Unearthing UK stocks to buy that can grow in the current market can be tough, despite the FTSE 100‘s recent bounce.
The combination of price inflation and the low-growth environment hasn’t been kind to my investment portfolio of late. With the Bank of England now forecasting a recession by the end of this year, prospects for growth in my portfolio’s value may have slimmed down dramatically.
Yet being a long-term investor, I stand firm on my long-term portfolio bets. But it doesn’t mean I can’t consider other approaches. Today, I’m scouting for momentum stocks with room to generate further growth in the current environment.
The best-performing UK stock this year
One FTSE All-Share company has found growth easy to come by this year — Go-Ahead Group (LSE:GOG). The transport company has been the fastest growing UK stock so far.
Over the last six months alone its share price has increased by 130%. This is a dream for an investor like me.
The company took a big hit during the pandemic when non-essential travel came to a halt. But as demand for domestic travel has risen, so too has the share price.
And I believe it’s still a top FTSE share to buy. Although the recent bull run could suggest the stock’s no longer a bargain, I’ll explain why I think there’s more room for growth.
Room for growth?
Go-Ahead’s footfall remains below pre-pandemic levels. Yet in the outlook section of its latest results report, the company said it expects its regional bus operations to deliver operating profit above that of the prior two years. This seemed rather bullish to me.
Earnings are also forecast to grow by nearly half (42.6%) year on year and the company looks undervalued compared to its peers (with a price-to-sales ratio of 0.2 times vs its peer average of 0.4 times). I view these factors as strong signs of growth potential.
The current price of the shares (around £1,540) is still way off the pre-pandemic high (£2,262). So they still have a long way to go until a full recovery.
As an investor focused on capital growth, that’s music to my ears.
The bull run can continue
I’m not a herd investor who follows trends. I find undervalued companies that can generate capital growth for my portfolio. The Go-Ahead Group is a UK stock I believe was sold off prematurely during the height of the pandemic.
In fairness, we didn’t know how long it would take to get back to normal life. Now normality is closer, I’m confident the company’s share price can continue to benefit. I’m not the only one either. The combination of long-term favourable trends, recovering share prices, and a weak pound, are also attracting foreign buyers. This is a huge factor that can stimulate the share price further.
For example, John Menzies — another UK stock and company with exposure to domestic transport — is the only other to have grown more than 100% in value this year. The rise followed news of a foreign acquisition. Similar rumours are emerging regarding Go-Ahead Group.
These are just some of the reasons why I’ll be buying some shares to add to my Stocks and Shares ISA portfolio this month.