I like to think I include myself in this group. And as luck would have it, the share price of one of my most coveted stocks is back down to levels not seen since the immediate aftermath of the March 2020 market crash.

Selling pressure

Set up in 2003, Farnham-based biotechnology firm Bioventix (LE: BVXP) specialises in the commercial supply of high-affinity monoclonal antibodies for applications in clinical diagnostics. In other words, these antibodies are used in blood testing machines in hospitals across the globe.

As a long-term hold, BVXP has been an absolute winner. As I type, the share price has climbed just under 1,000% in a little over eight years.

So far, however, this AIM-listed growth stock is having a poor 2021. The shares have retreated almost 24% year-to-date thanks to the brute that is Covid-19. With hospitals needing to prioritise treating the infected rather than diagnosing people for other things, it’s perhaps inevitable that profits have slipped. To compound the issue, fearful patients aren’t even reporting symptoms to doctors. 

So, the shares are cheap?

Not exactly. In fact, I imagine a fair few growth-focused investors would balk at the asking price (26 times earnings). However, I think this could prove to be a great contrarian opportunity for me for a few reasons.

First, BVXP scores extremely well on quality metrics such as returns on capital employed (ROCE) and operating margins. The former is something that star investors like Warren Buffett and Terry Smith pay a lot of attention to. Over time, it’s a company’s ability to reinvest the money it makes at a high level of return that separates the wheat from the chaff. 

Second, Bioventix is backed by some of what I consider to be the best fund managers in the business. No less than 20% of the company is held by star stock-picker Keith Ashworth-Lord in the CFP SDL UK Buffettology fund. Liontrust Investment Partners also owns a sizeable stake. Most importantly, Bioventix’s CEO Peter Harrison remains high up on the share register. Theoretically, the more willing management is to put its own cash at risk, the more likely it is to act in the interests of all shareholders.

Finally, there’s the balance sheet. With zero debt, Bioventix looks financially robust — the antithesis of many UK-listed companies right now. 

But what if Omicron sticks around?

It’s a fair question. The longer the pandemic goes on and resources are diverted elsewhere, the less near-term demand there is for Bioventix’s antibodies. Earnings could therefore continue to suffer in 2022.

Having said this, I do see Bioventix’s fall in 2021 as an opportunity to begin building a position at the very least. The shares could recover nicely if next year proves even slightly better than health and economic experts are currently predicting.

And if BVXP does stay down for longer than I expect it to, the dividend stream should make up for this. A potential 115p per share handout becomes a yield of 3.4% at the current share price.

As far as growth stocks go, I think there are a lot worse candidates out there.

The post 1 secret UK growth stock I’d buy now! appeared first on The Twelfth Magpie.

More reading

• Down 43% with a 9% dividend yield – should I buy this stock?

Paul Summers owns shares in the CFP SDL UK Buffettology fund. The Motley Fool UK has recommended Bioventix. 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.

Let’s take a look at what this under-the-radar firm does and, most importantly, question whether such a performance can be sustained. 

What’s this hot stock all about?

Genedrive is a molecular diagnostics business. In its own words, the company’s platform supports “the diagnosis of infectious diseases and for use in patient stratification (genotyping), pathogen detection and other indications”. These include Hepatitis C, military biological targets and, perhaps most importantly, Covid-19. 

Genedrive has been listed since 2007 and shareholders have enjoyed/endured a rollercoaster ride since. However, anyone buying at the height of panic in March 2020 will have done extremely well. Just before Boris Johnson announced the first UK lockdown, the Genedrive share price languished at just under 9p. On Friday, the very same stock closed at almost 62p. 

Why is the Genedrive share price flying? 

On 29 November, Genedrive revealed that its COV19-ID test had been supplied to “a range of potential commercial partners” for review and evaluation. This news was compounded by last week’s announcement that the company had now received the CE mark as intended. In other words, COV19-ID conforms with European health, safety, and environmental protection standards.

I won’t go into the science too much here, save to say that Genedrive’s test (performed via a nasal swab) can deliver positive results in 7.5 minutes. Negative results arrive within 17 minutes. As CEO David Budd commented, this will “allow immediacy and convenience in molecular testing, rather than waiting many hours or days for results from a central laboratory.”

On top of this, Genedrive’s test “offers several orders of magnitude improvement in sensitivity” compared to the usual antigen lateral flow devices.

