So how much money should investors expect to make?

What an index fund could deliver

The FTSE 100‘s currently forecast to deliver around 10% in price gains over the next 12 months, according to the average institutional analyst consensus. Pair that with a 3% dividend yield, and a £5,000 investment today could grow to roughly £5,650 by July 2027.

But what about stock-pickers? Obviously, the answer here depends on which stocks investors decide to buy. But looking at Kainos Group (LSE:KNOS), the potential rewards could be far more substantial if the latest projections prove accurate.

Could Kainos do even better?

As a quick introduction, Kainos is a technology company operating across three divisions:

• Digital Services – builds digital transformation platforms for public sector and healthcare clients.
• Workday Services – provides deployment and consulting services for Workday‘s enterprise software.
• Workday Products – its own suite of Software as a Service (SaaS) applications that sit on top of the Workday platform.

With an analyst consensus price target of 1,110p against today’s price of around 782p, meaning the stock could climb 42% over the next 12 months. That’s almost four times what index investors are expected to earn. And it’s enough to turn £5,000 into potentially £7,100 even before counting dividends!

So what’s behind this bullish sentiment?

The bull versus bear case

The group’s latest full-year results make a compelling case for why analysts are so optimistic. Between April 2025 and this March, revenue grew 17% to £431.1m, pre-tax profits rose 19% to £58.1m, and bookings surged 32% to £505.3m.

Healthcare revenue within Digital Services was particularly impressive, jumping 55% as NHS contract wins accelerated. And with a contracted backlog of £433.9m at the start of April, provides management with excellent visibility as Kainos enters its 2027 fiscal year.

But the most exciting part of the story is Workday Products. This SaaS division now has nearly 700 customers, with annual recurring revenue (ARR) of £89m. And with its latest Pay Transparency software package proving impressively popular, the company remains firmly on track to reach its £200m ARR target by 2030.

Having said that, there are risks worth considering carefully. Underlying margins slipped from 18% to 16% in the year, driven by a significant rise in contractor costs as Kainos scrambled to meet the pace of new contract wins.

While management expects margins to recover as contractors are replaced by permanent staff, this transition takes time. And if bookings growth were to slow before that margin recovery materialises, the fundamentals could come under pressure.

So is it worth buying?

Kainos is a bit of a rare thing in the current stock market, in my opinion. It’s a profitable, cash-generative tech enterprise gaining serious momentum. And yet the share price has largely lagged.

With a forward price-to-earnings ratio of 16.2, the valuation, while not dirt cheap, isn’t all that demanding given the underlying quality of this business. That’s why I’ve already added the shares to my own portfolio.

But it’s not the only stock that’s caught my eye this week…

What income stock do we like better than Kainos Group Plc right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Zaven Boyrazian owns shares in Kainos Group.

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But despite only being 10% of the target, the first £100,000 is actually the hardest milestone to hit. So how much money does it take to get there?

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

The road to a six-figure ISA

The ISA annual allowance sits at £20,000, which works out to an average of £1,667 a month. Drip feeding this money each month and investing it at the UK stock market’s average 8% annualised return would push a portfolio over the £100,000 threshold in roughly four and a half years with about £90,000 deposited in total.

Sadly, most people can’t commit that amount of money each month. The good news is, they don’t have to.

At a more modest £500 contribution each month, the journey’s longer, taking roughly 11 years. But here’s the twist: because compounding has had more time to work its magic, the total amount of money actually contributed is only around £66,000.

So the question now is, how can investors contribute even less while also shortening the length of the journey?

The power of stock-picking

By selectively investing only in the best and brightest of businesses through stock picking, investors can end up earning vastly superior returns compared to the wider stock market. And Kainos Group‘s (LSE:KNOS) a compelling example of what’s possible with smart stock selection.

The Belfast-headquartered IT services and software provider has delivered a 19.7% average annualised total return over the last 10 years. That means anyone drip feeding £500 a month at this rate not only crossed the £100,000 mark in roughly seven and a half years, but also only had to contribute around £45,000 to do it.

A strong business with one nagging concern

The latest full-year results, covering the year to 31 March, were genuinely impressive. Revenue jumped 17% to £431.1m, bookings surged 32% to £505.3m, and the contracted backlog rose 18% to £433.9m, giving the business exceptional forward visibility.

What’s more, the fast-growing Workday Products division is now closing in on management’s £100m recurring revenue target by the end of this year.

