What happened

Windward is an Israel-based software firm. Its AI-powered platform provides real-time insights on vessels, aiding data-driven decisions in risk management, compliance, supply chains, and maritime intelligence.

Over the past three years, the company has more than doubled its annual recurring revenue and more than tripled its global customer base. I’m not surprised it’s been snapped up.

On 24 December, it agreed to be acquired by Octopus UK Bidco, a subsidiary of FTV Capital’s investment fund. Under the terms, shareholders will receive 215p per share, valuing the company at approximately £216m, a 47% premium on Windward’s closing price of 146p on 23 December.

The share price is currently at 207p, slightly below that. But I’m not going to wait about for the extra few pence. I’m up 86% on my three separate purchases across 2024. I’ll take that.

Then again, it’s always sad to see a promising small company disappear from my portfolio. As Brad Bernstein, managing partner at the acquiring fund, remarked: “Windward has built a best-in-class maritime AI-based analytics platform spanning use cases across risk, compliance, trading and the supply chain.”

The stock in question

So how do I plan to reinvest the windfall from Windward? Well, there are half a dozen shares that I’ve been wanting to add to on a dip and one is BAE Systems (LSE: BA.)

Shares of the defence giant are down 18% since mid-November. I think that constitutes a dip.

There are three key reasons why I plan to buy more shares. First, the valuation looks attractive, with the stock trading at a forward-looking price-to-earnings multiple of 15.2. That’s the lowest this ratio has been for some time.

Second, the forward dividend yield has crept up to 3.1%. While no dividends are guaranteed, I’m reassured that BAE is a Dividend Aristocrat, with over 25 years of increases under its belt.

In 2025, analysts have a near-10% dividend rise pencilled in. And due to its record order backlog of £74bn, I expect BAE to afford rising dividends for many more years.

Next, we have a noticeable price target disparity. The average 12-month price target from City brokers is now 1,492p, which is 30% higher than the current level. It might never reach that price, but this suggests to me that BAE’s far from overvalued.

Recently, Deutsche Bank reaffirmed its Buy rating on the stock. It said: “We see 2025 as another good year for order intake at BAE Systems, with both Foreign Military Sales and Eurofighter orders set to contribute to the company’s performance.”

Trump wildcard

The company sells arms to governments in the UK, North America, Europe, Middle East, and Asia Pacific. But the US is a key market, and investors appear concerned that Donald Trump’s efficiency drive could result in lower military spending. This is a risk.

Longer term though, I think the company remains perfectly positioned to capitalise on higher NATO spending and rising defence budgets worldwide.

The post I’ll sell this ex-penny stock, after it rocketed 41% on Christmas Eve, and buy this FTSE 100 share appeared first on The Motley Fool UK.

A.G. Barr

What it does: A.G. Barr is a drinks company. Its main product is Irn Bru and it has recently added Boost via an acquisition.

By Stephen Wright. Shares A.G. Barr (LSE:BAG) fell after the latest trading update. Narrower margins meant profits came in lower than expected.

I think, however, this is a short-term issue and the long-term picture looks much more positive. That’s why I’ve taken the opportunity to buy the stock for my portfolio.

My investment thesis for A.G. Barr is based on two ideas. One is that margins are going to expand as the company completes its integration of Boost Drinks, which should boost(!) profitability. 

The other is the price-to-earnings (P/E) multiple is going to increase as a result. Right now, the stock is trading at a P/E ratio below its 10-year average and I expect this to  improve if profits grow.

A.G. Barr has recently changed its CEO, which makes the strategy a little uncertain going forward. But I think there’s enough margin of safety in the stock at the moment to make it worth the risk.

Stephen Wright owns shares in A.G. Barr.

Alphabet  

What it does: The owner of Google and YouTube, Alphabet is one of the largest technology companies in the world. 

By Edward Sheldon, CFA. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) shares have pulled back sharply in recent months and I’ve been buying the dip. 

There are a few reasons the stock has fallen. One is that regulators, including the US Department of Justice, are targeting the company due to its dominance. Another is that there are some concerns that Google’s search business could be disrupted by ChatGPT and other generative AI applications. 

These are both genuine risks. However, after the pullback, I reckon a lot of uncertainty is priced in. In my view, the valuation (the P/E ratio is in the low 20s), and risk/reward proposition, now look attractive. 