Rapid results should mean a reduction in transmission rates and, ultimately, a quicker return to normality. That’s potentially great news for, well, everyone but particularly for any operator in the travel, leisure and hospitality space.

More to come?

It’s clear that the Covid-19 tale has several more chapters to run. That could provide a sustained boost to the Genedrive share price. This is especially if deals with partners are announced over the next few weeks and months. A market-cap of just £57m certainly suggests a lot more room for growth compared to the likes of, say, diagnostic peer Novacyt.

Even so, it’s clear only those blessed with a stoical temperament should apply. While GDR has soared in only a few weeks, it’s still way below the 52-week high of 165p. Those who picked up the stock in February or March will still be nursing heavy paper losses.

Due to a relatively small free float (the number of shares available to trade on the market) of 60%, I think this kind of volatility is set to continue. As evidence of this, the Genedrive share price dropped almost 12% on Friday. 

(Very) cautious buy

Recent news from Genedrive is undoubtedly encouraging and I wouldn’t rule out further gains going forward. As such, I’d consider buying a slice of the company today. That said, I’d be sure to only use money I could afford to lose while also remembering that there are other ways to take advantage of the market’s Covid-19 concerns.

The post The Genedrive share price is up over 230% in one month! Is there more to come? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

Shares in online estate agent Purplebricks (LSE: PURP) crashed this morning following a downbeat half-year trading update. Is this penny stock one to avoid at all costs? Or should long-term Foolish investors like me be getting ready to pounce? Here’s my take. 

“More challenging” market

Buoyed by the stamp duty holiday introduced by the government, we’ve seen a post-pandemic boom in the UK property market. Today however, Purplebricks gave indications that the bubble — if we regard it as such — could be close to bursting.

New instructions have “slowed significantly“, making the six-month trading period to the end of October “more challenging” for the AIM-listed company. In fact, PURP estimated that the number of properties brought to market was roughly 23% below the same period in 2020.

To complicate matters, the firm has also been making adjustments to its business model over this time. A new pricing system has been introduced and staff have been brought in-house. While CEO Vic Darvey said he had been “encouraged” by results from this new strategy, it’s clear this isn’t apparent in performance just yet.

What now?

Confirmation of half-year numbers is expected on 14 December. Where the Purplebricks share price goes between now and then is anyone’s guess. Personally, I wouldn’t be surprised if the selling pressure continued, especially as the company expects the trading environment to remain tough.

Of course, there’s not much Purplebricks can do about the supply/demand imbalance. And even if the market is only pausing for breath as the colder winter months approach, bills will still need to be paid. As a result, the company now expects Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) for the full financial year will come in “below previous guidance“. That’s hardly encouraging stuff.

Penny stock perils

Today’s 35% fall in the Purplebricks share price leaves the stock trading at just 34p a pop. Had I invested when the company’s valuation peaked back in July 2017, I would have lost 93% of my capital, on paper.

If this isn’t a lesson on the need to stay diversified within a portfolio, I’m not sure what is. Sure, penny stocks have the potential to deliver life-changing returns over a short period of time. Purplebricks is proof that the reverse is also true and, I submit, far more likely. 

You might speculate that investor sentiment couldn’t get much worse and now might be the time to buy. I can see the logic in that. However, is a company that seems unable to grow investors’ wealth even when times are good, one I want to own when the (housing) market slumps?

Even if things do rebound, it’s clear PURP is needing to spend a lot of money to keep up to speed. Cash fell from £75.8m at the end of October 2020 to £58m last week. Ongoing investment for any business is inevitable. That said, I’m sceptical as to whether any of this will help Purplebricks truly distinguish itself in what remains an incredibly competitive market with increasingly digitally-savvy rivals.

One to avoid

I’d say Purplebricks’ purple patch is long in the past and unlikely to return any time soon. Having once owned the stock, it now goes firmly into my ‘avoid’ pile. As economist John Maynard Keynes once reportedly said: “When the facts change, I change my mind.” 

The post The Purplebricks share price just crashed 35%! Here’s why appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

Strong trading

Revenue jumped 19.5% to £135.3m over the 27 weeks to the beginning of August following “strong trading.” As might be expected, a recovery in on-the-go consumption was seen as the UK emerged from its multiple lockdowns. New product launches also appear to have hit the spot. Barr’s Funkin brand of ready-to-drink cocktails logged growth of 150% as well. 

On a statutory basis, pre-tax profit rocketed 378.4% to a record £24.4m. Although this needs to be put in context, I take this as a sign the worst is most definitely over.  

