The company I’m looking at today is tech firm Calnex Solutions (LSE: CLX). This Scottish firm makes network test and measurement equipment for the 5G and cloud computing industries.

Calnex only floated in 2020, but its shares have tripled since then. I think this business could still offer an exciting opportunity for growth investors.

Why I like Calnex

Calnex’s sales have grown from £8.4m in 2018 to £22m in the 2021/22 financial year. The company’s after-tax profit has quadrupled from less than £1m to £4.5m over the same period.

The UK market has quite a few good engineering companies, but very few of them are growing this strongly. What makes Calnex different? I think that one core reason for the group’s rapid progress is that its products are focused on two big growth markets — 5G and cloud computing.

Calnex specialises in systems used for network synchronisation and network emulation. Without going into too much detail, synchronisation is required between 5G mobile base stations to within 0.000000001 of a second (yes, really) to provide seamless coverage.

Network emulation is required for testing networks by simulating their behaviour under real-world loads. The rapid growth of cloud computing and data storage has created new demand for this kind of testing.

One other big attraction

There’s one reason why I think Calnex could be a better bet than many other UK technology stocks. The company’s founder, Tommy Cook, is still chief executive and owns 20% of Calnex shares. In my experience, companies led by owner-managers often outperform the market over the long term. It’s not hard to see why.

Hired management are often focused on short-term goals and triggering bonus payments.

On the other hand, founders are more likely to have an interest in the long-term growth of the business. They care about the business they’ve created and they want to maximise its long-term success. This often leads to good results for shareholders too.

Would I buy Calnex shares today?

Unfortunately for new investors, Calnex’s success means the shares are not cheap. Broker forecasts for the 2022/23 financial year price the stock on 26 times earnings. This P/E multiple falls to 23x earnings in 2023/24.

The main risk I can see here is that any slight disappointment could trigger a big sell-off. Although it’s normal for successful businesses to have occasional blips, the UK market is pretty unforgiving at the moment.

However, the company’s latest update was pretty reassuring. Despite fears of component shortages, Calnex has been able to keep up the pace of its deliveries without any delays. Looking ahead, the group’s order book is also at “record” levels.

I think Calnex should be able to deliver organic growth and expand through acquisitions. In my view, this could be a much bigger business in 10 years. For this reason, I’d consider buying the shares today, even at a high valuation.

Stephen Wright: Rightmove

My top growth stock for May is Rightmove. Its business generates around £226m in operating income using just £12m in fixed assets, and its dominant market position is protected by a strong network effect.

As a result, earnings have increased by 200% over the last decade, pushed along by share buybacks. It also has an extremely strong balance sheet with more cash than debt. I’ve been admiring this company for a while, and I’m excited to have finally had the share price reach a level that I’m happy buying it at.

Stephen Wright owns shares in Rightmove.

Royston Wild: Hochschild Mining

I think there’s a good chance precious metals prices could soar as worries over global growth and soaring inflation increase. For this reason, I’d buy silver miner Hochschild Mining (LSE: HOC) for my portfolio in May. 

Mounting concerns over possible stagflation could boost silver prices in the near term. And over the longer term, they could increase as improving economic conditions likely supercharge industrial demand for the dual-role grey metal. 

City analysts think Hochschild’s earnings will rise 8% in 2022. They believe the company’s bottom line will improve 26% in 2023, too. 

Current projections leave the South American mining stock looking quite cheap as well. Today, Hochschild trades on a price-to-earnings (P/E) ratio of just 9 times for 2022. FTSE 100-quoted silver miner Fresnillo’s forward multiple sits at double this level. 

Royston Wild does not own shares in Hochschild Mining or Fresnillo. 

Edward Sheldon: Calnex Solutions

My top growth stock this month is Calnex Solutions (LSE: CLX). It specialises in testing and measurement services for telecommunication networks.

Calnex has generated strong growth in recent years on the back of the rollout of 5G network technology and looking ahead, I think it’s likely to continue doing so. Recently, the group advised that it was seeing “high demand” for its testing solutions and that its order book was sitting at “record levels”. It added that the board was confident it can deliver “significant, sustainable growth” over the coming years.

It’s worth pointing out that Calnex shares have had a good run recently, so they could experience a pullback in the short term. In the long term, however, I think they could go much higher as the company grows its revenues and profits.

Edward Sheldon owns shares in Calnex Solutions.

G A Chester: Impax Asset Management 

My rule of thumb for asset managers is they may offer value if priced at less than 3% of their assets under management (AUM). 

