The distinction between a “growth” investor and a “value” investor has always been a subject of heated debate. In recent years, the growth style of investment has been winning this debate and as growth stocks have become more popular and the winning fund managers get more money to invest, the prices of growth businesses have reached eye-wateringly high levels. As a result buying these growth shares or the funds that invest in them may not seem appealing, however strong the long-term investment drivers behind them may be.
However, there is a third way. While growth in revenues or profits relates to what is going on in a business, value is about how much you pay for that growth. It is sometimes possible to buy companies growing or exposed to growth trends in overlooked parts of the stockmarket.
The uncertainty surrounding the UK’s political and economic future recently led to the UK stockmarket trading at a big discount to its peers, with the biggest discounts to be found in the bottom 10% of businesses that make up the so-called “small companies” sector. We highlight three that offer exposure to growth where we believe valuations are not excessive.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Cashing in on university spin-offs
IP Group (LSE: IPO) commercialises university intellectual property (IP). It was once a stockmarket darling, but the last five years have seen a big fall in the share price from 250p to 75p. We have some sympathy with the notion that many of IP Group’s companies were floated too early and that the shares had been a bit overhyped five years ago. IP Group has gone backwards while many investment plays in biotechnology, green energy and digital technologies have advanced strongly. Now, however, we see some good progress in IP Group’s portfolio, notably at Oxford Nanopore Technologies (which specialises in gene sequencing) and Ceres Power (green power) The net asset value (NAV) in June 2019 was 110p. We think that the good news will start to drive the share price of the company higher as the discount to NAV narrows.
Inspired Energy is looking more exciting
Inspired Energy (Aim: INSE) has if anything been a rather unexciting business; it sells energy to small companies. Still, there has been a nice progression of revenues, profits and dividends over several years. We think the company’s prospects look auspicious. It should thrive by selling energy-audit and clean-energy strategies to its captive client base. These green drivers should lead to a stockmarket reassessment and revaluation of the company’s shares.
Money in modifying genes
Twenty years ago the sequencing of the human genome was hailed as a great scientific breakthrough. There are now many new drugs being developed that involve gene editing.
MaxCyte (Aim: MXCT) makes scientific instruments for modifying genes and counts 20 of the world’s biggest pharmaceutical companies as clients in this novel field. Growth has been robust and has accelerated in recent months. MaxCyte also has deals in place with 60 pharmaceutical drug programmes worth up to $650m. We believe that this figure will grow significantly and that the share price trades at a substantial discount to its US counterparts.
Richard Penny has been managing the Crux UK Special Situations Fund for the past five years. Prior to this, he spent 15 years as a Senior Fund Manager at Legal & General Investment Management (LGIM) where he managed the award-winning L&G UK Alpha Trust and L&G UK Special Situations Trust In June 2021, Richard got awarded a AAA rating from Citywire. Richard studied Engineering and Economics at the University of Oxford and he now shares his expert knowledge on shares in our MoneyWeek share tips.
December 2023 NS&I Premium Bond winners - check now to see what you’ve won
If you hold money in NS&I Premium Bonds, you can check from today (2 December) to see if you have won in the December prize draw. Here’s how to check.
By Vaishali Varu Published
OpenAI – corporate drama unleashed
OpenAI, the firm behind ChatGPT, was in uproar as its boss was booted out, briefly snapped up by Microsoft and then brought back again.
By Dr Matthew Partridge Published
Halifax: House price slump continues as prices slide for the sixth consecutive month
UK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
By Kalpana Fitzpatrick Published
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?
UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
By Marc Shoffman Published
Pension savers turn to gold investments
Investors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
By Ruth Emery Published
Where to find the best returns from student accommodation
Student accommodation can be a lucrative investment if you know where to look.
By Marc Shoffman Published
Best investing apps
We round up the best investing apps. Looking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go?
By Ruth Emery Last updated
The top funds to invest in - November 2023
Tips Investors are focused on income strategies and FTSE heavyweights. We look at what investors have been adding to their portfolios in the last month
By Vaishali Varu Last updated
The world’s best bargain stocks
Searching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
By Andrew Van Sickle Published
Revealed: the cheapest cities to own a home in Britain
New research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
By Ruth Emery Published