Looking ahead, I’m convinced that Alphabet has plenty of growth potential. Today, YouTube revenues are growing at an impressive rate as are cloud computing revenues. And in the long run, Waymo’s self-driving taxis – which are on the roads in some US cities already – could provide a whole new source of revenue. 

Overall, I’m excited about the outlook for this stock. 

Edward Sheldon owns shares in Alphabet .

Aston Martin Lagonda

What it does: Founded in 1913, Aston Martin is a luxury sports car manufacturer that designs, engineers and produces sports cars in Warwickshire, and sells them worldwide.

By Harvey Jones. I thought long and hard before buying shares in James Bond car maker Aston Martin Lagonda (LSE: AML). Then stupidly, I went ahead and did it anyway.

I’d been monitoring the FTSE 250 stock on and off for years, watching the shares fall until I didn’t think they could fall anymore.

First-half results disappointed, as Aston Martin’s results usually do, but on 24 July the board flagged up a big second-half recovery and I thought why not?.

On 16 September I dived in and exactly two weeks later my shares crashed 33% after the board warned full-year profits would decline due to supply chain disruption and weak demand in China. So no second-half recovery, then.

No worries, I’m sure it’ll happen next year. Or the year after that. I won’t sell but it could be a long wait before I recoup my big early loss, assuming I ever do. 

I don’t think the global economy or luxury demand is about to roar into life, while Aston Martin still has to make the shift into electric motors. I’m bracing myself for a bumpy ride.

Harvey Jones owns shares in Aston Martin.

Aviva

What it does: Aviva is one of the UK leading financial services providers, as well as a big player in Ireland and Canada.

By Royston Wild. Aviva’s (LSE:AV.) share price has leapt to six-year peaks above 500p recently. But on paper it still looks remarkably cheap, so I’ve increased my stake for the second time since early June.

The FTSE 100 insurer trades on a forward price-to-earnings growth (PEG) ratio of 0.5. A reading below 1 indicates that a stock is undervalued.

On top of this, the prospective dividend yield is a mighty 7.2%. That’s more than double the Footsie average of 3.5%.

Aviva’s shares have increased as expectations for multiple interest rate cuts have strengthened. On the downside, this leaves the company at risk of sharply reversing if the Bank of England fails to deliver what the market expects.

But I don’t care. I invest for the long term, and reckon Aviva’s share price will rise much higher from current levels. I predict that steady demographic changes, allied with growing interest in financial planning, will drive demand for its products through the roof.

A strong balance sheet should allow Aviva to effectively exploit this opportunity, too. Its Solvency II capital ratio has moved further above 200% in 2024.

Royston Wild owns shares in Aviva.

Logistics Development Group

What it does: Logistics Development Group is an investment vehicle that, through a subsidiary, owns stakes in listed and private businesses.

By Christopher Ruane. I own a few penny shares in my portfolio already and recently added another one: Logistics Development Group (LSE: LDG).

The company’s operating subsidiary owns stakes in businesses like Finsbury Food Group and Alliance Pharma.

An activist shareholder has requisitioned a general meeting, hoping shareholders will vote for the firm to stop making new investments and prioritise returning cash to shareholders.

This is an unusual investment for me but I see potential value. The share has been trading at a significant discount to net asset value. At the end of May, net assets were £99m, of which net cash was close to £32m. The current market capitalisation is £64m.

The general meeting could help close that valuation gap. One risk when selling unlisted investments is whether their paper valuation can actually be achieved in the market. But I think the current Logistics Development Group share price looks like a bargain.

Christopher Ruane owns shares in Logistics Development Group.

Next

What it does: Next is a retailer selling clothing, homeware and beauty products both online and in its 800 stores.

By James Beard. The Economist recently described Next (LSE:NXT) as a “boring brand”. And yet record revenue and earnings for the year ended 27 January 2024 (FY24) shows that slow and steady sometimes wins the race.

In FY25, it expects to do better with a pre-tax profit of £995m. It therefore trades on a reasonable 15.9 times forward earnings.

As well as growing organically, it’s been building equity stakes in other fashion retailers. It plans to further expand overseas and hopes to generate additional income from licensing its brands and technology platform to third parties.