The last time I looked at fast-growing sustainable investing pioneer Impax Asset Management (LSE: IPX), its shares were trading at over £11. The market capitalisation was £1.5bn, meaning it was priced at 4.7% of its £32.2bn AUM. 

As I’m writing, the shares are below £7, the market cap is £910m, and it’s priced at 2.4% of £38bn AUM. Despite market and fund-outflow risks, I think Impax now offers value. Its half-year results are scheduled for 1 June. 

G A Chester has no position in Impax Asset Management. 

Zaven Boyrazian: Focusrite

Focusrite (LSE:TUNE) is a global audio equipment manufacturer targeting music industry professionals and hobbyists at home. Despite live events being cancelled during the pandemic, demand for its award-winning products continued to rise as artists shifted to working from home.

Music festivals are now back in business, restoring a portion of lost income. Yet recent supply chain disruptions have led to a slowdown in sales, sending the share price in the wrong direction.

However, the nature of the problem is ultimately short term. And with management’s long-term strategy uncompromised, the recent tumble looks to me like a fantastic buying opportunity for my portfolio.

Zaven Boyrazian does not own shares in Focusrite.

Christopher Ruane:  S4 Capital

Digital ad agency group S4 Capital (LSE: SFOR) saw its shares fall sharply after 2021 results were delayed twice. That has made me more nervous about governance at the company. But boss Sir Martin Sorrell has promised to fix that. I expect him to deliver.

Meanwhile, the unaudited results showed very high sales growth. S4 says 2022 has started ahead of already strong expectations. Any further governance slips are a risk. But the selloff looks overdone to me at this point. I am strongly considering topping up my position.

Christopher Ruane owns shares in S4 Capital.

John Choong: Rolls-Royce

Rolls-Royce (LSE: RR) recently posted a trading update, and it showed quite a bit of promise in recovery. Despite its flawed balance sheet, the firm is making some progress as it estimates to achieve positive free cash flow by Q3 this year.

Its other segments in defence, power systems, and new markets also posted encouraging developments, as orders continued to increase. Rolls-Royce is also set to grow its revenue in the low-to-mid single digit percentage range. So, with the share price below £1, this could be an opportunity to grab shares on the cheap and capitalise on the potential rebound.

John Choong has no position in any of the shares mentioned.

Paul Summers: AJ Bell

The awful performance of stock markets combined with the rise in the cost of living has hit trading at investment platforms such as AJ Bell (LSE: AJB). However, this is just the sort of quality growth stock I’d want to load up on in anticipation of a big recovery. 

A P/E of 25 isn’t cheap but it’s a far more palatable valuation than a year or so ago. This company consistently generates great margins and returns on capital.

With more people recognising the importance of planning for retirement, AJ Bell is one to tuck away, in my view.

Paul Summers has no position in AJ Bell

Roland Head: Standard Chartered

A FTSE 100 bank might seem an odd choice for a growth stock. But shares in Asia-focused Standard Chartered (LSE: STAN) look very cheap to me when compared with City growth forecasts.

Analysts’ estimates suggest StanChart’s earnings could rise by 15% this year and by 30% in 2023. But despite this bullish outlook, the bank’s shares still trade at a near-50% discount to their 1,120p book value.

Property losses in China and recession risks are a concern. But if CEO Bill Winters can deliver on Standard Chartered’s turnaround potential, I think the shares could perform very well.

Roland Head has no position in Standard Chartered.

The good news for UK investors like myself is that there are plenty of top tech stocks on the London Stock Exchange that are benefiting from this digital revolution. With that in mind, here are three tech shares I’d snap up for my portfolio today.

Calnex Solutions

Let’s start with Calnex Solutions (LSE: CLX), which specialises in telecommunications network testing solutions.

Calnex has generated strong revenue growth in recent years and I expect its top line to keep climbing in the years ahead. That’s because the rollout of 5G network technology, along with the introduction of new technologies such as self-driving cars, will mean that networks need to be tested rigorously. According to Grand View Research, the market for 5G testing is set to grow by around 9% per year between 2020 and 2027.

Last month, Calnex posted an excellent trading update. Here, it advised that its order book was sitting at “record levels” and that the board was confident that the group can deliver “significant, sustainable growth” over the coming years. This is encouraging, to my mind.

One issue with CLX is that the stock has had a good run recently. So, it could experience a pullback in the short term. Over the long term, however, I think there’s a good chance it will deliver attractive returns.

Kainos

The next stock I’d buy is Kainos (LSE: KNOS), which helps organisations with digital transformation.