Can this momentum continue?

The £600m-cap thinks it can. According to CEO Roger White, BAG is “on track to deliver strong full-year profit performance, slightly ahead of our 2019/20 pre-COVID level.” That last bit’s important. Beating last year’s numbers shouldn’t be a stretch, considering what was happening at the time. The real test is whether Barr is selling more drinks than it did the year before we were all told to stay behind our doors.

However, it’s the resumption of dividend payments that really makes me optimistic. This morning, it was announced that investors would receive an interim payout of 2p per share. That’s good in itself. However, BAG has also elected to pay holders a one-off special dividend of 10p per share. Such a move suggests real confidence on the part of management.

So why isn’t this growth stock rocketing?

Despite all this good news, shares in AG Barr were barely in positive territory early this morning. One explanation for this is that the company, like many others, is seeing “increased challenges” in its supply chain. Another could be BAG’s reflection that “a number of benefits” that supported profit growth in the first half would not be repeated.

There could be other reasons. Investors may be worried that sales at BAG may soften as the winter months arrive. Even if this isn’t the case, a resurgence in Covid infection levels could impact all stocks. 

For me however, these are short-term headwinds. Moreover, AG Barr’s reassuringly sound finances should allow it to weather any further storms. The £65.5m in net cash now on the balance sheet is just over 115% more than it had in its coffers this time last year.

Top-up opportunity

Having held the shares for a while now, I’m pleased to see that my patience in AG Barr is slowly being rewarded. If anything, today’s muted reaction gives me an opportunity to add more of this growth stock to my portfolio. A valuation of 20 times earnings still doesn’t seem excessive for a robust, quality company selling low-ticket items that people don’t think twice about buying.

I’m not the only one prepared to play the long game. Star fund manager Nick Train is the second-largest holder of the stock via his funds. If that’s not good company, I don’t know what is.

The post 1 UK growth stock to buy now appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers own shares in AG Barr. The Motley Fool UK has recommended AG Barr. 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.

What’s got the market so excited?

Fantastic trading, that’s what! Revenues from the first half of 2021 came in at $64.4m. That’s an 82% jump from the same period last year.

Much of this rise was attributed to a “very strong and highly active” US market — the firm’s biggest — and customers attempting to make up for lost time last year. Demand for new warehousing due to the huge growth seen in e-commerce following the pandemic was another reason. Elsewhere, three of the company’s five international markets delivered revenue growth. 

Naturally, all this has been good news for Somero’s profits. Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) jumped 183% to $24.6m. Margins also rose to 38%. On a statutory basis, pre-tax profit rocketed 213% to $23.5m.

An abundance of cash flow was also good news for those holding for income. A stonking 125% hike to the interim payout, to 9 cents per share (6.5p), was announced. Analysts currently have the firm down to return 29 cents (21p) for the whole year. That’s a chunky yield of 4% at the current share price. Even if I end up reinvesting this money in the company, I certainly won’t be turning that down!

Things definitely look positive. Following today’s very encouraging numbers and based on trading momentum going into H2, Somero hiked its full-year guidance. It’s now predicting record revenues of roughly $120m for the whole of 2021. A target of £42m for adjusted earnings has also been targeted.

As good as these numbers are, however, it’s the long-term prospects of Somero that I’m more interested in. On this front, I remain bullish given ongoing product development/launches, a growing workforce and expansion in markets like Australia. In fact, the firm is looking to begin increasing operational capacity by 35% towards the end of the year.

Still a buy

Somero traded on just 14 times earnings before the market opened. That’s a steal, in my (probably biased) opinion, especially as it consistently generates great margins and returns on capital. This cheap UK share is also a leader in specialised niche, giving it something of an economic moat.

However, this is not to say that there won’t be headwinds ahead. Trading clearly has the potential to be disrupted by ongoing issues with supply chains. Then again, it’s getting increasingly difficult to find a company/stock that won’t be affected by this issue. On a positive note, SOM did say today that it had “robust plans in place” to tackle this problem if it continues. 

Aside from this, one also needs to remember that construction is a cyclical industry. So, there’s certainly potential for the shares to jettison gains made over the last year (+150%) if the global recovery slows.

Again, however, I think Somero should be able to take any strain in its stride. Management expects the company to boast $36m in net cash at the end of the year. That’s a sufficient buffer for me to feel the risk/reward trade-off for this cheap UK share is still in my favour. 