And with approximately 60% of its revenue being generated online, it’s successfully managed to embrace the internet.  

But there are potential challenges. Fashion consumers are notoriously fickle. And a lacklustre British economy could also impact sales.

However, I think the company’s well positioned to continue to grow which is why I recently added the stock to my portfolio.

James Beard owns shares in Next.

Next

What it does: A multinational retailer of clothing, footwear, accessories, and homeware with 700 stores worldwide.

By Mark David Hartley. At almost £100 a share, Next (LSE: NXT) is one of my more pricey investments. But it’s also the largest clothing retailer by sales in the UK with a well-established brand, diverse product range and rapidly growing online presence. It has a history of consistent financial performance and a relatively reliable dividend track record. The company’s focus on own-brand products gives it greater control over margins and pricing, and its online platform provides a significant source of revenue and growth potential.

Retail is highly competitive, though, and economic downturns or changing consumer habits could negatively impact sales. Additionally, its reliance on online sales could be affected by technological disruptions or increased competition from other e-commerce platforms. Even fluctuations in the British pound could impact Next’s international operations and financial results. But with a price-to-earnings ratio of 14.7, I think the current price offers good value and has room to grow.

Mark David Hartley owns shares in Next.

Windward

What it does: Windward’s AI platform leverages advanced machine learning and behavioural analytics to provide real-time insights and predictive intelligence for the maritime industry.

By Ben McPoland. I recently added to my holding in Windward (LSE: WNWD) after the small-cap stock dropped 25%. The £117m company helps organisations mange risk on the high seas. Unfortunately, there’s a lot more of that these days with wars raging and geopolitical conditions worsening.

The firm said it had made a strong start to H2, winning two new government customers for a total of $1.9m of annual contract value (ACV). This adds to the $37.2m of ACV it reported in H1, which represented 35% year-on-year growth.

The biggest risk here is that the business is still loss-making. However, management expects that to change over the next couple of years. On 10 October, CEO and co-founder Ami Daniel said: “We are laser-focused on achieving profitability while continuing to execute against our product roadmap to deliver an enhanced offering for our customer base.”

Speaking of customers, Windward has already attracted blue-chip names like BP, Shell, and Interpol. And adoption of its recently launched MAI Expert, a proprietary generative AI agent, has been strong, with six existing and several new commercial customers signing up.

At the end of June, the company had a cash balance of $13.8m.

Ben McPoland owns shares in Windward.

Yu Group

What it does: Yu Group is an independent supplier of gas, electricity, water and metering services to UK business customers.

By Roland Head. I recently bought some Yu Group (LSE: YU.) shares after this £270m company reported a 60% rise in half-year revenue and a 52% increase in earnings per share.

Changing energy prices can affect revenue and profits at utilities. But I was excited to see this financial growth was backed by a big increase in Yu’s customer base.

The company says that the number of meter points supplied rose by 82% to 72,300 during the first half of this year. This was paired with a 110% increase in the equivalent volume of energy supplied to 1.0TWh.

Smaller energy suppliers have a chequered record in the UK. Many have failed in recent years. I think Yu will need to stay disciplined as it expands to avoid the risk of financial problems.

However, with the stock trading on seven times earnings and offering a 4% yield, I think Yu shares could do well if growth continues.

Roland Head owns shares in Yu Group.

Zscaler

What it does: The company focuses on cloud-based cybersecurity solutions primarily for enterprise customers.

By Oliver Rodzianko. I recently invested in Zscaler (NASDAQ:ZS) as its valuation has become significantly more attractive. For example, its forward price-to-sales (P/S) ratio is currently 58% below its five-year average, making it a compelling opportunity.

Zscaler’s investment potential is further supported by a consensus of 39 analysts, forecasting a 21% growth in revenue by fiscal 2026, following an equal 21% growth estimated for 2025. Additionally, the consensus price target suggests a 28.5% gain over the next 12 months.

However, the company has not yet reported any official net income, though it’s nearing profitability. Any delays in reaching this milestone could result in further losses, as the stock is already down 19.5% year-to-date.

That said, cybersecurity is a rapidly growing industry, and I wanted to be part of it. While valuations in this sector tend to be high, Zscaler offered the most attractive option I could find.

Oliver Rodzianko owns shares in Zscaler.

