UK markets closed
  • NIKKEI 225

    +82.29 (+0.28%)

    +403.58 (+1.42%)

    +2.87 (+4.77%)

    -11.60 (-0.66%)
  • DOW

    +60.18 (+0.18%)

    -1,050.86 (-2.27%)
  • CMC Crypto 200

    -29.80 (-2.17%)
  • ^IXIC

    -126.58 (-0.90%)
  • ^FTAS

    +25.36 (+0.64%)

2 small-cap UK shares that could outperform the FTSE 100

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Andy Ross
·3-min read
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Private investor buying UK shares at home
Private investor buying UK shares at home

As I’ve mentioned before, I think there are small-cap UK shares that could provide a significant boost to my portfolio. I’m looking at two such shares in this article.

A UK share with major growth

The first is Venture Life (LSE: VLG). The company is an international consumer self-care company and has brands such as UltraDEX, Rosa calma and Dentyl.

The company both owns brands and manufacturers for third-parties, giving it some diversification of earnings.

It’s also undergoing a successful turnaround, which I think could add significant shareholder value. Earnings per share went up over 150% from between 2019 and 2020. Revenue and gross profit growth was also very strong, at 49% and 61% respectively.

There’s also plenty of cash, which rose from £10.7m to £42.1m over the last year.

The company made excellent progress with its Dentyl brand, with launches in Boots, Alliance Healthcare, B&M and Bodycare stores. It also started selling in four new markets.

But there are potential risks with adding the shares to my portfolio. As an acquisitive company, the group could overstretch itself in future, or pay for weak brands that it can’t improve. Also, as it has invested in improved manufacturing facilities, these will need to be well utilised, otherwise costs will have increased.

Overall though, I think Venture Life is a UK share with good prospects looking forward.

The loss-making miner digging up nickel for EVs

Horizonte Minerals (LSE: HZM) is a penny share. Its shares trade, at the time of writing, around 7.5p. But its market cap is more than £100m. So what does it do, and could there be big share price growth in the future?

First off, you may not have heard of this smaller company. It is a nickel company that is developing two projects in Pará State, Brazil. The Araguaia ferronickel project and the Vermelho nickel-cobalt project.

According to Horizonte, the nickel market is a $20bn+ per year industry. It is used in electric vehicles (EVs), so is a play on the move to a green future.

Both Horizonte mines have long lives, which should mean they will be productive well into the future. For at least the next two-to-three decades.

A risk with any miner is that the commodity price – in this case nickel – could fall. That could quickly lead to big losses and may mean the company needs to ask shareholders for more money.

While Horizonte talks about ESG credentials because of its products’ ties with electric vehicles, there’s always the potential the share price could be hit by big investors avoiding miners altogether due to external pressures. Institutional investors have become increasingly keen to be seen to be acting with ESG in mind.

It’s always a bit of a risk investing in a loss-making, pre-revenue company. This is undoubtedly a higher-risk share, but for my well-balanced portfolio, I’d be potentially willing to add it as I expect big future share price growth. I think this could happen if earnings continue to be in strong double figures and investors get excited about the future prospects for both companies.

The post 2 small-cap UK shares that could outperform the FTSE 100 appeared first on The Motley Fool UK.

More reading

Andy Ross owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021