As CEO Brendan Mooney put it: 

“This was a positive year for Kainos, with excellent revenue growth. Our strong customer relationships and significant contracted backlog position us well for further progress in the year ahead.”

However, there’s a glaring issue for investors to watch carefully. Despite 17% top-line growth, underlying pre-tax profits only climbed 2%. Why? Because margins are under pressure.

Higher National Insurance contributions and increased investment spending in its Workday partnership have all squeezed profitability, with margins slipping from 18% to 16%. If management is unable to restore margins in the future, its current growth might be generating higher revenue, but not necessarily creating much shareholder value.

Nevertheless, I think Kainos might deserve the benefit of the doubt. It has a long track record as a quality compounder. And with both its strong order backlog as well as the AI opportunities emerging within the public and private sector, there are multiple long-term tailwinds to capitalise on.

That’s why I already have Kainos shares in my own six-figure ISA. And it’s why I think other investors may want to consider taking a closer look.

Should you invest £5,000 in Kainos Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Kainos Group Plc made the list?

Zaven Boyrazian owns shares in Kainos Group.

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But with valuations stretched and US GDP growth forecast at only 2%-2.5%, analysts don’t expect the same in 2026. Overall, the Dow isn’t expected to grow more than 10% in a best case scenario, with lower forecasts predicting only 3% growth.

These three high-yielding UK shares are forecast to grow far more.

Kainos

Kainos (LSE: KNOS) helps big firms like the NHS or banks to upgrade their digital systems, especially with Workday software for payroll and HR. It’s been growing revenue steadily the past few years, with increasing public sector deals and cloud demand as UK government tech expenditure grows.

Analysts forecast average price growth of around 67% in the coming 12 months. The 4% yield’s reliable too, covered by cash flow even after five years of increases, and shares trade on a fair-ish multiple around 29 times earnings. 

Still, it faces stiff competition from lower-cost alternatives in regions like India. If the economy dips, tightening budgets could send clients looking elsewhere. Still, the combination of growth and income makes it worth considering in my book — even with the tech-cycle wobbles.

Telecom Plus

Think of Telecom Plus (LSE: TEP) as a one-stop shop for broadband, mobile, gas, and electric. By bundling bills together, it saves customers cash and builds loyalty. The latest half-year results showed steady profits despite energy price swings, with dividends up 13% last year to a near-7% yield. Cash coverage is a bit thin at only 1.2 times but is backed by 25 years of payments.

Plus, the average 12-month analyst forecast is 68% higher than today’s price. That’s a chunky combo of income and growth!

But it’s a competitve sector, with rivals Octopus and Bulb muscling in on its market share. On the plus side, falling wholesale energy costs should boost profits as UK households switch. But any change in regulations could further pressure margins. 

For now, the balance sheet looks solid and cash generation is promising. For investors seeking dependable income with growth potential, it’s a strong contender to consider.

MONY Group

MONY Group (LSE: MONY) operates price comparison sites like MoneySuperMarket, helping customers find the best deals on loans, insurance, and broadband. Revenue recently ticked up 1% to £225m amid car insurance woes while EBITDA rose 2% and SuperSaveClub membership hit 1.5m, now 14% of sales.

The core attraction here is the stock’s 8.2% yield, but the average 57.5% growth forecast is a big bonus. Analysts have cited potential UK rate cuts as driving interest in switching providers.

But lately, AI-driven comparisons and fierce Google ad competition threaten its business model. If consumer spending softens, it could stall traffic and impact profits.

While the growth narrative is lower here, the yield is undeniably attractive for UK income hunters. It’s long been a favourite of mine and the current low price also makes it worth considering.

The post The Dow Jones may be at 50k but these 3 UK shares are forecast to grow further in 2026 appeared first on The Twelfth Magpie.

Yet, this could be just the tip of the iceberg. In fact, investors could be looking at a buying opportunity in British businesses that haven’t been seen in almost a decade.

An economic rebound?

Looking at the UK’s economy today, there’s plenty to be gloomy about, including stubbornly above-target inflation and rising unemployment. However, something that’s seemingly fallen below the radar of most investors is that productivity’s actually rising, with the latest forecasts for 2025 placing estimated growth at 1.4%.

Excluding the post-pandemic economic recovery, that’s the highest projected level of productivity growth seen since 2017, and just prior to the 2008 financial crisis before that. And if this improvement can be sustained, it could create a powerful tailwind that most FTSE shares can capitalise on.