The post 10 stocks that Fools have been buying! appeared first on The Motley Fool UK.

Over the last 10 years, however, the annualised return has been running slightly higher than that (around 12%). With dividends reinvested, it’s been above 13%! That’s an incredible, inflation-busting return!

This hot run of form isn’t guaranteed to continue. But if it did and the index returned 12%, then a £1,000 investment today would become £29,959 after 30 years (discounting any platform fees and currency fluctuations). That’s down to the incredible power of compounding.

So, should I invest a grand in the index this month?

Echoes of the past?

My worry here is that the S&P 500 has surged 20% this year and, at 5,751 points, is near an all-time record. This has been driven by stocks like artificial intelligence (AI) chipmaker Nvidia (up 154%).

While I wouldn’t bet against it hitting 6,000 before 2025, the index’s P/E ratio is now approaching 30, which is well above its historic average. I’m concerned about this sky-high valuation.

On top of this, I’ve just read that the S&P 500 is having it’s best year since 1997. In hindsight, we know what was lurking around the corner not long after that — a huge tech market crash!

Could the same happen to the AI stocks that have driven the market higher? We don’t know, but it does make me reluctant to invest a lump sum in the index right now.

As Mark Twain (purportedly) said: “History doesn’t repeat itself, but it does rhyme.” This can certainly be true in the stock market.

Fund management FOMO

According to the Financial Times, UBS analysts estimate that Nvidia alone accounts for 1.43% of the 2.1% year-to-date underperformance of active fund managers focused on US large-caps. In other words, those not holding the chipmaker’s shares have struggled to keep up with the S&P 500’s return this year.

The beauty about being an individual long-term stock-picker is that I can exercise patience. I’m not compelled to chase S&P 500 rallies or popular stocks.

Unloved small fry

So, this month, I’m going to continue hunting for UK small-cap stocks. Unlike the S&P 500, these market-cap minnows are still very much out of favour.

One stock that I’m considering adding to is Windward (LSE: WNWD). This is a small software firm operating an AI-powered platform that uses predictive analytics to manage risks on the high seas.

The shares are down 23% in the past month, which I imagine is linked to where the firm is based (Israel). Obviously, the wider Middle East conflict presents risks.

Stepping back though, this situation is also leading to massive headaches for shipping companies, especially around key waterways like the Red Sea and Gulf of Oman. Windward’s focus on maritime intelligence and risk management, including tools to monitor war risk zones, appears more relevant than ever today.

In H1, revenue jumped 37% year on year to $17.6m, with new commercial contracts won and losses shrinking. Its blue-chip customers already include BP, Shell, and Interpol. At 124p, I reckon the stock could outperform the S&P 500.

The post Should I invest £1,000 in the S&P 500 in October? appeared first on The Motley Fool UK.

An AI-powered platform

Windward operates a platform powered by artificial intelligence (AI) that uses predictive analytics to help clients foresee and manage risks on the high seas.

It’s used by shipping companies to optimise routes and reduce fuel costs, by insurers to assess risk and prevent fraud, by oil traders to make money, and by governments to enforce maritime regulations.

Cargo owners and freight forwarders also rely on Windward to track shipments in real time, ensuring smooth logistics and timely deliveries. With around 90% of global goods transported by sea, this capability is more important than ever.

The maritime environment is becoming increasingly complex. In addition to growing regulation and sanctions, there are threats from bad actors like pirates and Houthi rebels in and around the Red Sea.

The company has a blue-chip customer base that includes BP, Shell, the US Coast Guard, and Interpol. It’s chaired by Lord Browne, the former boss of BP.

A strong H1

On 20 August, the firm reported a strong first half. Revenue rose 37% year on year to $17.6m, while annual contract value (ACV), a future indicator of revenue growth, was up 35% to $37.2m.

It added 32 new commercial customers, including Bernhard Schulte Shipmanagement and Berge Logistics, to end the period with 219 customers. This more than offset a bit of churn from some smaller customers.

The main risk to the investment case is that the company isn’t yet profitable. It lost $9m last year and a $2.5m loss is expected this year.

However, Windward is rapidly steering a course towards profitability. Gross margin edged up to 81% from 79%, while the EBITDA loss narrowed to $1.3m from a loss of $3.8m the year before.

