While many people believe Bitcoin is a ticket to riches, personally, I’m not convinced. Not only is the cryptocurrency impossible to value and notoriously volatile, but there’s also a great deal of uncertainty in relation to its future. Right now, regulators all over the world are cracking down hard on crypto assets.
If you’re looking to make big gains from financial assets, investing in smaller companies is a better idea than investing in Bitcoin, in my view. As smaller companies grow, their share prices tend to rise as well. That means if you pick the right stocks, you could potentially turn £1k into £2k, £5k, or even £20k, with a little patience.
With that in mind, here’s a look at two smaller growth companies I’m backing right now.
One company I’m very bullish on at the moment is online fashion retailer Boohoo (LSE: BOO). It’s grown at an incredible rate in recent years (three-year revenue CAGR of 64%) and, looking ahead, I think it has the potential to keep growing at a prolific speed.
One thing that stands out to me about Boohoo is that it’s absolutely killing it on social media. For example, its subsidiary Pretty Little Thing (PLT) has 11.7m followers on Instagram (up from 11.4m in early October) and every post seems to generate a fair bit of excitement.
I also like the way that the company is collaborating with stars and influencers. Just recently, PLT launched its Little Mix collection and looking at Instagram likes, this is generating a lot of interest. Little Mix-related posts are receiving around 70,000 likes per post versus around 25,000-30,000 for a standard post. This is a good sign for sales, in my view.
Given Boohoo’s strong growth, the shares don’t trade cheaply. The forward P/E ratio here is 49. However, I don’t see that valuation as a deal-breaker. If the company continues to grow rapidly in the years ahead (which I expect it to), I think the shares will keep rising.
Another smaller company I’m backing to generate attractive returns in the years ahead is Clipper Logistics (LSE: CLG). This innovative logistics company counts the likes of ASOS, John Lewis, Superdry, and Pretty Little Thing among its customers.
What I like about Clipper is it’s a classic ‘pick-and-shovel’ play on the e-commerce boom. In the same way that those selling picks and shovels during the gold rush made a fortune (often more than those hunting for gold), Clipper looks set to benefit from the increasing popularity of online shopping because it provides essential logistics services for retailers.
An analysis of Clipper’s financials shows the company is growing at a very healthy rate. For example, over the last three years, revenue has climbed 60% while net profit has jumped 30%. Yet despite this strong growth, the stock is trading very cheaply right now, sold off on the back of Brexit uncertainty. Currently, the forward-looking P/E ratio just 12.4 which, in my view, is a steal.
Given this low valuation, I think Clipper has the potential to deliver very attractive returns in the years ahead.
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Edward Sheldon owns shares in Boohoo Group, Clipper Logistics, and ASOS. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended boohoo group, Clipper Logistics, and Superdry. 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 2019