if I have spare cash to invest.

Accrol Group Holdings

Tissue manufacturer Accrol Group Holdings (LSE:ACRL) only carries a 1.2% dividend yield for this financial year. But City analysts are expecting shareholder payouts to grow strongly over the medium term as earnings recover.

Supply chain problems and elevated costs have smacked profits here in recent times. And they could remain an issue for the business going forwards.

But I believe the pace at which sales of its own-label products is growing still makes it a top buy. It announced a “substantial growth in volume, revenue, and profit” between May and October as the cost-of-living crisis drew shoppers away from more expensive toilet tissue brands.

Accrol’s market share leapt two percentage points year on year, to 21.5%. And I don’t believe the business is a flash in the pan. I think profits here could keep marching higher as the value retail market grows.

Analysts at IGD expect discount retail in the UK to grow 23.9% between 2022 and 2027. The steady expansion of low-cost chains like Aldi and Lidl — allied with shoppers increasingly demanding more for their money — provides Accrol with excellent revenues opportunities.

One final thing. At current prices, the company trades on a price-to-earnings growth (PEG) ratio of below 1 for each of the next three fiscal years. Such readings indicate a stock is undervalued.

Vertu Motors

Buying retail shares can be dangerous for investors as Britain’s economy struggles. The outlook is especially daunting for sellers of big-ticket items like cars.

Still, it’s my opinion that this tough landscape is baked into Vertu Motors’ (LSE:VTU) rock-bottom valuation. Today, the business trades on a forward price-to-earnings (P/E) ratio of 7.4 times.

It’s also true that the company’s extensive used-car network could help protect it from broader pressures on consumers’ wallets. Sales of its pre-owned vehicles might rise as people switch down from more expensive new models.

As a long-term investor, I believe purchasing Vertu could be a good way to capitalise on the electric vehicle (EV) boom too. This is because purchasers of these cutting-edge cars are more likely to visit a showroom for advice before buying. Vertu has 188 franchised outlets on its books following the acquisition of Helston Motors in December.

Like Accrol, Vertu is tipped to also grow dividends over the next few years. This pushes a healthy yield of 3% for the current 12-month period steadily higher.

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Of course, the flipside of this also applies. Smaller companies may be less well established and more likely to run into financial difficulties.

The two companies I’m looking at today are both relatively small, but they’re profitable and have sound finances, in my view. I think they could both be good investments over the next three to five years. Here’s why.

Value price, quality business?

Car sales group Vertu Motors (LSE: VTU) has 188 franchised dealerships across the UK, with a focus on premium brands such as BMW, Jaguar Land Rover and MINI.

Admittedly, the UK car market is expected to slow this year. But recent trading has been strong and I think Vertu’s forecast price-to-earnings (P/E) ratio of six already reflects a cautious outlook.

Another attraction for me is that the group owns the freehold for many of its dealerships. This means there’s plenty of asset-backing for the share price. If the business runs into trouble, freehold property can usually be used to raise cash.

Vertu’s most recent accounts showed tangible assets of 71p per share, compared to a share price of 56p. The recent acquisition of dealer group Helston Garages means that these figures will have changed slightly, but I think the balance sheet should still be very strong.

What could go wrong? This business has a decent market share and I think it’s well managed. But if the UK suffers a severe recession, profits could fall much further than expected. If that happened, the shares could fall further and the dividend could be cut.

As things stand today though, I think Vertu looks decent value. I reckon this penny stock could perform well in an economic recovery.

Delivering good news

My second pick is distribution group Smiths News (LSE: SNWS). This company has an overnight delivery network that’s used to deliver newspapers and magazines to retailers.

There’s an obvious risk with this business — printed newspaper and magazine circulation is falling steadily. However, according to Smiths the decline is fairly steady and predictable. So far, the company has been able to adjust its network each year to stay profitable at lower volumes.

The long-term uncertainty surrounding this business is reflected in a super-low valuation. Smiths News currently trades on just five times forecast earnings, with a well-covered 7% dividend yield.

The risk is that at some point, someone will probably need to find a new use for the group’s overnight network. Otherwise it could become unsustainable.

Despite this, the next few years seem pretty safe. Smiths has already secured long-term contracts for 46% of its newspaper and magazine revenue. A recent deal with Telegraph Media Group runs to 2029, for example.