Looking ahead to the full year, it expects revenue of $36.2m (28% year-on-year growth) and is confident of achieving an adjusted EBITDA break-even run rate. This increasing profitability is encouraging.

Deploying generative AI

In June, the company launched MAI Expert. This generative AI-powered virtual agent uses its proprietary data to do comprehensive and rapid vessel risk assessments. Management says MAI Expert reduces screening times by about 20 minutes per screen. This is providing a tangible return on investment for customers.

CEO Ami Daniel said: “We are recognised for our expertise in artificial intelligence in the maritime sector, and generative AI is therefore a natural evolution of our product roadmap, paving the way for a significantly increased total addressable market and a competitive differentiation among our peers.”

Quality small-cap stock

The price-to-sales multiple is around five. That’s not particularly expensive for a fast-growing software company.

To summarise some things I like here:

• Innovative firm with a scalable platform
• Profitability improving rapidly
• Small market cap of £112m
• Cash position of $13.8m

At 128p, the share price is still down 42% since early 2022. With Windward’s AI-powered solutions now more relevant than ever, I’d buy the stock today if I hadn’t done so already.

The post This UK AI stock has surged 53% in 2024 as profits draw near! appeared first on The Motley Fool UK.

Moreover, it’s harnessing the revolutionary power of artificial intelligence (AI) technology in its products. Here’s why I’m invested and remain bullish.

Wind-what?

Windward is a software firm that uses AI to track ships and analyse data. Its platform is powered by machine learning models that utilise billions of data points to help companies and organisations understand risks, optimise routes, and ensure efficient transportation of goods by sea.

While the stock is up 75% over the past year, it’s still down 52% since listing in late 2021.

What I like here is that the firm’s marine tracking technology is in high demand (and likely to remain so) due to the increasing number of sanctions placed on regimes and vessels. Also, there’s ongoing chaos in the Red Sea where pirates — remember them? — have been making a comeback.

Here are some firms and organisations that need to track ocean freight, especially with rising risks on the high seas:

• Shipping companies track fleets and optimise routes for safety and efficiency
• Cargo owners and freight forwarders track shipments in real time to ensure timely delivery
• Insurers can use Windward’s data to assess maritime risk and set appropriate insurance premiums
• Government agencies monitor suspicious activity and ensure regulatory compliance

Big-name customers

The company has a growing blue-chip customer base that includes BP, Shell, and HSBC. Its non-executive chairman is Lord John Browne, former CEO of BP.

It also has a contract with the US Department of Homeland Security. And in February, the firm was chosen by INTERPOL, the world’s largest international police organisation.

Blue-chip names like this give credibility to the firm’s platform. Just as importantly, it offers the opportunity to sell additional modules and services to these well-financed customers over time.

Charting a course to profitability

The company’s software-as-a-service (SaaS) model, involving annual subscription for customers, means that nearly all its revenue is recurring.

By the end of 2023, its annual contract value had increased 35% year on year to $34.5m. Revenue rose 31% to $28.3m while gross margin expanded from 72% to 79%.

The main risk is that the business is still loss-making. Last year’s EBITDA loss was $5m, down from $12.1m in 2022. However, it’s worth highlighting that the loss narrowed to just $1.2m in H2 of last year.

This suggests that the firm is well on course to reach EBITDA break-even this year, with profits likely to follow given its high gross margins and low capital requirements.

It ended 2023 with net cash of $17.3m.

Higher price ahoy?

The City currently sees revenue rising to $35.1m this year then $41.2m in 2025. So growth looks nice and strong here, if forecasts are correct.

As a small firm, Windward only has three analyst teams covering it. But they all have a ‘strong buy’ rating on the stock and a consensus one-year price target of 143p. Though just a target and not guaranteed, it’s still 49% higher than today’s price.

Finally, the up-and-coming stock is trading at 3.8 times sales, so doesn’t appear overvalued to me. I’d consider buying shares with spare cash in July.

The post This 96p AI penny stock could rise 49%, say City brokers appeared first on The Motley Fool UK.

Windward (LSE: WNWD) is an AIM-listed share that I recently bought. The share price is up 179% in 12 months, giving the firm a market cap of £90m.

Here’s why I like this software company’s prospects.

