For long-term investors like me, I think this weakness has created an opportunity, as I expect plenty of these stocks to rebound in the not-too-distant future. With that in mind, here’s a look at three cheap growth shares I’d buy for my portfolio today.

Growth at a reasonable price

First up is Gamma Communications (LSE: GAMA). It’s a technology company that provides communications solutions (a rapidly expanding market) to businesses across the UK and Europe.

Gamma has grown at a very healthy rate in recent years and a trading update posted last month showed that the company continues to advance. Management said it expects the group to generate revenue growth of around 10% this year. It added that it had seen no impact from the chip shortage or inflation.

But this growth doesn’t seem to be reflected in the stock’s valuation. At present, Gamma’s price-to-earnings (P/E) ratio is just 17. I think that’s quite low given the company’s track record.

A risk to consider here is that Gamma is looking to expand in Europe. This expansion may not go to plan. I think this risk is baked into the share price right now however.

A play on the EV market

Another cheap growth stock I like the look of at present is Volex (LSE: VLX). It manufactures power products for the electric vehicle (EV), healthcare, and data centre markets.

Volex’s last trading update, posted in April, was very encouraging. It said the business had continued to trade strongly, with revenue from the EV sector nearly doubling over the period. It noted that revenue for the year ended 3 April was set to exceed $605m, which would represent year-on-year growth of around 37%.

This growth is being completely ignored by the market right now though. At present, the forward-looking P/E ratio here is just 10. At that valuation Volex shares are an absolute steal, to my mind.

It’s worth noting that the business could be impacted by supply chain and cost issues going forward. This is a risk to keep an eye on. But all things considered I see this stock as a ‘buy’.

Operating in a booming market

Finally, I also like Gresham House (LSE: GHE). It’s a UK-based investment management company that specialises in alternative assets.

The alternative assets market is booming right now. With bonds producing low returns, investors are looking for new ways to invest their money. And Gresham House is riding the boom. Indeed, over the last three years, revenue has climbed from £14.5m to £70.4m (helped by acquisitions). And in a recent trading update, the group said it is enjoying a lot of momentum right now.

The stock can still be picked up at a very reasonable valuation, however. With analysts expecting the group to post earnings of 54.6p this year, the forward-looking P/E ratio is just 16.

That said, Gresham House is a small company with a market-cap of just £342m. So its share price could be volatile in the short term. I’m comfortable with this risk though. I’m looking at this growth stock as a long-term play.

Communications provider

Gamma is a provider of unified communications solutions as a service (UCaaS). It has operations in the UK, Germany, Netherlands, and Spain, and continues to grow into new territories. Gamma develops its solutions and owns a significant amount of intellectual property. It sells these directly to customers and via a channel partner model.

As I write, Gamma shares are trading for 1,554p. At this time last year, the shares were trading for 5% higher, at 1,640p. The FTSE AIM incumbent listed in 2014 for 205p. At current levels, this equates to a 650% return.

UK shares have risks

The UCaaS market is growing and there are many firms vying for business and market dominance. Some of these names are perhaps more established and better known in the market. Losing out to competition and not gaining market share could deal a blow to Gamma’s growth aspirations and performance. This could also hinder any returns I hope to make.

The Gamma share price has pulled back in recent months. The shares were trading for over 2,300p in September. I think this is due to two reasons. Firstly, a stock market correction has lowered the price of many burgeoning UK shares. In addition to this, macroeconomic factors have also put pressures on worldwide stocks. I’m not worried about this, however. In fact, the current Gamma share price represents an opportunity, in my eyes.

Why I like Gamma Communications shares

Gamma operates in a growth market that is experiencing tailwinds, in my opinion. The continued digital transformation throughout the world has meant more businesses require UCaaS to continue to move with the times. In addition to this, in a lot of Gamma’s core markets, such as the UK and Germany, UCaaS adoption is lagging. I believe these opportunities will boost Gamma’s performance and shares upwards.

At current levels, Gamma shares present an opportunity to buy cheap shares. The shares sport a price-to-earnings ratio of just 21. In addition to this, it pays a dividend too which could make me a passive income. I do understand dividends are not guaranteed and can be cancelled, however. Its yield stands at just under 1%.

Most of the UK shares I review have a good track record of performance. I do understand past performance is not a guarantee of the future, however. Looking back, I can see Gamma has seen revenue and operating profit grow year on year for the past four years. Coming up to date, Gamma released a post-close update in January, for the year ended 31 December. Gamma said, despite economic uncertainty, it achieved upgraded forecasts and net cash was up too compared to last year. Full-year results in detail are due in the coming months.

Overall I do think Gamma Communications is an under the radar growth stock. I’d happily add the shares to my holdings. It has a good track record, operates in a growth market, and pays a dividend. What I also like about it is that it regularly acquires businesses to enhance its own offering and boost growth.

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.

The good news, for long-term investors like myself, is that after a recent bout of stock market volatility, a lot of these growth shares are now cheaper to buy. With that in mind, here’s a look at two top growth stocks I’d buy in December.

High growth, low valuation 

The first stock I want to highlight is Gamma Communications (LSE: GAMA). It’s a British technology company that specialises in unified communications solutions. Unified communications integrates multiple communication methods within a business, including phone calls, video conferencing, and instant messaging.

Gamma ticks a lot of boxes for me from an investment point of view. For starters, it operates in a high-growth industry. According to Grand View Research, the unified communications industry is set to grow by more than 20% per year between now and 2028. This market growth should provide tailwinds for the company going forward.

Secondly, it has a great growth track record and has historically been very profitable. Over the last five years, revenue has climbed from £192m to £394m. That represents growth of 105%. Meanwhile, over this period, return on capital employed (ROCE) has averaged 27%, which is excellent.