If the dividend is held, then the 7% yield would provide a 35% return in five years, even if the shares don’t move.

I wouldn’t bet the farm on this stock, but I think it probably offers a good opportunity at current levels.

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Vertu Motors

Sellers of luxury goods face significant uncertainty as the cost of living crisis worsens. But its my belief that car retailers like Vertu Motors (LSE VTU) will profit enormously from soaring demand for electric vehicles (EVs). And this makes the UK share a top buy for me for the near term and beyond.

It’s not just environmental concerns that are driving sales of low-carbon cars. Rocketing petrol and diesel prices — and their impact on customer wallets — are also boosting consumer interest.

A study by motoring consultancy New AutoMotive shows that the cost of running an EV is now 80% cheaper than a car with an internal combustion engine. The news comes as the cost of filling the tank of an average family car has passed £100 for the first time.

Data from the Society of Motor Manufacturers and Traders (SMMT) reveals how solid demand for EVs remains despite soaring inflation. Sales of new battery EVs jumped 17.7% year-on-year in May, latest data shows.

I worry that Vertu Motors faces the prospect of empty showrooms as the car industry faces ongoing production issues. However, the business is enjoying better margins on its new and used vehicles due to tighter supply, reducing a lot of the danger to profits.

Besides, I think that Vertu’s ultra-cheap share price reflects the risks it faces today. At 57.9p per share, the retailer trades on a forward price-to-earnings (P/E) ratio of just 7.7 times.

Vertu’s dividend yield also clocks in at a handy 3.2% at current prices, providing an added bonus.

The Berkeley Group

I already own a couple of FTSE 100 housebuilders in my portfolio. And I’m considering adding The Berkeley Group (LSE: BKG) to the set as the housing market keeps steaming ahead.

Rising interest rates pose a dangers to buyer affordability — and thus newbuild demand — looking ahead. So does the deteriorating UK economy which threatens to damage market confidence.

At the moment though, house prices continue to rise at breakneck speed. And it encourages me to believe that Berkeley and its peers should continue to enjoy handsome earnings growth. Latest data from Halifax shows the average property price in the UK rose 10.5% in May.

I like Berkeley in particular because of its focus on the more economically-stable regions of London and the South East. Official data this week showed that the capital’s economy (along with Northern Ireland) is now back above pre-pandemic levels while other regions struggle.

Finally, Berkeley offers excellent value for money right now. The housebuilder trades on a forward P/E ratio of 10.7 times. It also offers a 5.6% dividend yield at current prices of £42.30 per share. I think this is a top FTSE 100 share for me to buy today.

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Vertu Motors

What it does: Sells new and used vehicles (and provides after-sales services) through its 160 showrooms.

Friday’s closing price: 58.4p per share

I believe revenues at motor retailer Vertu Motors (LSE: VTU) could rocket as demand for electric vehicles (EVs) increases.

According to Uswitch, the number of EVs on British roads leapt tenfold between 2015 and 2020 (to 447,359 units). Uptake of these low-carbon vehicles has boomed all over the world as worries over the climate crisis have intensified. And EV sales have been boosted more recently by soaring petrol and diesel prices.

I’m concerned about how supply chain issues could damage profits at businesses like Vertu. This threatens to keep nudging vehicle prices higher — a dangerous scenario as the cost of living crisis worsens — and could also result in stock shortages.

However, Vertu Motors has so far been able to navigate these problems effectively. And this fills me with encouragement. Adjusted pre-tax profits soared to a record level of £80.7m in the 12 months to February. This was helped by gross margins rising to a fatty 12% as unit shortages boosted prices.

Today Vertu Motors trades on a forward price-to-earnings (P/E) ratio of just 7.7 times. I think this fails to reflect the penny stock’s excellent growth opportunities during the EV explosion.

Kingspan Group

What it does: A supplier of construction products with a focus on the ‘green’ economy.
Friday’s closing price: 75.9 euro cents per share

I believe Kingspan Group (LSE: KGP) could thrive over the next decade too as the drive for energy efficiency picks up.

Kingspan sells a huge range of building materials but is perhaps best known as a titan in the field of insulation products. Sales of these products are rising as companies and consumers try to reduce their carbon footprints and cut power bills.

