Every month, we ask our freelance writers to share their top picks for small stocks to buy for investors – here’s what they have for December!
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What it does: Mind Gym offers courses designed to increase employee happiness, productivity and leadership skills.
At Royston Wild. Marketing news comes out Mental gym (LSE:MIND) has been impressive in recent weeks. Christmas AIM-The listed business continues to trade in and around the Penny Stock region.
However, I think the small cap could be a great stock for investors to buy in early December. I believe that the release of half-year results on Friday 2nd will remind the market of the good sales momentum and may push the share price higher.
Mind Gym offers services to help employees improve their health and productivity. With the increasing focus on mental health, the demand in this market is likely to increase.
Urban analysts think so, too. Mind Gym – boosted by its acceleration in the digital platform – will post revenue growth of 31% and 129% in the financial years to March 2023 and 2024, respectively.
The company announced a month ago that sales were up 11 percent in the six months to September. Despite the worsening economic backdrop, I expect the December update to paint another sunny picture.
Royston Wild is not a shareholder in Mental Gym.
What it does: Calnex is a technology company engaged in test and measurement services for telecommunications networks.
By Edward Sheldon, CFA. Calnex solutions (LSE:CLX) continues to post strong growth on the back of the global 5G rollout. Revenues rose 38% to £12.7m for the six months to September 30. Meanwhile, diluted earnings per share rose 34% to 2.67p.
Looking ahead, I see the potential for further growth. In the recent H1 results, the company said that investment in telecom infrastructure to deliver next-generation communications will “continue at a rapid pace”. He also advised that he has a strong order book going into H2.
One thing I love about Calnex, aside from its growth potential, is that the company’s founder is the leader. Research shows that founder-led businesses often make good long-term investments. Founder and CEO Tommy Cook owns a significant amount of company stock, meaning management’s interests are aligned with those of shareholders.
There are some risks to consider here. Spare parts/supply chain issues are the same. But overall, I see a lot of appeal in the stock right now.
Edward Sheldon owns shares in Calnex Solutions.
Fisher James and Sons
What it does: Fisher James & Sons is a company specializing in providing support and engineering services to the marine industry.
By Gabriel McKeown. It was difficult to find high-quality companies with low market capitalization; However, the recent market turmoil means there are currently plenty of low-cost opportunities for UK investors. This is a prime example. Fisher James and Sons (LSE: FSJ ), its share price has fallen by around 85% from pre-pandemic levels.
Despite this drop in share price, the company’s earnings are forecast to grow significantly, indicating a rebound. Earnings per share are expected to grow more than 40 percent, compared with 3 percent sales growth, indicating that profit margins should improve. Additionally, free cash flow is strong and is now above its three-year average.
The company’s high debt ratio made investors avoid this opportunity. But an interest coverage ratio of 2.1 indicates that it can be comfortably covered by earnings. This financial stability is certainly encouraging, especially if market conditions begin to weaken.
Gabriel McKeown is not a shareholder in Fisher James & Sons.
What it does: Jury Scientific acquires and develops specialty scientific instrument manufacturing businesses that serve a variety of industries.
By Zaven Boyrazian. Scientific judges (LSE:JDG) owns and operates a range of scientific instrument manufacturing businesses acquired over the past two decades. It certainly offers a good market. However, the products are critical to the research process for many industries and scientific institutions.
Over the past five years, annual revenue growth has been a modest 5 percent. However, with management improving operational efficiency and leveraging pricing power, operating margins have improved to 17.5 percent by the end of 2021 from 1.7 percent in 2017. This is more than double the industry average.
Being a high-grossing business introduces some significant risks. If the group makes an expensive acquisition without achieving expected performance, the balance sheet may be compromised. However, given the jury’s history of scientific findings, I feel this is a risk worth taking.
Zavon Boyrazian does not own stock in Judge Scientific.
What it does: Shoezone is an affordable shoe retailer with over 380 stores in the UK.
By Harshil Patel Shoe zone (LSE:SHOE) reported record sales last year. As customers tighten their belts and face additional costs elsewhere, the low-cost offering is becoming more popular.
It is a founder-led, well-run business that keeps a tight lid on expenses. Much of its future growth will likely come from expanding its large store format and online sales. So far this strategy seems to be working.
