The FTSE 100 index hosts some of the top companies in the world. While the index receives a lot of investor interest, it is not equally distributed across every company. Darlings like Rolls-Royce and Lloyds see high daily trading volumes, while other top companies are overlooked, especially during a bear run.

I have identified two such FTSE 100 shares that are currently in the bottom half of the index when ranked by the 30-day average trading volume. And I think these companies look like they are ready to explode when the next bull run hits. 

Overlooked superstars

Spirax Sarco (LSE:SPX) and Croda International (LSE:CRDA) were big pandemic winners. Between March 2020 and December 2021, these two shares gained over 110%. In fact, Croda International was a top FTSE 100 performer across 2021, jumping 57% in a year. 

But since this bull run, both shares have fallen significantly. Croda bottomed out at 4,490p in June 2022 after hitting all-time highs in December 2021. Spirax-Sarco too fell over 46% during the same period, bottoming out at 9,130p. 

This caused investor interest to dampen. Thirty-day trading volume for Spirax-Sarco and Croda is currently at 168,000 and 434,000, respectively. For comparison, Lloyds shares recorded 205.33m trades during the same period. 

But I think the tides are changing. Since the June low, both companies have rebounded by over 22%, showing me that if the market is healthy, these shares could grow very fast. 

Finances

Croda International is a speciality chemical company operating in Britain for over a century. It focuses on chemicals used in beauty and personal care products. The firm also has a huge agriculture wing that focuses on chemicals required for crop growth. 

The recently released first-half (H1) 2022 results showed that sales jumped by 21% compared to H1 2021. Similarly, profit before tax went up 26% to £636.5m including proceeds from recent sales. 

The company recently redoubled its growth efforts in the fragrance industry, which is witnessing strong growth in emerging markets. It has a projected valuation of $58.8bn by 2022 which would bring compounded annual growth to 5.6%. 

The second company on my list, Spirax-Sarco, is an engineering firm with a focus on steam management systems. This share gained a lot during the recent green energy push across Europe. And this has gathered more steam this year, making the market ripe for Spirax-Sarco, which creates efficient energy systems for industries. 

In 2021, the company recorded a revenue of £1.3bn, up 17% from 2020. Total profits were £340.3m with an impressive margin of 25.3%. A strong positive is that insiders purchased Spirax shares worth over £462,000 last year and sold nothing.

While these are strong signs for both companies, I think there are some concerns to address. Both boards have noted fluctuating commodity prices as a major cause of concern for the coming months. Also, Croda has been spending a significant amount on R&D, which could backfire if there is a market crash. 

And it is unlikely that these companies will recreate the runs they had in 2020. But given the strong fundamentals and large market share, I think I would make an investment in both companies in 2022 provided the rebound continues. 

The post Hidden gems: these 2 FTSE 100 shares look ready to take off appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International. 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.

There’s always a chance we could see a pullback in the near term, of course. No one knows for sure what stocks will do next week or next month. However, encouragingly, some financial experts believe stocks could keep rising for a while.

Below, I’m going to highlight three growth stocks that I believe have the potential to rise in this bull market (and over the long term). I’d be happy to buy all three for my own portfolio today.

Clipper Logistics

One stock that has a lot of momentum at the moment is Clipper Logistics (LSE: CLG). It’s a fast-growing logistics company that offers a range of crucial services to retailers.

Clipper has gone from strength to strength recently. In February, for example, it announced that it had won logistics contracts with River Island and Mountain Warehouse. Meanwhile, earlier this week, it announced that it had signed a letter of intent with JD Sports Fashion to provide e-fulfilment services. Looking ahead, I expect the company to keep growing as the e-commerce industry expands. For the year ending 30 April 2021, analysts expect revenue growth of 28%.

It’s worth pointing out that CLG shares have had a great run over the last year (+230%). So, there’s always the risk of a pullback. However, the stock’s valuation (P/E of 23) doesn’t appear stretched right now. This leads me to believe it can keep climbing.

Alpha FX

Another growth stock I like the look of right now is Alpha FX (LSE: AFX). It’s an under-the-radar financial services company that helps businesses manage their foreign exchange (FX) risk. Its clients include ASOS and Halfords.

Alpha FX posted its full-year 2020 results in March and the numbers were impressive. For the year, revenue was up 31% to £46m while underlying profit before tax was up 20% to £17.5m. Looking ahead, the company said that it remains optimistic that it’s on track to deliver another strong year of growth this year.

Alpha FX isn’t a cheap stock. Currently, it sports a forward-looking P/E ratio of about 34. So, there’s some valuation risk here. If growth stalls, the stock could fall. However, I’m comfortable with this valuation as Alpha is a high-quality company with a good track record.

XP Power

The third stock I want to highlight is XP Power (LSE: XPP). It’s a leading manufacturer of critical power control components for the electronics industry with a focus on the industrial, healthcare, and technology sectors.

XP Power posted an encouraging Q1 2020 trading update earlier in the week. In this update, the company advised that the group had made a good start to the year with order intake up 7% year-on-year. For the quarter, revenue was up 23% at constant currency.

It said it believes it’s well positioned to grow ahead of its end markets. However, it noted that ongoing Covid-19 uncertainty and FX movements could impact the growth story. These are definitely risks to keep an eye on.

XP Power shares have experienced a bit of a pullback recently. As a result, the stock currently trades on a P/E ratio of 25. I think that’s a reasonable valuation for this stock. At that valuation, I see it as a ‘buy’.

The post 3 growth stocks I’d buy for this incredible bull market appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Clipper Logistics, JD Sports Fashion, ASOS, and Alpha FX.The Motley Fool UK has recommended Alpha FX, 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.