Kainos, like many other tech stocks, has underperformed in 2022 as investors have focused more on value. At the start of 2022, its share price was near 1,900p. Today, however, it’s close to 1,200p.

I see this decline as a great buying opportunity. Because nothing has really changed within the company. Indeed, last month, Kainos advised that trading for the year ended 31 March 2022 had been “very strong”. It added that it’s well-positioned for further growth due to its “significant contracted backlog”.

I’ll point out that even after the big share price pullback, KNOS isn’t cheap. Currently, the P/E ratio is about 30. This doesn’t leave much room for error. If growth was to stall, the stock could fall further. I’m comfortable with that valuation, however, as I think the growth potential here is significant.

Volex

Finally, I’d also buy Volex (LSE: VLX). It manufactures high-performance power cords and cables for a range of industries, including the electric vehicle (EV) market.

Volex has a lot of momentum right now. In a recent trading update, the group advised that revenue for the year ended 4 April is expected to be up 37% year on year while revenue in its EV segment had nearly doubled. It added that it was handling inflation and supply chain problems effectively.

Yet this momentum is not reflected in the share price or the valuation. Since September, the share price has fallen from 500p to 260p. Meanwhile, the P/E ratio now is just 11.5.

At that valuation, I see an attractive opportunity here. The stock could continue to be volatile in the short term, but I think in the long run, it could go much higher.

There’s one AIM stock in particular though, that has me really excited. This business lies at the heart of a number of technological mega-trends, and looks well placed to generate substantial growth in the years ahead. Here’s a look at why I’d buy this stock for my portfolio today.

My top AIM stock today

The company I’m referring to is Calnex Solutions (LSE: CLX), an under-the-radar Scottish business that specialises in telecommunications network testing solutions. Founded in 2006, it listed on the AIM in 2020, and currently has a market capitalisation of around £150m.

Calnex is a global leader in the telecoms network testing space with a distinguished list of customers. Today, it serves businesses across the entire telecoms value chain including network carriers such as BT Group, hardware providers such as Ericsson, and chip companies such as Intel. The group is led by founder Tommy Cook, who has over 35 years’ experience in telecoms testing and measurement.

Why I’m bullish on CLX

The main reason I’m bullish here is that the global telecoms industry is going through a period of major change today. Not only is new 5G network technology being rolled out but new technologies (cloud computing, autonomous vehicles, smart cities, etc.) are emerging. This means that telecoms networks will need to be tested rigorously in the years ahead. Calnex is in the right spot at the right time.

Strong momentum

Looking at recent announcements, Calnex appears to have plenty of momentum right now.

Earlier this month, the company advised that it continues to experience “high demand” for its range of test and measurement solutions and that results for FY2022 (the year ended 31 March 2022) would be slightly ahead of the market’s expectations. It added that the order book was sitting at “record levels” heading into FY2023, giving the board confidence that the group can deliver “significant, sustainable growth” over the coming years.

The group also announced the acquisition of iTrinegy Limited, a leading developer of software defined test networks technology, for £2.5m. iTrinegy generated revenues of around £1.4m in the year to 30 September 2021, and Calnex expects the business to be an important contributor to group profit in subsequent years.

A high-quality business

Looking past the growth potential here, I like the fact that Calnex is a high-quality company. Over the last five years, it has generated consistent revenue and profit growth. Meanwhile, return on capital employed has been high. On top of this, the balance sheet is strong and the company has started paying a small dividend. Overall, there’s a lot to like about this AIM stock, in my view.

I’d buy this AIM stock today

Now, of course, there are some risks to consider here.

One is the valuation. At present, Calnex trades on a forward-looking price-to-earnings ratio of about 31. That’s not an outrageous multiple, however, it probably doesn’t leave a huge margin of safety. If revenue or earnings growth slows, the stock could underperform.

Another is supply chain issues. These could potentially create challenges in the short term.

Overall, however, I’m very bullish here. I’d snap up this AIM stock today.

Here are two UK shares that have been winners for investors recently. I’d buy both today, as I believe they have plenty of room to run.

New all-time highs

Let’s start with Calnex Solutions (LSE: CLX). It specialises in telecommunications network-testing solutions. Recently, its share price hit new highs. Yet I think this is just the start of the growth story.

The rollout of 5G network technology will require an enormous amount of testing in the years ahead. For networks to work seamlessly (and handle new technologies such as autonomous vehicles), they’ll need rigorous testing. That’s where Calnex comes in. Its solutions help network carriers prove that new systems operate effectively, and conform to strict international standards.