Digitalising the global maritime industry

Windward uses artificial intelligence (AI) to provide risk management solutions to companies and organisations in the global shipping industry.

These range from oil supermajors and port authorities to banks, freight forwarders, commodity traders, and insurers.

Its cloud-based, all-in-one platform incorporates data from various sources to predict and mitigate risks.

For example, it offers features like route optimisation, where AI identifies the safest and most efficient shipping routes based on weather patterns, piracy threats, and port congestion.

It also carries out real-time cargo security risk assessments and tracks vessels to ensure adherence to environmental regulations and sanctions. And its solutions can now be delivered directly onto customer and third-party platforms.

Uncertain world

As we know, it can be carnage on the high seas these days.

Houthi rebels have launched dozens of attacks on commercial ships in the Red Sea and Gulf of Aden since November. And I’ve just been reading that Somali pirates are back and bolder than ever.

Windward says it provides an “AI-powered risk profile for every vessel in the world”. So I think this is a very relevant service in today’s unpredictable world.

Strong growth

In 2023, Windward’s revenue rose 31% year on year to $28.3m, while its EBITDA loss of $5m significantly decreased from the year before ($12.1m).

It increased its customer count to over 200, up from 132 at the end of 2022. This saw its annual contract value grow 35% to $34.5m, providing a solid basis for further growth.

Almost all (99%) of its revenue is subscription-based, with a 7.5% churn rate overall but none in key government customers. Meanwhile, its gross margin expanded from 72% to 79%

Looing ahead, management says it has “a clear pathway to achieving positive EBITDA”, and it had a year-end net cash position of $17.3m to help it get there.

An ocean of potential

Now, this is still a penny stock, so above-average volatility can be expected.

Moreover, there are other software firms in this space, while further AI rivals may emerge as the global maritime industry grows. So competition could become a key risk.

That said, I’m very encouraged by the firm’s growing roster of blue-chip customers and partners here. It has deepened its partnership with London Stock Exchange Group by integrating some of the latter’s World-Check services into its platform.

And INTERPOL, the world’s largest international police organisation, has chosen Windward to help it identify and prevent drug trafficking, human smuggling, and illegal fishing.

This suggests to me that Windward is building a competitive advantage through its AI-first approach, setting it up for further growth as it adds more services and – hopefully – customers.

All but 10% of global trade sails through the sea, so this is a very large market opportunity the company is pursuing. According to management, it is worth over $10bn.

I’m thinking about buying more shares in May.

The post 1 penny stock I’d buy today while it is 99p appeared first on The Motley Fool UK.

Apple

What it does: Apple is the world’s largest consumer technology company, best known for the iPhone.

By Charlie Keough. I recently jumped on the opportunity to buy more shares in Apple (NASDAQ: AAPL) after its stock took a hit. The world’s second-largest firm by market cap has fallen 10.3% in the last month.

The business can’t seem to catch a break this year. Declining sales in China, which fell by 24% during the first six weeks of 2024, as well as a $2bn fine for breaking EU laws over music streaming, has spooked investors.

This isn’t great news. But I’m not too concerned. The stock is one of the largest holdings in my portfolio and I plan to own it for as long as possible.

Sales in China have slowed. However, in the long run, I expect the region to be a strong source of revenue for Apple as it continues to capitalise on Asia’s massive customer base.

What’s more, I’m bullish on what Apple could do in the years to come in the artificial intelligence (AI) space. CEO Tim Cook has already alluded to how the company has been working on generative AI technology for years. I think the times ahead could be exciting.

Charlie Keough owns shares in Apple.

BAE Systems

What it does: BAE Systems is a UK-based defence contractor that manufactures arms, aerospace, and security technology.

By Mark David Hartley. BAE Systems (LSE:BA.) is the largest defence contractor in Europe, developing technology for military agencies in the UK and beyond. I’ve been tracking the stock for some time now since it began rising after Russia invaded Ukraine.

The company made record profits of £2.7bn in 2023, resulting in a 38% share price increase over the past 12 months. Looking back, I should have got in earlier. The stock now has limited room for growth, with analysts on average forecasting a meagre 2% increase in the next 12 months.

While defence is a necessary evil, the company is profiting off wars that many hope will be resolved soon. In the event of peaceful outcomes, the share price is likely to fall again as government defence spending declines.

