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Two UK growth stocks I’d buy in November to build long-term wealth

Edward Sheldon, CFA
·3-min read
Sign pointing towards route to becoming a millionaire.
Sign pointing towards route to becoming a millionaire.

As we begin November, there’s quite a bit of volatility in the financial markets. This kind of volatility scares a lot of investors. Personally, I love it. For long-term investors like myself, it can create fantastic buying opportunities.

In this article, I’m going to highlight two UK growth stocks I’d buy in November. Both stocks have pulled back recently as a result of market volatility, and I think it’s a great time to buy.

A UK growth stock with huge potential

One UK growth stock that I think has big potential is Clipper Logistics (LSE: CLG). It’s a company that offers a range of services to retailers, including warehousing, delivery, and returns management. It has a distinguished list of clients that includes ASOS, John Lewis, and Sports Direct.

Clipper has a lot of momentum right now as it’s benefitting from the accelerated shift to e-commerce. This is illustrated in the company’s full-year results, which were posted in late August. For the year ended 30 April, group revenue increased by 8.8% to £500.7m, while basic earnings per share were up 20.5% to 15.9p. A dividend of 9.7p per share was declared.

Looking ahead, Chairman Steve Parkin that the group is in an excellent position to achieve further growth both in the UK and internationally. Analysts expect revenue growth of around 20% this year.

Clipper shares have a great run recently. Since I covered the stock in late June, it has risen from 290p to as high as 520p. However, recently, it has pulled back. I think this is a good entry point. The stock is now trading on 18 times next year’s forecast earnings. I see that as a buy.

Poised for big growth

Another UK growth stock I like the look of right now is XP Power (LSE: XPP). It’s a leading manufacturer of critical power control components for the electronics industry. Its focus is on the industrial, healthcare, and technology sectors.

XP Power looks set to benefit from a few dominant trends in the years ahead. The first is digitalisation. As the world becomes increasingly digital, demand for its products should rise. The second is increased healthcare spending. XP Power creates components for crucial healthcare devices such as X-ray machines, patient monitors, and ventilators.

XPP posted an encouraging Q3 trading update in October. For the first nine months of 2020, orders were up 29%. That’s pretty good when you consider that the company was disrupted by Covid-19 earlier in the year. Third-quarter revenue came in at £69m, up 28% on the same period last year.

Looking ahead, the company said that it expects its performance for full-year 2020 will be toward the top end of current analyst expectations. It also said it remains confident in the long-term market opportunity, supported by the structural growth drivers in the marketplace, and in its ability to capture this opportunity.

XP Power shares were trading near 4,700p in the first half of October. They’ve since pulled back to around 4,000p. I see this share price weakness as a buying opportunity. The P/E ratio using next year’s earnings forecast is about 22, which seems very reasonable. I think this UK growth stock has a lot of appeal right now.

The post Two UK growth stocks I’d buy in November to build long-term wealth appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Clipper Logistic and ASOS. The Motley Fool UK has recommended ASOS, Clipper Logistics, and XP Power. 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 2020