A recent trading update revealed that the company has a lot of momentum right now. Not only did it say the strong levels of trading in the first six months of FY2022 (its year ends 31 March) had continued, but it also said it begins FY2023 with a record order book across all product lines. As a result of the order book strength, it said that revenue and operating profit for FY2023 would be “materially ahead” of market expectations.

In terms of risks, supply-chain challenges are one to consider. Share price volatility is another. This is a small company with a market-cap of just £130m. So its share price is likely to swing around a bit.

Overall, I’m excited about the potential here. With the stock trading at just 26 times this year’s expected earnings, I see it as a strong buy.

Strong momentum

Another stock that I believe has a lot of growth potential is Cerillion (LSE: CER). It’s a small British technology company that provides billing, charging, and customer relationship management solutions, predominantly to telecommunication companies. Its share price is up more than 50% over the last year. However, I see the potential for significant upside from here on.

It’s been a while since Cerillion provided investors with a trading update yet in the last one, posted in November, management was very confident in relation to the prospects for this financial year.

“With a record back-order book and strong new business pipeline, we remain confident of continued momentum,” said CEO Louis Hall.

Analysts expect revenue of £31.2m for the year ending 30 September for growth of about 20% year-on-year.

It’s worth noting that this year Cerillion has been positively recognised in two Gartner industry reports and won the ‘Best Performing Company – Business & Consumer Software’ award at the annual Megabuyte Quoted25 awards event. That celebrates the best-performing technology companies in the UK. This recognition suggests it’s doing something right.

Of course, Cerillion shares could get caught up in another tech sector sell-off. I expect tech shares to be volatile this year interest rates rise. Being a small company adds to the volatility.

However, with the stock at just 25 times this year’s forecast earnings, I think the risk/reward proposition here is very attractive.

What are metaverse stocks?

The term metaverse is defined as a three-dimensional world that is accessible to all. It refers to a virtual space that enables social interaction with others, for many purposes such as entertainment or business.

One of the best examples I can think of is when I use my virtual reality (VR) gaming headset and interact with other gamers. This virtual communication occurs in the metaverse.

As well as VR, the metaverse also covers ‘augmented reality.’ This is when the real world and virtual world come together. An example of this is the augmented reality game Pokemon Go from the famous Pokemon franchise. This was a hugely popular game a few years ago.

A metaverse stock is a share in a company that presents, supports, or enables the metaverse.

One metaverse stock I like

The biggest area of growth in the metaverse is thought to be virtual and augmented reality. In order for the metaverse to excel in this and other areas, the quickest and most reliable online network infrastructures are needed. This is why I like Calnex Solutions (LSE:CLX).

Calnex is the world leader in testing and measurement solutions to prove and monitor the performance and reliability of the global telecommunications sector.

Calnex is a new addition to the UK market and I believe it could be a good opportunity to get in early. Other metaverse stocks will be new additions to the market but there will be some established companies diversifying towards this new craze.

As I write, Calnex shares are trading for 121p. At this time last year the shares were trading for 2% less at 118p.

One of the risks with Calnex is that it only listed on the UK market approximately 15 months ago. Its progress since that time has been supported by growth and excellent results. There is a chance that results and growth slows down, affecting the share price and its investment viability.

Calnex has a good track record of performance. I do understand past performance is not a guarantee of the future, however. Looking back, I can see revenue and gross profit have increased year on year for the past four years. Coming up to date, interim results for the six months ending 30 September, released in November, were impressive. Revenues increased by 20% compared to the same period last year. In addition to this, net income increased by 24%. It also reported growth in all its key market segments.

The adoption of 5G and the rise of cloud computing will help firms like Calnex, especially as the need to monitor network reliability will increase. Metaverse stocks will continue to soar in popularity, in my opinion.

At current levels I’d happily add Calnex shares to my holdings and hold them for a long time. I believe they could provide lucrative returns over the longer term, especially as growth increases and the metaverse and its adoption expands.

#1: essential services

My first pick is Keywords Studios (LSE: KWS). This Dublin-based firm provides a wide range of specialist services to the video games industry. These include audio service, graphic design, player community management and much more. I see these as major growth sectors as we spend more of our lives online.

Keywords has been expanding rapidly in recent years by combining acquisitions with in-house growth. This can be a difficult strategy to do well, as there’s a lot to go wrong. Any disappointments could see Keywords’ shares slump — but results so far have been impressive.