The double-digit profit margin is stable compared to last year, but the drop in shipping costs could make it even higher next year.
I like growing dividend and share returns. Shoe Zone currently offers a 3% profit rate. I am pleased to report that with £14m of cash on the balance sheet, it is well funded.
As a shoe retailer, there is competition. And growing stores in an uncertain economic environment may be a challenge in the coming years.
That said, overall, I’d say it’s an established, money-making business. It is doing very well and I will be buying the shares for an ISA this December.
Harshil Patel is not a shareholder in Shoe Zone.
What it does: A financial services company that operates through three divisions: Aquis Exchange, Aquis Stock Exchange and Aquis Technologies.
By GA Chester. Founded and led by a pioneer in stock exchange technology, Water exchange (LSE: AQX), is an industry innovator and disruptor.
The main Aquis exchange is a pan-European equity trading platform for institutional investors. Instead of paying per transaction, it offers a ground-breaking subscription-based pricing model. The company owns the Aquis Stock Exchange b London Stock ExchangeAIM market. Additional revenue is generated by selling market data and licensing software to third parties.
Aquis has a current market value of £118m. Revenue for 2022 is expected to be close to £20m (+15%), while pre-tax profits are in excess of £4m (+25%). After that, it forecasts annual top-line growth of nearly 20%, with pre-tax profit growth in the mid-to-high 30s.
I think the market is generous enough to give me an opportunity to buy Aquis shares at 21 times forecast 2023 pre-tax profit of £5.65m. However, there is a risk that the shares could fall if the growth rate is expected to be higher.
GA Chester is not a shareholder in the Aquis Exchange.
Premier Mitton Group
What it does: Premier Mitton Group is a Surrey-based fund management company.
By Paul Summers: Many listed fund managers have seen their share prices fall as their clients lose track of the global economy. AIM-listed Premier Legend (LSE: PREM) is no exception. The value has more than halved by 2022.
Based on analysts’ forecasts, the stock can now be mine for 14 times earnings. That’s not exactly cheap. However, it can be a bargain as market sentiment changes and forecasts are revised. Importantly, Premier has a track record of returning investors, with 88 percent of its funds performing in the first or second quarter of their sector since inception.
Then there is the income stream. Although a dividend cannot be guaranteed, Premier is down to a 9.5 percent yield this fiscal year.
I think this could be a great counter game. That said, I would consider waiting until full-year results are announced in early December before buying the stock.
Paul Summers has no place in the Premier League team
What it does: Frontier IP provides business and support services to early-stage companies to establish equity stakes.
By James J. McComby: Border IP (LSE: FIPP) In its 2022 annual report, the portfolio company was able to claim its first IPO listing, raising £6.5m in cash through share sales. He cashed in a further £3.4m after selling more identical shares. The hope is that this kind of cash flow will become a regular occurrence as the 24 companies in Frontier’s portfolio continue to grow. And there are some interesting companies out there. One is developing a new family of antibiotics, and the other is turning waste feed into high-quality tiles and countertops.
Frontier IP invests time and resources in acquiring equity stakes in companies that may be little more than ideas. Although the reward can be a lot, many of them can not return anything, and now the lion’s share of the income is not money. The portfolio approach reduces the risk of any failure to liquidate the company, but this is still a high-risk investment.
James J. McComb does not own stock in Frontier IP.
What does he do? Hotel Chocolat is a premium British chocolate retailer. It produces and distributes chocolate and other cocoa-related products.
He shares in John Chung Hotel chocolate (LSE: HOTC ) is down an eye-watering 70% this year. Its recent exit from the US market has not helped investor sentiment, as management now expects a loss-making FY22 and slower growth for FY23.
The good news is that the bad news is that prices have already dropped, and hotel chocolate stocks may be running low. But more importantly, the company could use capital as the UK plunges into recession. The ‘lipstick effect’ – where more affluent customers downgrade purchases to more ‘affordable’ items such as chocolate – can lead to a boost in sales for the firm.
Having said that, I suggest that there is limited downside potential for the stock, according to Bernberg, who has a £1.55 price target on the stock. So, in the coming days, I’ll keep my fingers crossed and may buy more stock as the retail outlook improves.
John Chung has no place in Hotel Chocolate.