It has been a busy September in the stock market. With the economy struggling, I think we could see more of the same in the coming month. But whatever happens, I think recent stock market volatility has presented a buying opportunity for my portfolio.
Some growth shares I see as having promising long-term prospects are now available to me at what I see as an attractive price. So if I had spare funds to invest in October, here are two I would happily add to my portfolio.
S4 Capital
The digital media agency S4 Capital (LSE: SFOR) has had a horrible 2022. The shares are down 50% since the start of the year.
But the outlook for these growth shares looks compelling to me. This month, S4 published its interim results. Net revenue grew 28% compared to the same period last year. The business says it expects full-year net revenue growth of 25%. It also expects to increase the number of accounts with annual billings of $20m or higher, from 6 to 20 by the end of 2024.
Growth shares with a digital focus
The cost of staffing up to service accounts is a threat to profitability, so I am glad the company is taking steps to control rising staff costs. A recession often leads advertisers to cut their budgets. I do see that as a risk to revenue growth at S4. However, the company seems to have done a good job so far building the size of its existing accounts, as well as winning new ones.
I expect digital advertising to slow down less than traditional media during a recession. That could be good news for S4 with its purely digital focus. Its heavy US presence means a strengthening dollar may actually help results at the business, which reports in pounds.
B&M
Is discount retailer B&M (LSE: BME) really a growth stock? After all, B&M saw both revenues and post-tax profits fall last year. In the first quarter of this year, sales again fell 2.2% compared to the same period last year, athough the trend improved during the quarter.
While the past year has shown business slowing, the longer-term trajectory at the company has been one of strong growth. Last year’s profits, for example, were still more than double what they had been just three years previously.
I see continued growth drivers for B&M. As the recession bites, I expect more shoppers to become increasingly cost conscious. That plays to the strengths of a discounter like B&M. I also expect a slowdown in eating out and costly entertainment, with more people opting to stay at home. With its range of homewares, food and drinks, I think that could boost sales at B&M.
Inflation remains a risk to profits. The company’s focus on sharp pricing can make it difficult for B&M to pass such increases on to customers in full.
But with the prospect of buoyant demand, possible growth in its customer base and a proven model, I expect the B&M growth story in coming years to be strong. Despite that, these growth shares have tumbled 50% in the past year.