Indeed, emergency callout specialist Homeserve has witnessed “early signs of a shift of emphasis” towards green home improvements. It said last week that people are beginning to switch away from kitchen and bathroom upgrades, for example, towards cost-saving improvements like insulation and fitting solar panels.

Penny stock Kingspan is about more than just insulation, however. It supplies products that improve the amount of natural light entering a building, reducing the need for lighting. Other solutions include the management of water and wastewater and boosting a structure’s ventilation.

Sales at Kingspan would take a hit if inflation keeps soaring and the construction industry slows. However, I think this threat is more than reflected by the company’s recent share price slump. As a long-term investor I think Kingspan could be a brilliant dip buy for me right now.

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A shortage of semiconductor chips and essential parts of new vehicles, coupled with the global supply chain crisis, has led to a shortage of new vehicles being manufactured. Used car sales in the UK rose 5.1% between January and March this year, compared to the same period last year.

UK shares have a competitive advantage

Motorpoint (LSE:MOTR) is the UK’s largest independent vehicle retailer. It specialises in selling used “nearly new” cars that are usually two to three years old. Motorpoint has large retail outlets strategically located throughout the country.

As I write, Motorpoint shares are trading for 243p. At this time last year, the shares were trading for 286p, which is a 15% drop over a 12-month period.

I like Motorpoint shares for three reasons. Firstly, many UK shares have seen prices dip due to a market correction in recent months. At current levels, Motorpoint shares look good value for money on a price-to-earnings ratio of 20. The industry average is closer to 30.

Next, Motorpoint possesses a competitive advantage due to its profile, reputation, and position as the largest vehicle retailer in the UK. With its extensive presence and an online arm for online sales, the business could be primed to secure sales and boost performance.

I do understand that past performance is not a guarantee of the future. However, looking at Motorpoint’s recent year-end update release last month, it said it expects to report a revenue increase of 82% for the year ended 31 March 2022 compared to 2021. It also noted its market share increased too.

Motorpoint shares could come under pressure if macroeconomic headwinds are curbed and the supply chain issue and semiconductor issue are resolved. This could mean newer cars are more readily available.

Pick #2

Vertu Motors (LSE:VTU) operates a chain of franchised motor dealerships across the country selling vehicles on behalf of well-known brands such as Audi, BMW, and Land Rover.

The company sells new and used cars. Its used car arm should be more lucrative until the current macroeconomic issues ease.

Vertu shares are currently trading as a penny stock, for 52p. At this time last year, the shares were trading for 46p, which is a 13% increase over a 12-month period. Vertu, like many other UK shares, saw its share price drop in recent months due to the stock market correction.

I think Vertu shares look cheap on a price-to-earnings ratio of just 3. In addition to this, the shares could help boost my passive income stream. Vertu shares’ dividend yield is just less than 1.5%. Of course, dividends are never guaranteed.

Looking back, I can see Vertu grew revenue and profit for three years between 2018 and 2020. 2021 levels dipped due to the pandemic. Results for the year ended 28 February 2022 were released today. Record trading resulted in an increase in revenue, profit before tax, and net cash. A dividend of 1.7p per share was also declared.

Vertu’s biggest issue could be competition in the saturated market as it continues to jostle for market share.

I’d add both of these UK shares to my holdings and believe they could provide me with lucrative returns in the longer term.

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I think Vertu Motors (LSE: VTU) could be one of the best ways for me to execute this plan. And at current prices below £1 per share, I think it could be too cheap to miss.

A growing market

Britain is the fifth largest European market for electric passenger vehicles. Yet according to researchers at Statista battery- and hybrid-powered vehicles command a market share of below 20%.

This gives car retailers like Vertu Motors plenty of upside to exploit as interest in EVs takes off. According to the Office for National Statistics, 44% of Britons say they are likely, or very likely, to switch to an all-EV from one that uses fossil fuels over the next decade.

Four out of 10 of these people said that they plan to make the switch over the next five years too.

BIG business

I think it’s particularly well-placed to capitalise on the EV boom. The internet is becoming an increasingly important channel for car retailers in the post-pandemic landscape. But customers who are looking to buy an EV are more likely to visit a showroom for face-to-face advice on these new technologies.