But as history has shown, peace times seldom last forever. I can’t imagine BAE will lose significant value in the long term.

Mark David Hartley owns shares in BAE Systems.

HSBC S&P 500 UCITS ETF

What it does: HSBC S&P 500 UCITS ETF is a low-cost fund that tracks the performance of the S&P 500 index in the US.

By Royston Wild. The S&P 500 index continues to rally and has burst to fresh peaks above 5,000 points in early 2024. It’s risen 14% over the past six months as a terrific blend of robust earnings reports, impressive economic data, and hopes of interest rate cuts has fuelled investor confidence.

I opened a position in the exchange-traded fund (ETF) HSBC S&P 500 UCITS ETF (LSE:HSPX) to ride this momentum. And in recent days I’ve decided to top up my holdings.

There’s nothing short-termist in my approach, though. The S&P 500 has delivered stunning returns for decades (it’s up 1,000% in the past 30 years), and holders of tracker funds have reaped rich rewards in the process.

This fund gives me exposure to the world’s biggest economy in a way that limits risk. Spreading my capital across hundreds of stocks spanning multiple sectors reduces the impact of potential company- or industry-specific issues on my wealth.

The fund also gives me significant exposure to the fast-growing information technology sector. Its five biggest holdings are Microsoft, Apple, Nvidia, Alphabet and Amazon.

This ETF could fall in value if the Federal Reserve doesn’t cut rates as quickly or sharply as the market expects. But over the long haul, I expect my investment to pay off handsomely.

Royston Wild owns HSBC S&P 500 UCITS ETF.

JD Sports Fashion

What it does: JD Sports Fashion is a global retailer of shoes, sportswear and equipment that also operates a chain of gyms.

By Christopher Ruane. I have long liked the business model and proven operational ability of JD Sports Fashion (LSE: JD.), which is why I have held it in my portfolio.

After a profits warning in January, the shares have moved lower. Still, they are around 27% higher over the past five years.

The price slump looked like a buying opportunity to me and I added some more shares to my portfolio.

I do think there are risks here, such as inflation eating profit margins and a recession hurting customer demand.

But JD has weathered economic storms before. I see it as a well-oiled machine that benefits from a strong brand and wide geographic reach.

A plan to open hundreds of new shops annually in coming years could be a further growth engine for the FTSE 100 retailer. The business remains solidly profitable and its interim results showed a net cash balance of £1.3bn at the end of July.

Christopher Ruane owns shares in JD Sports.

Windward

What it does: Windward operates a predictive analytics and risk management platform for the global maritime industry.

By Ben McPoland. I recently bought more shares of Windward (LSE: WNWD), adding to a position I started in January.

This is a small maritime artificial intelligence (AI) company whose growth is being driven by the rising number of sanctions placed on regimes and vessels. Hundreds of due diligence checks are run by companies daily, and Windward’s AI leverages tens of dozens of data and real-time sources to uncover risk and ensure compliance.

Deals have been coming thick and fast, including one with INTERPOL in February to address illegal activities at sea. More such partnerships should materialise as migrant smuggling and piracy become priority issues. The company has also just expanded its partnership with London Stock Exchange Group to integrate the latter’s leading World-Check services into its platform.  

Now, this is a small-cap company with a market cap of just £95m as I write. This means the shares can be volatile.

Revenue is expected to rise 23% this year to around $35m. Meanwhile, cash burn is decreasing significantly and EBITDA profits are forecast for 2025. So there’s a lot of promise here.

Ben McPoland owns shares in Windward and London Stock Exchange Group.

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Beauty in the eye of the beholder

First up is Revolution Beauty Group (LSE:REVB). It sells make-up, skincare and hair products to major retailers, as well as selling online. The firm has grown quickly and went public back in 2021.

At the moment it has a market-cap of £93m. Over the past year the stock has risen by 14%.

The business has endured a tough time over the past couple of years, but excites me because it seems to have left the problems behind now. It had issues with auditing and late publication of accounts, which caused both the CEO and CFO to depart last year. It all seemed a bit murky, but now former boohoo CFO Neil Catto is in the role.

