Every month we ask our freelance writer investors to share their top thoughts on growth stocks – here’s what they have for October!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
What it does: ASOS is an online fashion retailer with 17 different brands. It works around the world.
By Andrew Woods. My growth stock is for October selection. ASOS (LSE:ASC) For the years ended August, between 2017 and 2021, earnings per share (EPS) rose from 77.2p to 128.9p. During this period, the company had an annual EPS growth rate of 10.8 percent. I consider it stable and strong.
However, ASOS has been operating in a generally challenging environment for the retail sector. Due to the cost of living problem, consumers spend less on clothing. Inflation has pushed up wages and costs, reducing profit margins. The share price reflects these problems, and has fallen 82 percent in the past year.
Despite this, sales have improved over the summer and the business expects full-year profits to be in the first guidance range. Another indication that the company is in good financial condition is the low loan amount. This means it is well placed to work on expansion as we emerge from the pandemic.
Andrew Woods has no place in ASOS.
What it does: Kainos is an IT support services business that helps companies, organizations and governments digitize their operations.
By Zaven Boyrazian. Kainos group (LSE:KNOS) helps clients digitize operations and deploy human capital management solutions in partnership with Working day. The group serves both the public and private sectors and its most notable collaboration is with the National Health Service.
Despite double-digit organic sales growth, the stock has lost about a third of its market capitalization over the past 12 months. The recent decline in profit margins seems to have caught some investors by surprise. And given that the stock trades at a steep premium to 47 times earnings, this volatility isn’t surprising.
The decline in profitability comes more from the periodic tailwinds of the pandemic than from internal issues. Meanwhile, demand for the Kainos service continues to grow with record bookings of £349.8m.
While it’s frustrating to see the profitability falter, the underlying business is intact. And with impressive potential, I believe the recent downward trend presents an attractive buying opportunity, although the stock still looks expensive.
Zavon Boyrazian does not own stock in Kainos or Workday.
What it does: Halma is a group of businesses focused on industrial safety, environmental control and life sciences.
By Stephen Wright. I’m buying stocks. Halma (LSE:HLMA) over the past month. So I’m putting my money where my mouth is on this one.
The reason I started investing in this stock is because I think it is finally trading at an attractive price. The company always looks good but it’s expensive for me.
Halma has a straightforward business strategy. He tries to find businesses and buy more businesses with the cash they generate.
The company has a decentralized corporate culture. In other words, it leaves individual businesses to continue doing what they do best.
Halma’s share price has recently fallen below £20 per share. At those prices, I think it’s a great buy.
If the stock reaches that price again in October, I will try to increase my investment significantly. But I’m happy to own Halma stock, I think it’s a great company.
Stephen Wright is a shareholder in Halma.
What it does: Spire Healthcare provides private healthcare services through 39 hospitals and eight clinics in England.
At Royston Wild. Coping with health care costs is like stocks Spire Healthcare (LSE: SPI) are popular choices in tough economic times like these.
In theory, the Spire’s transformation could hurt when the Brits start pinching. As times get tougher, people may be tempted to wait that long for treatment and get it for free on the NHS.
But the size of NHS waiting lists today means that demand for personal care is increasing dramatically. At Spire, revenues grew 7% in six months as personal income jumped nearly 22% year over year.
In September, 6.8m people were on NHS waiting lists. And the Institute for Fiscal Studies thinks the numbers will get worse before improving, possibly hitting 10.8m people in 2024 before gradually falling.
This explains why City analysts expect Spire to report healthy earnings growth in the short to medium term. It is expected to move from a loss of 7.1p per share in 2021 to 4.4p this year. And by 2023 revenues will double to 8.8 p.
Royston Wild owns shares in Spire Healthcare.
Scottish Mortgage Investment Trust
What it does: Scottish Credit Investment Trust is one of the world’s largest and most famous trust funds. The Baillie Gifford & Co fund invests globally and seeks strong businesses with above-average returns.
While in John Chung Scottish Mortgage Investment Trust ( LSE:SMT ) has performed horribly so far this year, with investors told to expect a five-year return. Therefore, the current downturn could pave the way for a major recovery when the global economy eventually recovers.
The trust’s top holdings are mostly growth stocks, with the likes Modern And Tesla It will help boost their earnings and share prices over the next decade. Scottish Mortgage also has healthy exposure to China. As the world’s second-largest economy reopens from Covid-19 lockdowns, Chinese stocks are seeing sharp improvements, and Scottish mortgages are expected to benefit to some extent.
In any case, with the share price down nearly 50% from an all-time high, this may be an opportune time to start a long position in a historically successful fund. That being said, investors should be wary that further lockdowns in China could prolong the road to recovery.
John Chung has no position in Scottish Mortgage Investment Trust.
Smithson Investment Trust
What it does: Smithson is a global investment trust managed by Fundsmith. It invests in high quality, small and mid-cap growth stocks.
By Edward Sheldon, CFA. Smithsonian (LSE: SSON) share price has taken a big hit in 2022 as growth stocks are out of favour, and I think this presents a buying opportunity. Currently, the investment trust is trading at a significant discount to its net asset value (NAV).
I like Smithson’s approach to investing. Like his older brother, Fund Summit EquityIt mainly invests in highly profitable companies. Meanwhile, it eliminates highly leveraged companies, as well as companies in rapidly changing industries. The names in the portfolio at the end of August include the UK property website powerhouse Take it rightMedical technology company Fieldsand a cyber security expert Fortinet – All major companies.
It is worth noting that Smithsonian’s portfolio is quite concentrated. Therefore, stock-specific risk is very high. If a few stocks in the portfolio underperform, the overall performance may suffer. But I am comfortable with this risk. I think Smithsonian is a great way to gain exposure to small growth companies listed globally.
Edward Sheldon has positions at Smithson Investment Trust, Rightmove and Fundsmith Equity.
What it does: Hargreaves Lanestown is a UK-based digital asset management services company.
By Paul Summers: Stock Price Hargreaves Lansdowne (LSE: HL) has been in dire straits in 2022 and it’s not hard to see why.
With so many people trying to pay their energy bills, the company’s revenue was bound to suffer. Combine this with a reduction in new business and assets under management, and a 35% decline, while severe, makes some sense.
However, I think this is shaping up to be an interesting counter-play. A price-to-earnings (P/E) ratio of 17 doesn’t sound cheap, but it looks like a very attractive price for a company that generates some of the highest margins in the FTSE 100. More control over their money will definitely spell good growth for the coming years.
Meanwhile, there is a 4.7% forecast yield in progress.
Paul Summers has no place in Hargreaves Lanestown