FTSE 250 contrarian play

Like most in the market, online price comparison site Moneysupermarket.com (LSE: MONY) hasn’t had the easiest 2020 so far. In its most recent update, the FTSE 250 member revealed a 16% decline in revenue over Q3, due to travel restrictions and banks pulling products from the market.

But let’s not get distracted by a temporary period of troublesome trading — Moneysupermarket still ticks many boxes on a quality-focused investing checklist:

• Sky-high returns on capital employed? Check.
• Huge operating margins? Check.
• A strong brand? Check.
• Net cash on the balance sheet? Check (£5m).
• Still paying dividends? Check.

In addition to all this, Moneysupermarket should benefit from a rush for travel insurance when people start flying again. Even those that aren’t so inclined to travel will still be wanting to use the site to save money on monthly bills. 

Could I make greater gains buying battered travel and leisure stocks? Quite possibly. The issue with this strategy, however, is that many of these simply aren’t very good businesses when it comes to making money for their shareholders. And, as Warren Buffett would surely attest, it’s the quality of a business that really matters in the long run.

Assuming things do get back to normal next year, Moneysupermarket shares trade at 17 times forecast FY21 earnings. That still looks great value to me, considering the five-year average PE of 22.

Down but not out

A second battered FTSE 250 stock I’ve bought more of in November is high-performance polymer supplier Victrex (LSE: VCT). Like Moneysupermarket, recent trading hasn’t been great, due to the chaos caused by the coronavirus.

Last month’s update spoke of end markets remaining “subdued” after sales volume and revenue fell 26% (to 695 tonnes) and 27% (to £55,7m) respectively in Q4. Job cuts will help mitigate the company’s high fixed costs, but it’s hardly the sort of news to make investors bullish. There’s also Brexit to ponder.

As negative as this sounds, Victrex remains a classy operator. Let’s look at some of the attractions: 

• High returns on capital employed? Check.
• High operating margins? Check.
• Operating in multiple industries. Check.
• A market leader in what it does? Check.
• Lots of net cash on the balance sheet? Check (£67.4m).
• Dividends? Check (a dividend for FY2020 is expected).
• Growth opportunities? Check.

Thanks to its exposure to the aerospace industry, I also think Victrex is another good ‘picks and shovels’ play on the recovery in travel. Tapping into the growing trend for green investments, the company’s lightweight thermoplastics help make aircraft more fuel-efficient and environmentally friendly.

Play the long game

Naturally, big gains won’t come overnight. As an investor however, it pays to distinguish between short-term hurdles and game-changing problems. The coronavirus, I submit, is the former.

A valuation of 24 times forecast earnings does look dear, given current headwinds, but this should reduce as profits recover over the next couple of years. Just like star UK fund manager Terry Smith, I think price is of secondary importance compared to buying a great company with solid growth prospects. This belief certainly hasn’t adversely affected the performance of his Fundsmith Equity Fund.

Victrex’s eventual rebound should be worth the wait.  

The post Stock market rally! Here are 2 FTSE 250 shares I’ve been buying for the next bull run appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Moneysupermarket.com and Victrex. The Motley Fool UK has recommended Moneysupermarket.com and Victrex. 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.

Here’s what I think we need to be asking ourselves.

1. What’s driving this ‘bull market’?

Naturally, there are a few things that have caused this incredible rally in stocks.

First, there’s the financial support instigated by governments around the world in the wake of the pandemic. The ‘whatever it takes’ message has hit home with employers and investors and, for now at least, they like what they hear. 

Second, the coronavirus finally looks to be losing its grip. The number of people testing positive and/or dying has thankfully reduced as social distancing measures and lockdowns appear to have had the desired effect.

Third, the gradual lifting of restrictions has brought with it an inevitable wave of renewed optimism, particularly from those who think they were too draconian anyway, or simply want a proper haircut. 

Fourth, the severity of March’s crash meant a big bounce was always possible. When everyone in the market seems to agree on something, you can be pretty sure it won’t last!

All this is well and good. The more important question for me, however, is whether the rally is sustainable. 

2. Can it last?

Here’s where I start getting gloomy. Regardless of the reassuring platitudes made by those in charge, the financial support provided simply can’t last forever. Moreover, the world is still facing a significant global recession. Many companies will still go to the wall and many jobs will be lost.

We also need to look at who’s buying stocks right now. Based on what we’re hearing from the US, it’s new retail investors, not established professionals. This doesn’t make the former wrong, but it does make me suspect that at least a proportion of those buying now probably won’t be regular readers of company reports!

Knowing this, it’s worth questioning how many will be capable of holding their nerve when current expectations meet with hard economic data. To date, we’ve only been able to estimate the financial impact of the coronavirus. Over the next few months, we’ll see whether these predictions are anywhere approaching accurate. If they are, markets may hang on to recent gains. If theyre not, the recovery could be over.

Last, we need to consider whether the coronavirus will be gone after only a few months. As far as this is concerned, all I know is I don’t know.  

3. Should we avoid buying?

Absolutely not! I’m a fan of buying whatever the economic weather, so long as I know I’m investing for years and my holdings are of sufficient quality. I’m talking about companies with great brands, big market shares, strong management, sound balance sheets, and large operating margins. 

Having said this, I’m also reminding myself that no company is worth buying at any price. So, before clicking that ‘buy’ button, I’m thinking about whether the renewed market optimism is already priced in. For some stocks, I really think this is the case.

Bull market or bubble? My heart whispers the former. My head screams the latter.

The post Bull market or bubble? What should we make of the super stock market recovery? appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.