I’m searching for the best small-cap shares to add to my investment portfolio. Here are three I think could enjoy excellent earnings growth over the next decade.
Investing in UK-focused shares can be risky as economists tip prolonged weakness in the domestic economy. Yet Bebgies Traynor (LSE:BEG) is a stock that could thrive in this landscape.
You see, this company’s operations are about as counter-cyclical as it gets. Demand for its insolvency services is currently soaring as the number of firms experiencing financial distress unfortunately balloons. The AIM share recently announced that “we continue to take an encouraging level of new insolvency appointments across all market segments”.
This week, web-hosting business GoDaddy predicted that as many as 630,000 small and micro businesses could go bust this year. Companies of all sizes are struggling as consumers cut spending, and rising energy bills from April will heap extra pressure on British firms.
Naturally, trading activity at Begbies Traynor could fall as economic conditions improve. But I believe the firm’s aggressive expansion strategy should still deliver excellent long-term earnings growth. Just this month, it paid £400,000 to acquire chartered surveyors Mark Jenkinson & Son.
Games developer Frontier Developments (LSE:FDEV) has been having a tough time of late. Its share price slumped in January when it downgraded revenues and profits forecasts due to disappointing festive trading.
Weak sales remains an ongoing danger for the small-cap share too. Not only could turnover suffer as the cost-of-living crisis endures. Intense competition in the video games market is a threat that will never go away.
Frontier shares however, still appeal to me as a long-term investor. The video games market is already bigger than the movie and music industries combined and tipped for further stratospheric growth.
Frontier has shown it has what it takes to make a splash in the industry too. Popular titles include the Jurassic World, F1 Manager and Elite Dangerous, and the business is rapidly increasing its headcount to grow its games portfolio.
Demand for big-ticket goods often sinks when economic conditions worsen. So profits at car retailer Vertu Motors (LSE:VTU) are in danger of sustained weakness as the cost-of-living crisis endures.
Despite this, the business could be supported by a surge in demand for electric vehicles (EVs). The Society of Motor Manufacturers and Traders believes 500,000 of these vehicles will be sold in 2022. That’s up from the record 452,527 that hit the road last year.
Consumers are more likely to buy these new-age vehicles from showrooms as well. As a result, Vertu — which has almost 200 sales outlets across the country — is well positioned to win plenty of customers.
There are signs that the EV market is set for strong and sustained growth in the future. I’m expecting this small-cap share to make big profits in the process.
The post 3 UK small-cap shares I’d buy to hold for 10 years! appeared first on The Motley Fool UK.
Pound coins for sale — 51 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Begbies Traynor Group Plc, Frontier Developments Plc, and Vertu Motors Plc. 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.