Are British growth stocks as exciting as American ones? I don’t know the answer to that. But I do know that there are some very interesting UK growth stocks worth exploring for my portfolio right now.
With £2,000 to invest, here are the UK growth stocks I would consider adding to my holdings today. To reduce my risk by diversifying across sectors, I’d put £500 in each.
With quarterly results due tomorrow, I’ll be keeping a close eye on Renalytix AI.
The company has developed an artificial intelligence platform to help perform kidney diagnostics. After opening up a sales channel into the US government, it has recently beefed up its executive team to help boost revenue. I like the growth story here because I think the company has an exciting technology platform. Its product scaleability means profits could be strong once sales hit the right level.
Risks include more experienced medical device companies launching their own competitor products, which could limit Renalytix’s revenue potential.
UK growth stocks in advertising
Advertising network WPP is up 60% in the past year. But like-for-like revenue growth in the first quarter was just 6.3%.
With former boss Sir Martin Sorrell saying the current advertising market is the strongest since the 1970s, I don’t find that growth story compelling. By contrast, Sir Martin’s digital advertising group S4 Capital recorded like-for-like reported revenue growth of 35% in the first quarter. I’d consider buying it today.
This growth stock continues to impress me. S4 recently reiterated that it has a strong chance of hitting its ambitious target of doubling revenue organically over three years. It plans to add more financial firepower to accelerate growth even more by acquisition. Proven leadership, excellent quality work, and a clear digital focus combine to put it among the most attractive UK growth stocks in my view.
But as S4’s own rapid growth shows, barriers to entry for digital advertising are quite low. Increased competition is therefore a risk to future profitability.
Software supplier Kainos is also on my list of UK growth stocks to buy now.
The company saw revenues increase 31% last year. Pre-tax profit more than doubled. Kainos has an established reputation, long-term contracts, and a customer base that spans both private and public sectors. I think that helps give it a strong foundation for further growth. But it isn’t resting on its laurels, announcing this month that it would increase its Workday service provision by acquiring part of Finnish company Cloudator.
Workday is a significant part of Kainos’ operations. The firm is the largest European Workday specialist. That is a risk in my view, as any future change to the Workday relationship could hurt revenues.
The Euros are likely to boost customer demand for sports clothes. Even without that, JD Sports has a strong business formula that puts it on my list of UK growth stocks. Growth slowed during the pandemic last year, but over the past five years the company has seen revenues increase by 160%.
For a retailer, I think that’s impressive. It reflects JD’s strong understanding of customer needs and well-curated brand collection. I see further growth opportunities ahead – but there is a risk that online giants like Amazon could reduce profit margins in some of JD’s markets.
The post How I’d invest £2,000 in UK growth stocks appeared first on The Motley Fool UK.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. christopherruane owns shares of S4 Capital plc. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Kainos and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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