The post Profits jump over 200% at this cheap UK share! I’ll keep buying appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares in Somero Enterprises, Inc. The Motley Fool UK has recommended Somero Enterprises, Inc. 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.

Headlam

I think floor coverings distributor Headlam (LSE: HEAD) might fit the bill of being a cheap UK share. Sure, this is hardly exciting stuff. However, it’s a market leader at what it does and one that seems to be coming through the other end of the Covid-19 storm in good shape.

Today, the company announced it had seen a “strong recovery” in trading. Total revenue of just under £330m over the first six months of 2021 is close to what the company achieved in the same period in 2019. Clearly, it’s also far ahead of last year (£227.2m).

As one might expect, this rebound was good news for underlying pre-tax profit at Headlam. This came in at £16.7m — a huge contrast to the £1.8m loss reported for the first half of 2020.

I reckon this momentum will continue. While activity in the commercial sector remains “subdued“, HEAD has still been trading in line with recently-upgraded expectations in the last few months. It’s also been able to maintain inventory levels despite issues with its supply chain. The resumption of normal dividend payments faster than thought also gives me confidence. 

Sure, Headlam isn’t risk-free. A rebound in Covid-19 infection levels would be less than ideal as the company goes into its traditionally busiest part of the year trading-wise. The share price performance hasn’t been magnificent either. While up 63% over the last year, the stock is still only 10% above where it was five years ago. So, I wouldn’t expect massive gains (like those seen at this FTSE 250 firm) any time soon.

Still, a valuation of 16 times earnings, reducing to 13 next year based on analyst projections make this a potentially good deal for me. 

Ab Dynamics

Another small-cap stock that could prove a good long-term buy for me is automotive testing firm AB Dynamics (LSE: ABDP). That’s despite the company’s share price falling 22% in 2021 so far, including a 6% fall today. 

At least some of this is due to trading still being stodgy in the wake of the pandemic. Recent news that founder Anthony Best has taken retirement hasn’t gone down well either. He does, after all, own over a quarter of the company’s stock and may be inclined to begin selling.

As a holder already, I can’t say I’ve been over the moon about all this. Moreover, this is unlikely to be regarded as a cheap UK share for anyone with a short investing horizon.

However, the fact that this company works with 25 major car manufacturers around the world speaks volumes. I struggle to think why the demand for its services won’t rapidly increase in the years ahead with the advent of autonomous driving. In addition to this, AB is also financially sound. So, not a cheap UK share in the traditional sense, but increasingly good value based on potential growth.

If anything, I think now could be a time for me to top up my holding. 

The post 2 cheap UK shares I’d buy now appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares in AB Dynamics. The Motley Fool UK has recommended AB Dynamics. 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.

Jersey Electric

As its name suggests, market minnow Jersey Electric (LSE: JEL) supplies electricity to approximately 50,000 domestic and commercial customers on the island. Importantly, it’s the only company to do so, making it arguably as defensive as small-cap stocks come. 

As a result of this, Jersey has shown itself to be an extremely consistent dividend raiser (+5% every year).  A total payout of 17.3p per share is expected in FY21. That’s a 2.9% yield; not massive but easily covered by profit.

As one might expect from a solid income payer, however, JEL’s share price performance has been adequate rather than explosive. The stock is up 44% in value since 2016. That’s clearly a whole lot less than other UK shares. So, a danger with JEL is that I wouldn’t get much in the way of capital growth. A valuation of 16 times earnings for a predictable utility stock isn’t exactly cheap either. 

Still, that predictability might suit me down to the ground if income were a priority. If/when markets correct, I can be pretty confident that JEL will recover quickly. That’s exactly what happened last year. 

NWF 

Small-cap NWF Group (LSE: NWF) describes itself as a “specialist distributor of fuel, food and feed across the UK“. Like Jersey Electric, it’s also a brilliantly regular dividend hiker. This potentially makes it another one of the best shares to buy at this end of the market spectrum.

The company is down to return 7.34p per share to holders in FY22, at least according to analysts. That’s a yield of 3.43% at last Friday’s closing price. Some might say that’s not enough given that shares in minnows can be pretty volatile due to their illiquid nature. Margins are also wafer-thin.

In NWF’s defence, its annual payouts are usually very well covered by profits, making them pretty secure. That’s more than you can say for some far larger stocks these days. On top of this, NWT’s shares aren’t expensive relative to the wider market. I could pick some up today for 12 times forecast earnings. 