It has a huge network of almost 160 dealerships on its books. This broad geographic wingspan could give it the edge when it comes to winning EV customers.

I also like Vertu because of the huge range of EVs it stocks. The business has dealerships representing 32 of the world’s largest car manufacturers. This means it sells most of the country’s most popular EVs like the Kia e-Niro, Volkswagen ID.3 and Nissan’s Leaf.

Supply strains

The long-term outlook for Vertu is pretty bright, in my opinion. However, I am concerned that profits could suffer if problems with car production continue and stock levels are squeezed.

Latest Society of Motor Manufacturers and Traders (SMMT) data shows new car registrations fall 15.8% in April. Just 119,167 units rolled out of UK showrooms last month, it said on Thursday, with “global supply chain shortages” hampering new vehicle deliveries. Vertu has warned of the uncertainties that these supply issues pose to its business.

A cheap penny stock I’d buy

Still, I think the returns I can expect to make from owning this one over the next decade make the penny stock a great buy today. And at current prices of 51.2p per share, I think Vertu is particularly attractive. This means that it trades on a forward price-to-earnings (P/E) ratio of just 7 times.

What’s more, Vertu also offers great value in terms of dividends. Its forward yield sits at 4.1%, ahead of the 3.7% average for UK shares.

I think Vertu’s a great way for me to make money from the green revolution.

The post A dirt-cheap penny stock I’d buy for the electric vehicle boom! appeared first on The Motley Fool UK.

I’m searching for the best penny stocks to buy for my portfolio in April. Here are just a couple that have attracted my attention today. I’d happily spend several grand on each in the coming days.

Investing for the EV boom

Investing in retail stocks is particularly risky today as the cost of living crisis worsens. The immediate outlook is particularly dicey for sellers of big-ticket items like car retailer Lookers (LSE: LOOK) too.

Still, at current prices of 67.2p I’m considering adding the penny stock to my portfolio. This is because Lookers currently trades on a forward price-to-earnings (P/E) ratio of just 8.7 times. This is comfortably below the bargain benchmark of 10 times and below. I think profits here could surge over the long term as the electric vehicle (EV) revolution rolls on.

EV sales are soaring as concerns over the environment and rising petrol and diesel prices grow. Experts believe this momentum is set to click through the gears as the decade rolls on too. Electricity regulator Ofgem believes that almost one in four British households will have bought one of these low-carbon vehicles by 2030.

Government and businesses are spending huge amounts on infrastructure to make this a reality too. Today, eEnergy announced plans with EO Charging to install 50,000 charging points in office locations by the end of the decade.

Lookers has a network of 150 locations across the country. And it sells cars from dozens of the world’s leading motor manufacturers like Ford, Toyota, Volkswagen and BMW. It’s therefore well placed to exploit the blooming popularity of EVs.

Going for gold

I believe that buying gold stocks remains a good idea today. Bullion prices have retreated from the near-record highs struck earlier in March. But at $1,930 per ounce, they remain in range of another attack on those peaks.

It’s my opinion that gold could surge higher again before too long, too, on account of soaring inflation. Prices are rising at an alarming rate and above what economists were predicting, too. This gives plenty of scope for precious metals to surge again.

Today, for example, it was announced that German consumer price inflation hit 41-year highs of 7.3% in March. This beat market predictions by around a full percentage point. Prices increases are set to get even more intense across the globe too as energy prices increase and supply chain problems continue.

I can buy gold or gold-backed financial instruments like exchange-traded funds (ETFs) to benefit from rising metal prices. However, I’d much rather buy a gold-producing stock like Centamin (LSE: CEY). This way I can play the gold price boom while also receiving dividends.

And today Centamin’s dividend yield sits at a tasty 4.6%. I’d buy this penny stock despite the threat that a resurgent US dollar could pose to gold prices.

The post £5k to invest? 2 penny stocks to buy in April! appeared first on The Motley Fool UK.

A top electric vehicle-themed stock

I think profits at Vertu Motors (LSE: VTU) could soar over the next decade as demand for electric vehicles (or EVs) takes off.

Sales of these low-carbon vehicles are certainly rocketing right now. Latest industry figures showed that battery and hybrid vehicle sales in the UK leapt more than 120% year-on-year in February. And last week the government announced plans for 300,000 charging points to be available by 2030 in encouraging news for the industry.