Keywords Studios’ sales and profits have risen by an average of 45% per year since 2015. Broker forecasts suggest this pace could slow in 2022, but the company’s new chief executive has already said he expects results this year to be “at the upper end” of current forecasts. I think a further upgrade is possible.

This stock isn’t cheap, which is a risk, but I would buy Keywords Studios for my portfolio as a long-term play on metaverse growth.

#2: a metaverse security stock

Cyber crime is already a huge risk for anyone (or any company) that is active online. In my opinion, these risks are only going to get bigger as the metaverse evolves. Anti-virus protection won’t be enough. Businesses will need a much broader range of security-related services.

One company that already operates in this area is NCC (LSE: NCC). This £680m, Manchester-based business provides a full range of security and “risk mitigation” services for businesses. These include security assessments, training, incident response and compliance certification. The big risk facing NCC, of course, is that it could fall victim to cyber crime itself. I’d imagine this might destroy its reputation as a trusted advisor.

The NCC share price has pulled back since the start of this year, in line with the wider tech slump and many of the risks affecting tech stocks are the same for NCC. I reckon this could be a buying opportunity. NCC shares now trade on 18 times forecast earnings, with a 2.1% dividend yield. That doesn’t seem expensive to me, for a business that’s expected to deliver earnings growth of around 15% for the current year. I’d consider buying at this level.

#3: superfast networks

One area where the metaverse is expected to drive growth is virtual and augmented reality. Delivering this kind of service needs fast and reliable networks. That’s where my final pick comes in.

Calnex Solutions (LSE: CLX) specialises in “test and measurement solutions for the global telecommunications sector”. It’s a recent addition to the UK market that’s impressed me considerably so far, with a track record of growth, 20% profit margins and owner-management.

One risk for shareholders is that Calnex only listed on the stock market 15 months ago. I think there’s some risk of a slowdown after sales rose by 20% last year. However, long term I don’t think this should matter.

Founder Tommy Cook expects cloud computing and 5G mobile to create new opportunities. I agree. I’d be happy buying a few Calnex shares today to tuck away for the next decade.

Zaven Boyrazian: Bioventix

Bioventix (LSE:BVXP) is a specialist producer of monoclonal antibodies. These are an essential ingredient for performing blood tests when diagnosing a patient. It’s undoubtedly a niche product but remains in high demand as revenues have consistently grown by double digits over the last five years.

Recently, the stock has taken a hit as hospitals have prioritised spending in areas dealing with Covid-19. Consequently, the group’s bottom line has suffered for it. But, with the vaccine rollout making good progress and the world adapting to the pandemic environment, these disruptions may soon be coming to an end.

As such, I think this could be an excellent addition to my portfolio.

Zaven Boyrazian does not own shares in Bioventix.

Ed Sheldon: Calnex Solutions

My top British small-cap stock for January is Calnex Solutions (LSE: CLX). It’s a leading provider of testing and measurement services to the telecommunications industry.

Calnex looks well placed to benefit from the global telecommunication industry’s upgrade to 5G technology. 5G is ultimately the key to many of the exciting new technologies we keep hearing about such as self-driving cars and remote surgery. Networks will need to be tested thoroughly in order for these kinds of technologies to go mainstream.

One risk to consider here is the ongoing semiconductor shortage. This could cause disruption. However, with the stock trading on a P/E ratio of less than 25, I think the risk/reward proposition is favourable.

Edward Sheldon owns shares in Calnex Solutions.

Roland Head: Finsbury Food

My small-cap pick for January is bakery firm Finsbury Food (LSE: FIF). This group supplies supermarkets and also sells under its own brands.

Finsbury has been going through a turnaround period, but now appears to be trading well. Earnings rose by 15% last year and brokers expect growth of 26% for the year ending 26 June.

Rising costs are a concern and supermarkets will always be tough customers. But I’m impressed by Finsbury’s recent performance. I think the stock still looks good value at under 10 times forecast earnings. I hold Finsbury shares and would buy more.

Roland Head owns shares of Finsbury Food.

Rupert Hargreaves: Michelmersh Brick Holdings

My top small-cap is Michelmersh Brick Holdings (LSE: MBH). The specialist brick manufacturer looks set to report a bumper year of growth for 2021, which could underpin further development in the year ahead.

The firm has no debt and a cash-rich balance sheet, suggesting that it has the financial headroom to support its growth ambitions this year. There is also room for shareholder returns. Michelmersh currently supports a dividend yield of 2.5%.

Inflation and competition are the two primary risks the business will have to overcome going forward. Despite these challenges, I would buy this small-cap stock today.

Rupert Hargreaves does not own shares in Michelmersh Brick Holdings.