Wynnstay

Agricultural product manufacturer Wynnstay (LSE: WYN) has shown itself to be admirably predictable when it comes to returning cash to its owners. We’re talking about an average hike of +5%, with the total sum always covered by profits.

A potential 15.2p per share in FY21 would give a yield of 2.7%. That’s the lowest of those mentioned here. However, it’s important to consider the impact of many years of compounding that regular dividends enable.

There are drawbacks, of course. Margins, like those at NWF, are seriously low. And, although performing superbly over the last year (+64%), WYN’s shares are now only back to the level they were in 2016. Like most things in life (and investing), I think balance is key. I would never fill an income-focused portfolio solely with small-cap stocks.

So, while Wynnstay might make a nice addition, I’d aim to reduce volatility by also holding some larger dividend hikers as well. 

The post Small-cap income: 3 of the best shares to buy for rising dividends appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

While the LISA can be a great way of saving for a first home, my priority is growing my retirement savings via growth-focused stocks and funds. After all, any capital gains made via investments are tax-free. One example of the latter I’ve started building a position in this month is Marlborough Nano-Cap Growth.

My latest LISA buy

Nano-Cap aims is to increase investors’ capital by more than the FTSE SmallCap Index (ex-Investment Companies) through buying the best of the UK’s listed minnows. At the time of writing, these include software business IQGeo, metal recovery business Jubilee Metals, and leak fixer Water Intelligence.

In terms of sector breakdown, the Nano-Cap Growth fund has almost 30% of assets invested in tech businesses. This shouldn’t come as a surprise considering the fund’s growth-focused approach. Collectively, Industrials and Consumer Discretionary companies make up another 30%. However, just 3% is invested in ‘Steady Eddie’ Consumer Staples.

So, why pick this fund for my Lifetime ISA over others?

Top performer

Well, the long-term performance has been great. According to Trustnet, the fund has delivered a 179% return since August 2016. Its benchmark has ‘only’ doubled in the same five-year period. This ranks Marlborough Nano-Cap Growth second out of a field of 45 funds dedicated to this part of the market.

Comparing this to the derisory performance of the FTSE 100 (up 4%) also helps explain why I definitely want some exposure to small-cap stocks in my LISA. Consider the gains I could make if I held this for 10, 15, or even 20 years! 

Expect volatility

Of course, the pursuit of higher returns comes at a cost. As experienced Fools will know (and newbies quickly discover), market minnows can soar in value on just a bit of news. Unfortunately, the opposite is equally true.

Yes, the diversification offered by the fund gives some protection. However, a rollercoaster ride is still quite possible.

This specific fund might also underperform. In fact, Nano-Cap Growth has returned 6% less than its benchmark over the last six months.

Obviously, judging form on such a short period makes little sense. Nevertheless, it’s important for me to keep track of how things are going to make sure the fees I’m paying to hold this in my Lifetime ISA are still worth it. 

Ah, yes, fees. To be frank, the 0.67% ongoing charge I’m paying via my broker isn’t that high for a specialised fund. That said, it’s still a lot more than I’m paying for a passive Vanguard small-cap fund I hold in another account. Picking my own stocks (which I also do) would avoid these charges completely. 

Sitting still

Buying Nano-Cap Growth for my Lifetime ISA now may not turn out to be one of my better decisions, at least in the short term. Since I’m terrible at timing the market, I know it’s better to be invested than not.

The key to successful investment returns isn’t so much about what you do, it’s about sitting tight and not doing anything! 

The post 1 fund I’ve been buying for my Lifetime ISA in August appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares in Marlborough Nano-Cap Growth. 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.

With this in mind, here are what I believe to be three of the best penny stocks to buy now.

Growth-focused penny stock

Trading at just under a pound, as I type, is Record (LSE: REC). This is a business that tries to reduce the impact of currency movements on institutional clients’ investment portfolios. 

Unfortunately, Record’s recent move to invest for growth has been at the expense of a “short-term decrease in profitability.” However, the firm is still cash-generative and boasts a healthy balance sheet. The payment of a special dividend smacks of confidence too. 

Speaking of which, Record started its new financial year in April with its highest recorded Assets Under Management Equivalents (AUME). It’s also been developing new products, including the recently-launched Emerging Market Sustainable Finance Fund.