Digging deeper, there are two possible factors driving this surprise surge.

The first is that investments made by businesses to cut costs and improve efficiency over the last few years are finally starting to pay off. And we’re already seeing supportive evidence of this with record profits emerging and rising profit margins among many UK stocks.

However, the second explanation’s less exciting. Due to the government increasing both employer National Insurance contributions and the Minimum Wage, low-paid jobs, particularly in the hospitality and retail sectors, have been cut, temporarily boosting the perceived productivity of the remaining workforce.

The truth is likely a combination of both factors. But as it turns out, there are several FTSE shares that can benefit either way.

A hidden winner?

Regardless of whether productivity’s being boosted through operational efficiency or labour restructuring, Kainos Group (LSE:KNOS) still benefits.

The company offers a portfolio of software and digitalisation services to help businesses automate operations and become more efficient. If companies need to cut back on jobs, Kainos can help ensure minimal disruption. If companies want to become more efficient with their existing workforces, Kainos can help implement artificial intelligence (AI) and other software solutions.

This nifty combination has already translated into record sales and orders across the first half of its 2026 fiscal year (ending in March). Meanwhile, its relatively new software-as-a-service segment is currently on track to surpass £100m high-margin recurring revenue by the end of this year.

Needless to say, this structural tailwind bodes well for Kainos shareholders. But of course, there are still some risks. One of the firm’s biggest customers is the UK government, making it susceptible to budget cuts, particularly for the NHS.

At the same time, with the rise of new AI models potentially lowering long-term demand for external digitalisation experts, this economic productivity tailwind may end up being offset.

Nevertheless, AI disruption risk is potentially problematic for its currently larger services segment. By comparison, its rapidly expanding software arm appears to be an AI beneficiary. And with management aggressively investing in this long-term growth engine, this risk could be mitigated.

That’s why, in my opinion, Kainos could be worth a closer look. And it’s not the only FTSE share I’ve got my eye on right now.

The post FTSE shares: a near-once-in-a-decade opportunity to get richer? appeared first on The Twelfth Magpie.

Kainos Group (LSE:KNOS) is one such enterprise whose market cap had already been on a downward trajectory since early December 2025. And now, on a forward basis, the group’s price-to-earnings ratio sits at a decade low of just 14.8!

So, is this growth-turned-value stock now a screaming buy for long-term investors? Or is there trouble brewing?

AI disruption risk

For most of its history, Kainos has been a digitalisation specialist, helping businesses and governments implement software solutions to automate processes and boost operational efficiency.

But, in more recent years, management has been evolving the company into a software-as-a-service enterprise by creating bespoke plugins for the Workday human capital management (HCM) platform. And while its suite of tools is still quite niche, they’re proving to be rather popular, delivering impressive and expansive recurring revenue growth.

As of November 2025, its software segment is now responsible for 20% of the top line. But over the medium-to-long term, that could increase significantly, especially as the firm aims to reach £200m in annual recurring revenue by 2030, up from £77.5m today.

However, right now, that means the business remains largely dependent on supporting customer digital transformation projects. And that’s something that could be exposed to significant AI disruption. After all, why would a company hire large teams of consultants to write code and configure systems when AI agents can do most of the legwork?

This fear of disruption is what sparked a wider tech sell-off recently, and unsurprisingly, Kainos got caught in the crossfire.

A buying opportunity?

Buying Kainos shares today is very much a bet on whether the company is an AI enabler or an AI victim. There’s no denying that the firm’s currently core consulting-style revenues are at risk. But with its existing contracts spanning multiple years, the group appears to have more than enough time to adapt and reallocate resources to more aggressively expand its software arm.

This obviously introduces some critical execution risk. And it’s worth highlighting that by building tools for the Workday platform, the business is also tied to Workday’s long-term trajectory and its fight against competing HCM platforms from Oracle and SAP.

Nevertheless, with Kainos shares now trading at a dirt-cheap valuation not seen in over a decade, I can’t help but wonder if the market is seriously underestimating this business. And with a pretty impressive track record of navigating through both favourable and adverse operating environments, this does indeed look like a potential buying opportunity worth investigating further.

Yet it’s not the only business to have been hit during this recent tech sell-off that’s caught my attention this month.