G A Chester: B.P. Marsh & Partners 

B.P. Marsh (LSE: BPM) is a specialist investor in unquoted, early-stage financial services businesses that are in need of growth capital. 

Marsh looks for strong management and business plans. It takes a minority equity stake (typically 20%-40%), and aims to be a supportive, long-term partner. It works with management to grow the business’s value, ultimately towards a profitable exit via a public flotation, trade sale or other route. 

It has a long history of delivering value for shareholders through net-asset-value (NAV) appreciation and dividends. The shares are currently trading at a 20%+ discount, and I’m expecting a further NAV uplift in an early-February trading update. 

G A Chester has no position in B.P. Marsh & Partners.

Niki Jerath: Zephyr Energy 

For January, I’m looking at Zephyr Energy (LSE:ZPHR). This has oil and gas interests in Utah, Colorado and North Dakota.  

As oil and gas prices increased during 2021, its shares surged by over 600%. Although year-to-date, the stock is down around 2% due to worries about the Omicron variant. 

That said, its Paradox Basin project, in Utah, shows a lot of promise for 2022 and it has a pending deal in North Dakota, which was delayed last year. 

I could be wrong, but if the transaction goes ahead, I expect the share price to see a jump. 

Niki Jerath does not own shares in Zephyr Energy

Royston Wild: Card Factory 

I think Card Factory (LSE: CARD) is a small-cap stock whose eye-catching all-round value merits serious attention. The card and greetings retailer trades on a forward P/E ratio of below 6 times. It sports a mammoth 6.1% dividend yield as well. 

I like Card Factory for a number of reasons. Its strategy of selling products at low prices puts it in good shape to ride the value retail revolution. Recent investments in digital will allow it to make money during the e-commerce boom. I also like Card Factory’s focus on a more-defensive part of the retail market. We don’t stop celebrating birthdays, Christmas and other special occasions when times get tough, right? 

Royston Wild does not own shares in Card Factory.

Paul Summers: Cake Box Holdings

At 25 times earnings, shares in Cake Box Holdings (LSE: CBOX) certainly aren’t cheap. That said, the company’s fundamentals help justify this valuation. Returns on capital and operating margins are consistently high and there’s net cash on the balance sheet. CEO Sukh Chamdal also owns almost 25% of the company, which should mean that his interests are aligned with those of other investors.

Having already climbed 70% in the last year, share price growth may moderate in 2021. However, this looks like the sort of quality minnow I’d be comfortable holding a stake in for years rather than months.

Paul Summers has no position in Cake Box Holdings

Andy Ross: Property Franchise Group 

Shares in Property Franchise Group (LSE: TPFG) bring together an attractive combination of growth and income. Over three years the shares have gone from 120p to around 314p. Historic share price growth then has been good. The dividend yield is currently around 3%, but with decent levels of dividend cover, as well as earnings growth, I’m sure the dividend can keep growing.  

As a franchising operation, the business has high operating margins and returns on capital. For me, this makes Property Franchise Group a top British small-cap stock and I’ll likely be adding more, especially if the share price dips again.  

Andy Ross owns shares in Property Franchise Group.

Here, I’m going to highlight five top AIM stocks I’d buy for 2022 and beyond. All five of these companies are already profitable (which reduces risk significantly), have good track records in terms of growth, and look set to benefit from powerful structural trends in the years ahead.

Software stock with momentum

One of my top AIM picks is Cerillion (LSE: CER). It’s a software company that provides billing, charging, and customer relationship management solutions for businesses.

There are a number of reasons I’m bullish here. For starters, the company has a lot of momentum right now. In its full-year results for the year ended 30 September 2021, revenue was up 25% to £26.1m while adjusted earnings per share (EPS) were up 105% to 25.5p. During the year, the group won a number of major new contracts.

Secondly, management appears to be very confident about the future. “Prospects for ongoing growth remain very strong. With a record back-order book and strong new business pipeline, we remain confident of continued momentum over the new financial year,” said CEO Louis Hall in the company’s full-year results.

Third, the company’s financials look very solid. Debt is low while return on capital employed (ROCE) – a key measure of profitability – is trending up.

Finally, the valuation seems very reasonable. At the current share price, the forward-looking price-to-earnings (P/E) ratio is about 30, which is not high for a software company.

Of course, there are risks to consider here. One is that, at this stage, recurring revenues are still relatively low (33% last financial year). So, the company will need to keep landing new contracts to generate top-line growth.

Overall, however, I think the risk/reward proposition here is very attractive for me.

