Each month, we ask freelance writers to share their best ideas for investors buying small-cap stocks.
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premium mittens
What it does: Premier Miton is a UK fund manager offering a wide range of actively managed funds and mutual funds.
By Rowland Head. premium mittens (LSE: PMI) has had a tough year, but I think it’s the right time to buy shares in this reputable company.
It is normal for a fund manager’s profits to decline when the market is down. This is because fee income is based on the value of assets under management.
However, even though Premier’s stock fell nearly 50% in 2022, its pre-tax earnings fell only 15% in the year ending Sept. 30. That makes the stock look cheap to me, trading at 13 times expected earnings and yielding an 8.5% dividend.
It is clear that the dividend could be cut if market conditions deteriorate next year. However, I think it is more likely that the situation will stabilize and the payment will be withheld.
In my view, this is a good time to invest in this cyclical business. I think the stock will do well from its current level.
Roland Head does not own shares in Premier Myton.
bioventics
What it does: Bioventix manufactures monoclonal antibodies that it sells to customers for use in commercial and research applications.
James J. McCombie: bioventics (LSE: BVXP) is a £192m biotech stock, Alternative investment market (target). This small-cap biotech stock is growing in sales and making a profit. In fact, it has been profitable over the years and the final numbers are increasing. We generate ample free cash flow and steadily increase our dividend.
The stock is slightly overvalued relative to the industry and the broader market, trading at 23 times earnings. But I think it’s high for a company with increasing sales, a huge 79% operating margin and consistent profitability. A price worth paying for the quality of the business.
However, new product development is a slow and relatively expensive process to reach approval. As with all biotech and research-focused companies, there is always the possibility that what Bioventix risks today may not pay off in the future.
James J. McCombie does not own shares of Bioventix
on the beach
What it does: On the Beach Group is an online retailer of beach holidays based in Manchester.
By Paul Summers.as a shareholder of on the beach (LSE: OTB), 2022 wasn’t all sunshine and fun. Nevertheless, I’m starting to think the worst may be over.
Recent deals are encouraging. FY22 revenue increased 373% year over year, returning to pre-Covid levels. If this continues, we expect earnings to rebound significantly in 2023, especially since this small-cap already holds a 20% share in its niche.
That said, we can’t guarantee anything. Clearly, a slowdown in consumer spending could slow a sustained uptick in earnings and ultimately stock prices.
I think the 12x return valuation takes that into consideration. Additionally, On the Beach’s financials appear to be stable. This is underpinned by the fact that its online-only model makes it quick and easy to reduce your marketing costs when needed.
I am considering replenishing this small cap position.
Paul Summers owns stake in On The Beach.
mulberry
What it does: Mulberry is a British fashion company best known for its luxury leather goods, especially women’s handbags.
By John Chung. Luxury stocks tend to hold up well during recessions. This is due to the Veblen effect, a phenomenon where consumers perceive higher prices to be more valuable.So I hope mulberry (LSE: MUL) profit from this.
The stock could fall more than 20% this year, but recent developments surrounding its main market, China, could provide strength to the luxury brand. Ultimately, analysts at Shore Capital say Mulberry is “well-positioned to deliver on its Asia-focused geographic expansion and potential product expansion strategy.”
Currently trading at a profitable 0.1 PEG ratio, this luxury stock is a bargain. This is especially true when considering the potential for stock price appreciation.With the world’s richest consumer waiting to spend big in the coming months, it’s not hard to see why. barclays The price target is £3.40. This suggests a potential upside of 36% if you buy the stock today, and is something I’m deeply concerned about.
John Chung has no positions in any of the mentioned stocks.
Argentex
What it does: Argentex is a financial services company that provides foreign exchange (FX) services to institutions, businesses and individuals.
Edward Sheldon, CFA. Argentex (LSE: AGFX) seems to have a lot of momentum right now.
In November, the company posted a strong performance in the six months to 30 September, with revenues up 75% year-on-year to £27.4m and adjusted operating profit up 55% year-on-year to £7.3m. I was.
Then in December, the company told investors it expects earnings and earnings in 2022 to beat market expectations.
However, I don’t think this momentum is priced into the stock. The stock currently has a relatively low valuation.
Going forward, revenue growth may slow down. In recent months, FX volatility has increased, and the company has benefited from this.
But I think the company has the potential to continue to grow at a healthy rate. And at current valuations, I think small caps have a lot of appeal.
Edward Sheldon has no positions at Argentex.
Gateley Holdings
What it does: Gateley Holdings is an AIM registered commercial law firm with 15 offices in the UK and one in Dubai.
By Royston Wilde.In my opinion Gateley Holdings (LSE:GTLY) may be the best stock I buy in January. The company is expected to grow its annual revenue by 8% this fiscal year (ending April 2023). It trades at 11 times the futures price/earnings ratio (P/E).
Along with this, the company offers a delicious 5.5% dividend yield.
Gateley provides a variety of legal and professional services in areas such as banking and financial services, real estate, pensions and benefits. And right now, this business (with a market capitalization of £220m) is doing very well.
The company’s latest financial information for November showed revenue growth of 22% in the six months to October and underlying adjusted pre-tax earnings growth of 11%.
Gateley expects to announce that trading remains strong at its next market update on Wednesday, January 18th. This could lead to new stock price gains.
Royston Wild does not own any shares of Gateley Holdings.
Ampario
What it does: Anpario designs and manufactures specialty animal feed additives to improve livestock health management.
By Zaven Boyrajian.Despite the growing popularity of plant-based foods, protein consumption from meat and fish continues to soar. Ampario (LSE: ANP).
This business is a manufacturer of specialty animal feed healthcare additives. Farmers blend his Anpario products into livestock food for superior health, toxin control, hygiene and insect repellent. The result is a better quality of life for animals, lower healthcare costs for farmers, and better protein quality for consumers.
The company recently completed an expansion of its UK factory, significantly increasing its production capacity. The timing is impeccable given that recent regulatory changes in China have banned a significant portion of our competitors’ products, creating a window of opportunity.
The company’s reliance on a single factory poses risks. After all, any prolonged disruption to your facility could result in your customer’s orders being filled by your competitors. However, given the importance of this industry, this risk seems worth the potential long-term reward.
Zaven Boyrazian does not own shares in Anpario.
The Motley Fool UK first posted the Best UK Small Caps to Buy in January.
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Motley Fool UK recommends Anpario Plc, Barclays Plc, Bioventix Plc and On The Beach Group Plc. The views expressed about the companies mentioned in this article are those of the author and may differ from official recommendations on subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering diverse insights makes us better investors.
Motley Fool UK 2023