The post After its share price crashed 40% in 3 months, is this a bargain basement value stock? appeared first on The Twelfth Magpie.

And when leveraged correctly using an ISA, it can drastically accelerate the journey towards financial freedom. Here’s how.

Capitalising on volatility

When investors panic, they’re often quick to sell businesses in their portfolio as an attempt to prevent losses, regardless of whether these businesses are actually in trouble.

This knee-jerk reaction, driven by a lack of emotional discipline, is what smarter investors can exploit to target outsized, long-term returns. And right now, such an opportunity could exist within the tech sector.

Earlier this month, many technology stocks were slammed. Microsoft and Amazon have seen their market-caps tumble by double digits. And for some software vendors including Atlassian and Duolingo, the losses have stretched by almost 50% since the start of 2026!

It’s not just US stocks getting sold off. UK businesses such as RELX, Softcat and Kainos Group (LSE:KNOS) have also seen their shares get caught in the panic-selling crossfire.

The primary cause of this sell-off seems to be panic about artificial intelligence (AI) disruption, causing some software enterprises to potentially become obsolete. After all, why pay for expensive software-as-a-service licenses when an AI model can do just as good a job at a much lower cost?

It’s a valid concern. But right now, investors seem to be throwing the baby out with the bathwater. And that’s where intelligent investors can potential unlock some impressive long-term gains.

Time to go shopping?

Let’s zoom in on Kainos Group. The digitalisation and software specialist’s shares have tumbled by around 25% since the start of the year, once again driven by concerns of AI disruption.

Is this justified? There’s an argument to be made that Kainos could be in trouble. After all, the firm derives a large chunk of its revenue from digitalisation consultancy services – an area where generative AI is already taking market share.

However, recognising the disruptive potential of AI on its business years ago, management’s been steadily pivoting away from its dependency on consultancy. As such, the group’s been building out a suite of complex software tools that plug directly into the Workday platform to handle mission-critical tasks like compliance, data security, and process automation.

This part of the business is still relatively small. But it’s expanding rapidly and in the long-run, is expected to eventually dominate the revenue stream. And with the Workday platform so heavily integrated into its customers’ operations, replacing this entire ecosystem with AI tools seems very unlikely.

Meanwhile, the Kainos short-term outlook also appears quite strong. It’s now the fifth-largest AI supplier to the UK public sector, with pre-approved government contracts running through 2026 and 2027. In other words, AI may not actually be a threat. Instead, it looks like an opportunity.

Transitioning from an implementation specialist to an AI-native platform is no easy feat. There’s no denying that significant execution risk surrounds this business. But with the stock now 25% cheaper, that’s a risk I’m seriously considering. And it’s not the only sold-off stock that I’ve got an eye on right now.

The post The stock market in 2026 could be a rare opportunity to build wealth in an ISA! appeared first on The Twelfth Magpie.

Here are two of the recent top picks.

1. An evolving SaaS business

The analyst team at Bank of America has flagged Kainos Group (LSE:KNOS) as a potentially top stock to consider in 2026, upgrading its recommendation from Underperform to Buy.

This change of tone’s pretty drastic. But looking at the company’s recent achievements, it’s not hard to see why. Following its latest results, Kainos is now standing on a record contracted backlog of £396.9m alongside £227.9m in bookings – 27% higher than a year ago.

Digging deeper, the business is benefiting from structural tailwinds in public sector spending, particularly within the NHS and wider government-backed AI initiatives. But the firm’s relatively new software-as-a-service (SaaS) offer that piggybacks the Workday platform is also picking up steam.

Its SaaS arm has reached £77.5m in annual recurring revenue as of September 2025, on track to surpass £100m by the end of 2026, and over £200m by 2030. And with order and revenue momentum building in North America, Kainos’ growth trajectory looks like it’s accelerating.

This promising outlook is why I’ve already snapped up shares for my own growth portfolio. However, it’s important to recognise the risks. Given the state of the UK’s finances, public sector spending could be vulnerable to budget cuts, handicapping Kainos’ growth potential.

Its commercial software does provide some revenue diversification. However, these too could be exposed if economic conditions deteriorate – something growth investors need to consider carefully.

2. Opportunities in facilities management

Mitie Group‘s (LSE:MTO) another business among growth shares that institutional investors have on their radars. The team at Peel Hunt has even issued a 191p share price target, suggesting potential double-digit growth could be on the horizon.