Having an experienced senior management member bodes well for the future. Not only this, but financial results are improving too. The half-year results from last November showed a 20% increase in revenue to £90.4m from the same period the year prior. This helped to boost the pre-tax profit to £0.4m.

The business is 27% owned by struggling fashion retailer boohoo, which can be seen as a risk or a good thing depending on one’s viewpoint. Either way, it will be influenced by the (much larger) fast-fashion retailer going forward.

AI on the open sea

Another penny stock I like is Windward (LSE:WNWD). The maritime artificial intelligence (AI) firm is very unique in what it does, but is still small in size, with a market-cap of £94m.

The share price has jumped by 88% over the past year. I believe this is partly driven by the huge focus on AI companies, as well as the strong results Windward has been putting out.

For example, late last year, it confirmed it had won some large contracts with US government customers. Even earlier this month, a trading update said it “expects FY2023 results to be comfortably ahead of market forecasts”. Both events caused the share price to jump.

As for the AI frenzy right now, it’s clear that many investors believe it’s the future. Does this mean the Windward share price is being expanded by hot air surrounding this technology? I don’t believe so, but it’s certainly a risk to consider.

The stock has moved higher very quickly and could see some retracement lower as investors settle on more realistic expectations of the uses of AI going forward.

I’m thinking about adding both stocks to my portfolio. Both carry risks, so only confident investors should consider buying.

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FRP Advisory Group

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

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

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

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

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

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

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

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

Muhammad Cheema does not own shares in FRP Advisory Group.

Jet2

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

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

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

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

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

Jon Smith does not own any of the shares mentioned.

Keywords Studios

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

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

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

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

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

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

Edward Sheldon has no position in Keywords Studios.

Windward 

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

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

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

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

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

Ben McPoland does not own shares of Windward.

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As I write, the former is up 49% while the latter has surged around 121%. Having said that, Agronomics is down 20% for me. There’s always one.

I’m hoping the following penny stock will be another winner.

A potential hidden gem

Windward (LSE: WNWD) is an Israel-based software company that operates in the area of predictive maritime analytics. Its platform combines artificial intelligence (AI) and big data to serve the global maritime industry with risk management solutions. The platform identifies patterns and anomalies.

The company has been adding customers at an impressive clip. In the six months to the end of June, it bagged 48 new commercial customers, which was almost as many as in the whole of 2022.

This brought its total customer count to 174. Then in November, it signed a five-year contract worth $3.5m with a European national coastguard. Its technology “will protect against the increasing sophistication of maritime bad actors“, the firm said.

Meanwhile, it has secured a partnership with London Stock Exchange Group (LSEG) to integrate its technology into LSEG’s Workspace platform for trading and chartering customers. This allows approximately 117,200 global vessels to be tracked at sea.

Improving profitability

This is a software company, so these customer wins should be translating into healthy levels of predictable annual recurring revenue (ARR). And indeed that’s what we’re seeing. ARR jumped 23% year on year during H1 while gross margin expanded to 78%, up from 72% last year.

On the negative side, Windward still isn’t profitable and is expected to post a net loss of $9m on revenue of $26m this year.

However, the group managed to halve its rate of operational cash burn during H1. And analysts see losses falling to around $4m next year, which would be a substantial improvement from 2022’s net loss of $19.2m.

So there’s a clear trend towards positive earnings here, with EBITDA profitability forecast for 2025. Reassuringly, the company has $17.9m of cash to get it there.

This strong business momentum probably explains why the stock has surged about 82% in the last six months. Zooming out though, it’s still down 50% since going public two years ago.

I’m buying

Now, I must now address the elephant in the room, which is the war in the Middle East. After all, Windward is based in Israel, and the possibility of the conflict spreading further cannot be ruled out.

The company has confirmed that events there haven’t severely affected trading and its offices remain open. But it’s definitely a risk worth bearing in mind, I feel.

On the flip side, one of the consequences of these tragic wars, including in Ukraine, is increased sanctions on various regimes (and vessels). This environment is contributing to growing demand for Windward’s compliance product from commercial shipping companies.

The firm has a market cap of £72m, with its shares trading at 3.8 times trailing sales. For an emerging technology leader in a growing market, I think that looks very attractive. I’m going to add some shares to my portfolio.

The post I’ll be snapping up this rising AI penny stock in 2024 appeared first on The Motley Fool UK.