This would be 10 times the current level and could bolster EV sales still further. Concerns over range and ease of charging continue to influence the buying decisions of many people.

Vertu Motors operates more than 150 dealerships across the UK and sells product from most of the world’s leading carbuilders. It therefore has significant revenues potential as demand for low-emissions vehicles booms (today it sells nine out of 10 of the country’s most popular EVs).

Threats to Vertu Motors

My main concern with buying it today is the threat of sinking revenues in the near term. This penny stock is highly sensitive to broader economic conditions so the current cost of living casts a shadow over it. The company also faces the threat of prolonged stock shortages as weak semiconductor supplies persist.

Latest figures from the Society of Motor Manufacturers and Traders (SMMT) showed car production in Britain tanking 41% year-on-year last month. This was the biggest February fall for some 13 years.

Problems could get even worse too if Covid-19 cases in China keep rising and chip manufacturing is hit.

Why I’d still buy this penny stock

That being said, as someone who invests with a long-term view I’d still buy Vertu Motors today. The stock isn’t without risk. But this is the same with any UK share and I think the car retailer could deliver delicious shareholder returns over the next decade.

Besides, at current prices I think Vertu Motors could be too cheap to miss despite those aforementioned threats. The retailer’s share price has slumped around 15% from January’s multi-year highs. This leaves it trading on a forward price-to-earnings (P/E) ratio of 8.8 times for this fiscal year (to February 2023). This is well inside value territory of 10 times and below.

Vertu Motors also offers plenty of punch from a dividend perspective at recent prices of 64.4p. A predicted 2.3p per share full-year payout results in a chunky 3.3% dividend yield.

And what’s more, this anticipated dividend is covered 3.5 times by expected earnings, well above the widely-regarded security benchmark of two times. This gives me confidence that Vertu Motors should make this estimated dividend even if conditions in the UK car market worsen considerably in the near term.

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As a long-term investor I don’t think I need to be overly concerned with current market volatility, anyway. Sure, the sharp falls in UK share prices more recently could take a bite out of my final returns. But I’m convinced that the value of my investments will rebound strongly. On a longer timescale I believe that history is on my side.

Investing like Warren Buffett

So I won’t be selling my shares in light of recent market volatility. In fact I’m looking for some top bargains to buy following the fresh share price falls today. I plan to follow the strategy of billionaire investor Warren Buffett when stock prices come crashing down. He famously claimed that one should “be fearful when others are greedy, and greedy when others are fearful.” This way I have the chance to make some robust returns when the market eventually rebounds.

Here is one top penny stock I’m thinking of buying following recent share price falls.

A top electric vehicle stock

Vertu Motors (LSE: VTU) doesn’t make low-carbon vehicles or the parts that help them run. But its role as a major auto retailer in the UK still makes it top electric vehicle stock to buy in my book.

Strong demand for these greener cars helped Vertu’s like-for-like sales rise 9.4% in the five months to January, latest financials show. And data from the Society of Motor Manufacturers and Traders (SMMT) today shows that the popularity of electric vehicles has continued to soar since then.

Sales of battery, hybrid and plug-in hybrid vehicles rocketed 123% year-on-year in February. This was higher than the 92.5% rise recorded in January, the SMMT said, a period when car showrooms were also affected by Covid-19 lockdowns.

A dirt-cheap penny stock I’d buy

As concerns over the environment grow, people are switching from their old petrol and diesel vehicles to battery- and hybrid-powered vehicles in huge numbers. And lawmakers are aggressively acting to speed up adoption of these greener cars too. The Mayor of London, for example, is reported to be planning to turn the whole of London into an ultra-low emissions zone. This all bodes well for Vertu Motors and its industry rivals.

My main concern with Vertu Motors is how soaring inflation could hit profits in the nearer term. Demand for its big-ticket items could come under severe pressure as consumer spending power crumbles.

Still, this is a risk I’d be prepared to take given the cheapness of the shares. The penny stock has fallen 17% in value since the start of 2022. This leaves the business trading on a forward price-to-earnings (P/E) ratio of just 9.6 times, below the bargain benchmark of 10 times. I think this is a great UK share to buy to capitalise on the green revolution.

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