Just like Kainos, Mitie’s been delivering some robust results of late. Thanks to a combination of organic and acquisitive growth, management’s delivered solid double-digit revenue growth while simultaneously securing a record £3.8bn in total new contract awards.

Yet this could be just the tip of the iceberg. Thanks to its transformational Marlowe acquisition last August, management added over £300m in annual high-margin revenue. And with £30m in expected cost synergies, both operating profits and free cash flow generation are expected to step up significantly throughout 2026 and beyond.

However, acquisitions don’t always pan out. Digesting Marlowe seems to be progressing well so far, but there remains significant integration risks.

Unexpected disruptions and culture clashes often create unforeseen costs and headaches for acquisitive businesses. And with fierce competition within the facilities management sector, any missteps could create opportunities for Mitie’s rivals.

Nevertheless, given the group’s emerging strength and prudent leadership, this business could also be worth mulling. Of course, there are plenty more growth shares with promising potential to explore.

The post 2 top British growth shares to buy in January, according to the experts appeared first on The Twelfth Magpie.

I’ve got a few ideas, but I’m worried I might be missing something. So just for fun, I asked ChatGPT to pick three UK shares with serious, if not epic, growth potential.

I’d never actually use AI to pick stocks, that’s not what it’s designed for, but I hoped it would point me towards something interesting. To my surprise, given my focus on income, I already own the first stock it highlighted.

I shouldn’t really be surprised, given that the stock is Rolls‑Royce Holdings (LSE: RR.). It’s rocketed 1,150% in three years, and 99% over the last 12 months. Which is pretty epic.

Rolls‑Royce Holdings is risky now

ChatGPT says the engineering giant has benefitted from the rebound in aviation, combined with optimism around future nuclear and aerospace contracts. It listed risks as “execution and cash flow”, which is very generic.

Personally, I’d be wary about Rolls-Royce. Expectations are sky-high, with a price-to-earnings ratio of 55. If profits, revenues or margins disappoint, it could smash the shares at these levels. I’m seriously thinking of taking profits rather than buying more. It’s a good example of why investors should never take ChatGPT as written, but do their own research.

Kainos Group shares

By contrast, the next pick came out of the blue. FTSE 250-listed Kainos Group (LSE: KNOS), a digital technology services firm I hadn’t considered before. ChatGPT says it’s riding a wave of enterprise tech spending, with revenue growth expected to outpace the broader market. The Kainos shares price jumped 30% in 2025, though the five-year trend has been patchy.

The board reported a 16% drop in first-half profits to £32m, but that was mostly due to investing in the business and taking on new staff. Six-month revenues actually rose 7% to £196.1m. Kainos further cheered investors by hiking the interim dividend and announcing a £30m share buyback.

ChatGPT warned that “growth may stall if budgets tighten or competitors nibble at market share”, which is so generic as to be meaningless. I’ll dig deeper, but I think this one deserves a longer look.

Oxford Biomedica has momentum

Finally, ChatGPT tossed out FTSE 250 cell and gene therapy specialist Oxford Biomedica (LSE: OXB). It’s clearly chasing momentum here, as the company’s shares are up 40% this year and 200% over two.

In September, Oxford Biomedica posted a 44% rise in first-half revenues to £73.2m, and the order book more than doubled year-on-year. Consensus forecasts are optimistic, suggesting the shares may rise another 24% over the next year, to 748p.

Biotech’s a little too volatile for my liking. Regulatory approvals and long development cycles can make share prices swing dramatically if anything goes wrong. This one’s not for me.

Investors might consider both Kainos and Oxford Biomedica but, like me, they should do their own due diligence. And then tread very carefully around Rolls-Royce. Investing is a personal thing. It’s fun to play with AI, as it’s brought two exciting stocks to my attention, but the rest is down to me.

The post I asked ChatGPT to name 3 epic growth stocks to buy in 2026 and it said… appeared first on The Twelfth Magpie.

So much so that even when starting from scratch, investing £400 a month could be all that it takes to grow a portfolio into millionaire territory. Here’s how.

Becoming an ISA millionaire

Today, there are over 5,000 ISA millionaires in Britain – proof that building a seven-figure tax-free portfolio is possible even with a £20,000 annual allowance limit. What’s more, investors don’t even need to use this entire allowance to achieve it.