Poised to benefit from economy recovery

My next pick for 2022 is Keystone Law (LSE: KEYS). It’s an innovative UK legal firm that operates a ‘platform’ model in which lawyers can work remotely.

There are two main reasons I like this AIM stock. The first is that the company looks well placed to benefit from the ongoing UK economy recovery. Higher levels of economic activity typically lead to higher demand for legal services.

The second is that as a platform business, the long-term growth potential here is significant. Unlike traditional legal firms, the firm is not constrained by office space. I expect its work-from-anywhere business model to be very appealing to lawyers across the country post-Covid.

A risk though is the valuation. Currently, Keystone Law sports a forward-looking P/E ratio of just under 40. This means the stock is priced for perfection.

This is a high-quality company, however. Over the last five years, revenue has climbed 163% while ROCE has averaged 26%. So, I think I can justify the higher valuation here.

A founder-led company

Another stock that could potentially benefit from the economic recovery is Alpha FX (LSE: AFX). It’s a leading provider of foreign exchange (FX) hedging services. It also offers payment solutions for businesses.

Alpha FX has a lot of momentum right now as well. In a December trading update, the company told investors that trading had remained “strong”. Additionally, it advised that revenue and earnings for 2021 would be ahead of expectations.

One thing I like about AFX is that the company is ‘founder led’. Research has shown that such companies often turn out to be good long-term investments.

I also like the growth here. Between 2015 and 2020, revenue climbed from £5.1m to £46m. For 2021, analysts expect revenue of £72m.

On the downside, this AIM stock is another one that’s expensive. Currently, the forward-looking P/E ratio is near 40. If growth slows, the share price could take a hit. I’m comfortable with this risk, however.

An stock for the 5G revolution

My fourth AIM pick for 2022 is Calnex Solutions (LSE: CLX). It’s a leading provider of testing and measurement services to the telecommunications industry.

The reason I’m bullish on CLX is pretty simple. Right now, the telecommunications industry is undergoing massive transformation as the fifth generation of network technology (5G) is being rolled out. 5G is ultimately the key to all the exciting new technologies we keep hearing about such as self-driving cars and remote surgery. This rollout of new telecommunications technology is likely to create a high demand for network testing services in the years ahead.

In November, Calnex posted a solid set of H1 results for the period to 30 September 2021. The company advised that it had experienced “strong levels of trading” in the first half of its financial year and that it was expecting this trend to continue in the second half. “We continue to capitalise on the global telecom industry’s transition to 5G and the growth of cloud computing,” commented CEO Tommy Cook.

A risk to consider here is the ongoing semiconductor shortage. This could potentially cause disruption. I think this is probably priced into the stock, however. Currently, the forward-looking P/E ratio is just 25, which is quite low relative to the company’s growth.

Growth at a reasonable price

Finally, I like Gamma Communications (LSE: GAMA). It’s a leading provider of business communications solutions.

One reason I’m bullish on Gamma is that the industry it operates in, ‘unified communications’, looks set for strong growth in the years ahead. According to Grand View Research, the industry is set to grow by around 21% per year between now and 2028. This growth should provide huge tailwinds for Gamma, which has grown its top line by over 100% in the last five years.

Another reason I like this AIM stock is that its share price has had a big pullback over the last few months. Back in September, the stock was trading above 2,300p. Today, however, it’s trading near 1,620p. I see this pullback as an opportunity. Currently, the forward-looking P/E ratio is just 23.

But of course, growth could slow in the near term. That’s because many businesses have pulled forward their communications spending during Covid. For long-term investors like myself, however, I think the risk/reward skew here is attractive.

Here, I’m going to highlight five UK technology stocks I’d buy for my portfolio for 2022 and beyond. All five of these companies are already profitable and have the potential to get much bigger in the years ahead. 

One of the best UK tech stocks

The first tech stock I want to highlight is Softcat (LSE: SCT). It’s a FTSE 250-listed IT infrastructure and services business that provides bespoke, end-to-end technology solutions for businesses and public sector organisations. Its areas of expertise include cloud computing, cybersecurity, data analytics, and remote connectivity.

I see Softcat as a classic ‘picks-and-shovels’ play on the technology boom. In the same way that those selling picks and shovels during the 19th century gold rush made a fortune, Softcat should profit as businesses get up to speed digitally. It’s worth noting that here in the UK, a large proportion of small businesses are yet to achieve full digital transformation, so there should be plenty of opportunities for Softcat in 2022 and beyond.