Aside from this, Record also scores well on the quality metrics, such as returns on capital and margins. These are high, relative to the market in general, and go some way to making up for industry risks, such as regulatory hurdles. Nevertheless, the latter still has the potential to knock the share price.

On a P/E of a little less than 20 for FY22, I think Record could be a good stock for me to buy now. 

Recovering well

Also featuring in my selection of the best penny stocks to buy now is retailer Topps Tiles (LSE: TPT). Unsurprisingly, this is a company that really suffered at the hands of the pandemic. However, the tide has clearly turned.

Last month’s update said the company’s retail business had “performed well” in Q3, helped by the reopening of stores in April. Topps went on to say it expected to benefit from “high levels of consumer demand” going forward as the home improvement boom continues. A return to sales growth at its Commercial business is also expected.

Of course, hindsight shows that March 2020 was the time to pile in. The shares have multi-bagged since then. However, a P/E of under 15 now still doesn’t feel unreasonable for a debt-free company with an encouraging outlook. That said, its cyclical nature coupled with warnings that Covid-19 could get worse before it gets better makes this a cautious rather than automatic buy.

Ahead of expectations

A final pick is EKF Diagnostics (LSE: EKF). For under a pound a share, I can buy inmto a company that achieved record sales and profits in 2020.

According to May’s AGM statement, this form has carried on into 2021, thanks to “a very meaningful recovery in trading.” EKF’s core business “performed more strongly than expected” in Q1, again thanks to ongoing demand for sample collection devices generated by the pandemic. Indeed, the company now believes that full-year numbers are likely to be “comfortably ahead of already upgraded management expectations.” 

Naturally, all this hasn’t gone unnoticed by the market. In the last year, EKF’s stock jumped by 72% in value and now trades on a forecast P/E of 28. Unfortunately, this high valuation could mean the share price falls heavily if the company disappoints.

With a solid growth strategy and balance sheet, however, I’d still buy EKF today.

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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.

Today’s trading update for the year reads pretty well to me. 

Strong sales

Revenue hit £165m over the last 12 months. That’s a jump of 21% from FY20. That said, I think the 24% jump from FY19 is more important, since this was at a time when the word ‘coronavirus’ was uttered only by virologists.

On a shorter timescale, sales have “remained strong” since the company last spoke to the market in May. As one might expect, trade at the firm’s sites in commuter and tourist locations continues to be impacted by travel restrictions. However, it would appear that stores in less prominent locations have “largely offset” this lower footfall. All told, sales in the 10 weeks to 27 June were 34% higher than over the same period in 2019. 

What really impresses me however, is the huge strides HOTC is making with its digital offering. The AIM-listed company now claims to have grown its UK customer database to 3m. That’s a 66% increase since December 2019. Although not every one of those will be actively purchasing chocs, HOTC did say that sales via this medium now represented a “substantially larger proportion” of total revenue.

But what about the outlook? On this front, I remain optimistic. Unsurprisingly, so does HOTC’s management. 

Increased expectations

Based on the recovery in store sales following the first UK lockdown, the company expects a similar trend over the next few months. Although no actual numbers were given, HOTC now believes that underlying pre-tax profit will be higher than previously thought. This helps to explain why the share price is up today. 

The company’s growing presence in overseas markets is another reason to be bullish, in my opinion. Sales in the US and Japan (via its joint-venture partnership) rose 62% and 277% respectively over the last year. Sure, these are still early days. However, it does indicate that the brand is rapidly winning admirers in two of the world’s biggest economies. 

Following a £22m equity raise last year, HOTC also looks to be in decent financial shape to continue investing for growth. New products are hitting the shelves (including Unbelievably Vegan chocolate). The firm’s UK distribution centre has nearly doubled in size too.

Obviously, where the share price goes from here can’t be predicted with any certainty. The fact that scientists are already warning that the pandemic will get worse before it gets better is not something I’d ignore.

However, it does look like HOTC has already done/is doing what it can to mitigate the impact of Covid. Lower rents have already been negotiated at 30% of the UK stores, for example. 

Growth… at a price

Hotel Chocolat’s stock changed hands for a frothy-looking 44 times forecast earnings as markets opened this morning. That said, it also had a price/earnings-to-growth (PEG) ratio of under 1. This suggests the small-cap stock may actually be better value than it initially appears to be.

So long as the rest of my portfolio remains diversified and I don’t mind the potential for greater volatility, I’d be content to buy now.

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