Over the long term, the FTSE 100 has historically generated an average total gain closer to 8%. And by investing just £400 a month or £4,800 a year (using less than a quarter of the annual allowance), a brand new portfolio would grow to £1m in around 36 years.

Obviously, waiting around for three and a half decades is hardly ideal. This is where stock picking can come to the rescue. By selectively investing in only the best businesses, a portfolio can achieve far better returns than an index fund.

This requires a lot more time, dedication, and discipline. Yet, even if the returns are increased by an average of 4% to 12%, that’s enough to wipe out almost a decade from the timeline to becoming a millionaire.

In other words, even a 40-year-old investor with next-to-no savings could build a seven-figure nest egg – just in time for retirement. And by using a Stocks and Shares ISA, all of this wealth can be enjoyed entirely tax-free.

So which stocks could potentially unlock these sorts of gains in the future?

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

A future UK tech giant?

One enterprise that I’ve got my eye on right now is Kainos Group (LSE:KNOS).

The digitalisation specialist has struggled in recent years with both public and commercial sector spending taking a tumble in light of inflation uncertainty. And this headwind has only been compounded by rising levels of competition.

However, management hasn’t sat idle. Through continuous investment, Kainos has begun pivoting from an IT services group into a fully-fledged software-as-a-service enterprise.

Today, it has five solutions that work directly with the Workday platform, enabling businesses to assist in regulatory compliance, sensitive data protection, and automation.

The group’s software offers are currently responsible for around 20% of sales. But if management hits its 2026 targets, this could grow closer towards 25%-30%. And by 2030, where Kainos expects to earn £200m in annual recurring revenue from software subscriptions, this high-margin proportion of sales could climb even higher, potentially paving the way for double-digit share price gains.

Even as this growth engine expands, Kainos still has risks to navigate. Its digitalisation services operations will continue to face fierce competition. And even its software arm is somewhat tied to the fate of the Workday platform. If Workday losses market share within the human resources management space, Kainos’ growth ambitions could be subdued.

Nevertheless, with the business already generating an impressive volume of free cash flow, the company seems to be well-positioned to capitalise on a software-driven rebound. That’s why I’ve already added it to my Stocks and Shares ISA. And it’s not the only promising long-term growth opportunity I’ve spotted.

The post How to invest £400 a month in a Stocks and Shares ISA to try for a million appeared first on The Twelfth Magpie.

Building for the future

The first one is Persimmon (LSE:PSN). Unlike Lloyds, which has already surged higher in the past year, Persimmon stock is down 2% in the last year. Yet, momentum appears to be building for a move higher in the share price.

Last week, the business put out a trading statement saying the company has performed well in 2025 with increased sales rates, more sales outlets and forward sales up 15%. This indicates better near-term revenue visibility as we head into 2026. That kind of operational improvement can translate into strong earnings beats for the coming quarters, ultimately helping to lift the share price.

Another reason Persimmon could outperform Lloyds is lower interest rates. Housebuilders typically outperform other sectors during periods when interest rates fall. This is because mortgage affordability improves, boosting housing demand. I think the Bank of England committee will accelerate the pace of rate cuts into next year to help the economy.

Of course, there are risks. Potential changes to taxation from the Budget next week could hinder things, especially if stamp duty gets cut or if policy towards housing becomes less accommodating. This could change investors’ sentiment about the stock’s valuation.

Operating in a key sector

Another company to consider is Kainos Group (LSE:KNOS). The FTSE 250 stock is up 16% over the past year, but I think it could continue to surge in the coming year.

Kainos is well-positioned in the digital transformation space and the AI evolution. After all, its core business is providing digital technology and software services. Last year, it worked with the UK government on implementing AI-related products and services for the defence department.

I think the business can outperform Lloyds as it has more ability to scale in a rapidly growing market. Banking can grow as well, but not at the same pace. Kainos has strong profit margins and some subscription revenue, allowing it to benefit from economies of scale if it can maintain its growth trajectory.

It’s true that half-year profits took a hit when results were announced earlier in November. This was partly blamed on higher labour costs and increased investment. Even though rising costs are a risk going forward, I don’t see the boost to investment as being a bad thing for the long term.

Of course, I can’t say for sure if either of these picks will outperform Lloyds for the coming year. But based on the momentum both companies have right now, I think they are options for investors to consider.

The post 2 UK shares I’d prefer to own over Lloyds stock right now appeared first on The Twelfth Magpie.