Its financials are impressive. Over the last five years, revenue has climbed from £672m to £1,157m. Over that period, return on capital employed (ROCE) – a key measure of profitability – has averaged 65%, which is outstanding. These numbers indicate to me that Softcat is a high-quality business.

I’ll point out that the valuation here is quite high. Currently, the forward-looking price-to-earnings (P/E) ratio is about 36. This means there’s some valuation risk. If growth slows, the stock could underperform. Overall however, I think the risk/reward proposition here is attractive.

A top FTSE 250 tech stock

Next up is Kainos (LSE: KNOS). It’s an under-the-radar FTSE 250 company that specialises in digital transformation services. Its customers include the Home Office, the NHS, and Travelex.

Kainos has generated strong growth in recent years (five-year revenue growth of 205%) and recent H1 FY22 results showed further progress. For the six months ended 30 September, revenue was up 33% to £142.3m. Meanwhile, software-as-a-service (SaaS) bookings were up 118%. Looking ahead, analysts expect Kainos to generate revenue of £297m for the year ending 31 March 2022. That would represent growth of a very healthy 26%.

It’s worth pointing out that in November, its Chairman Tom Burnet spent £250,000 of his own money on Kainos shares. I see this insider buying as very encouraging. It indicates that the Chairman is confident about the future and that he expects the stock to rise. It’s worth noting that Burnet paid around £18 per share for his stock, which is pretty close to the share price now.

This is another technology stock with a lofty valuation. Currently, the forward-looking P/E ratio is about 48. I’m comfortable with the valuation however, given the level of growth here. It’s worth noting that analysts at Berenberg just raised their target price to 2,100p from 1,680p.

A work-from-home stock

A third UK tech stock I’d buy for 2022 is Gamma Communications (LSE: GAMA). It’s a leading provider of ‘unified communications’ (UC) solutions. UC integrates all of an organisation’s communication channels, including voice, video, instant messaging, and content sharing, to improve the user experience and help boost productivity. It’s a big growth market in today’s digital age in which employees want to work remotely. According to Grand View Research, the UC industry is set to grow by more than 20% per year between now and 2028.

Like Softcat and Kainos, Gamma has generated strong growth recently. Between FY15 and FY20, revenue jumped from £192m to £394. Over this period, ROCE averaged 27%, which is excellent. Looking ahead, analysts expect the group to post revenue of £452m for 2021 and £494m for 2022.

Gamma shares had a great run in the first half of 2021, but have pulled back in recent months. I think this pullback has created a buying opportunity. At present, the forward-looking P/E ratio here is around 24, which in my view is very reasonable for a company with Gamma’s track record and growth potential.

A play on e-commerce

Another tech stock that has experienced a pullback over the last few months and now offers more value is dotDigital (LSE: DOTD). It’s a software company that provides digital marketing solutions. Its main product is a cross-channel marketing platform designed to help organisations connect with their customers, analyse their marketing data, and grow their brands more effectively.

DotDigital has grown its revenues from £26.9m to £58.1m over the last five years which represents a healthy annualised growth rate of 16.7%. Looking ahead, I expect the group to keep growing on the back of the growth of the e-commerce industry, which is projected to get much bigger over the next five to 10 years. For the year ending 30 June 2022, analysts are forecasting revenue of £65.5m, which represents growth of around 13%.

Currently, the forward-looking P/E ratio here is about 44. That doesn’t leave a huge margin of safety. I can accept this valuation, however, as recurring revenues as a percentage of total revenues is high at over 90%.

A technology stock for the 5G revolution

Finally, I’d also buy Calnex Solutions (LSE: CLX) for 2022. It’s a Scottish technology business that specialises in testing and measurement services for telecommunication networks.

The reason I like Calnex is that the company is seeing high demand for its services right now on the back of the rollout of 5G infrastructure. Mobile networks need to be rapidly expanded to facilitate this new technology and this means a lot of network testing. It’s worth noting that the market for 5G testing equipment is projected to grow at around 9% per year between now and 2027. So, Calnex should have strong tailwinds behind it for many years to come.

The forward-looking P/E ratio here is about 23, which seems very reasonable, to my mind.

Tech stocks: the risks

I’ll point out that while I’m bullish on all five of these UK tech stocks, there’s no guarantee they will perform well in 2022. If we see interest rates rise next year, the technology sector could potentially underperform. Meanwhile, all of these companies face their own unique risks. If their growth slows, their share prices could fall.

I’m optimistic that 2022 will be another good year for the best UK technology stocks though. After all, we are in the midst of a technology revolution.