Third, the valuation is attractive. After a recent share price pullback, Gamma shares have a forward-looking price-to-earnings (P/E) ratio of about 25. For a tech company with a high level of recurring revenues (89% of total revenue in H1 FY22), I think that valuation is a steal.

There are risks to consider here, of course. One is that growth could slow after Covid-19 (when firms rushed to enhance their communications systems so employees could work remotely).

Overall, however, I think the risk/reward proposition here is very attractive right now.

A top UK growth stock

Another UK growth stock I’d buy today is Keywords Studios (LSE: KWS). It’s a leading provider of technical and creative services to the video gaming industry.

Keywords Studios also operates in a high-growth industry. According to Fortune Business Insights, the global video gaming industry is expected to grow by around 13% per year between now and 2028. Given that KWS serves nearly all the big players in gaming including Electronic Arts, Activision Blizzard, and Microsoft, I see it as a good ‘picks-and-shovels’ play on the industry.

Like Gamma, Keywords has a great growth track record. Over the last five years, revenue has jumped from €58m to €374m. That represents growth of 544%. Looking ahead, analysts expect revenue of €500m and €569m for 2021 and 2022 respectively which means they expect the company to keep growing at a healthy rate in the near term.

One risk to consider is that the company has just appointed a new CEO who doesn’t appear to have experience in the gaming industry. Another risk is the threat of companies like Roblox, which allow users to develop their own video games.

I’m comfortable with these risks, however. With the stock currently trading on a forward-looking P/E ratio of about 35 after a recent pullback, I see it as a buy.

That said, I did buy one stock for my portfolio last month and that was a UK tech stock that looks set for solid growth in the years ahead. Interested to know what company I invested in? Read on and I’ll tell you…

The 1 stock I bought

The stock I bought last month was Gamma Communications (LSE: GAMA). It’s a leading provider of unified communications (UC) solutions. UC incorporates voice and video calling, video conferencing, messaging, team collaboration, and file sharing – all of which are now ‘must haves’ for businesses in today’s digital world.

I already had a small position in Gamma however. When the share price pulled back after the company’s H1 results, I boosted my holding significantly.

Why I’m bullish

The reason I’m bullish on Gamma is that the company is benefitting from the ‘digital transformation’ boom. In recent years, businesses all across the world have embarked on digital transformation journeys in order to increase competitiveness and enhance resilience.

UC is a key component of digital transformation. A robust UC system provides an environment where employees have everything they need to work, connect, collaborate and look after customers, wherever they’re located.

Looking ahead, the market’s projected to grow substantially as businesses continue to digitalise. According to Grand View Research, the global UC market is expected to expand by around 20.5% per year between now and 2028. This should provide some big tailwinds for Gamma.

Strong growth

Gamma’s a very impressive company, in my view. Over the last five years, it’s grown revenue from £192m to £394m, which represents a compound annual growth rate (CAGR) of 15.5%. Net profit over the five years has climbed from £18.3m to £64.2m, which represents a CAGR of 28.5%.

Over this period, return on capital employed (ROCE) has averaged 27%, which shows the company’s very profitable. Debt on the balance sheet is negligible, meaning the company’s financially sound.

H1 results for the six months to 30 June showed further growth. Revenue for the period was up 23% year-on-year, while adjusted earnings per share were up 30%. The dividend was increased 13%.

Looking ahead, analysts expect revenue of £454m for the full year, which would represent growth of around 15%. Overall, I see it as a high-quality business.

Risks

There are some risks to the investment case, of course. One is in relation to the group’s expansion into Europe. This may not be all smooth sailing. For example, acquisitions may not go to plan. It’s worth noting that this is a highly competitive industry, so Gamma’s likely to face plenty of competition from rivals.

Overall however, I think the risk/reward proposition here is attractive. With the stock now trading on a forward-looking price-to-earnings (P/E) of less than 30, I see it as a good buy for my portfolio.

G A Chester: Gamma Communications 

Gamma Communications (LSE: GAMA) is in the high-growth market of unified communications as a service (UCaaS) for businesses. Whether employees are in the office, at home, in a coffee shop etc, the company’s products enable them to communicate in multiple ways with colleagues and customers. Need I say more than ‘hybrid working’? 

Gamma is a UK leader but has also recently entered Europe where cloud-based UCaaS is at an earlier stage. There’s risk in this expansion abroad, but huge potential. Gamma’s shares may have overheated through the summer and I see a recent pullback as an opportunity for me to buy. 

G A Chester has no position in Gamma Communications.

Charlie Keough: F&C Investment Trust  

My best stock for October is F&C Investment Trust (LSE: FCIT). The FTSE 250 stock, with over £5bn in assets, has performed solidly year-to-date. 

The trust offers access to an array of sectors in numerous locations, all with cheap ongoing charges. I specifically like its relatively large weighting in emerging markets. Its long-term investment strategy is also an appealing factor. 

Launched in 1868, this trust has stood the test of time. Its 70% return (at the time of writing) over the past five years show that FCIT is a solid long-term investment to buy in October.  

Charlie Keough does not own shares of F&C Investment Trust. 

Rupert Hargreaves: Wickes Group

Wickes Group (LSE: WIX) is one of the primary beneficiaries of the home improvement trend that has evolved over the past 12 months. Over the 26 weeks to the 26th June, sales jumped 22.4% compared to 2019 levels. 

Management seems to think this trend will continue, and it is reinvesting windfall profits back into the enterprise to improve the customer experience and digital proposition.

As customer demand remains elevated, I would buy the shares for my portfolio.

However, challenges such as rising wages and materials shortages may prove to be a thorn in the company’s side as we advance.

Rupert Hargreaves does not own shares in Wickes.

Edward Sheldon: Gamma Communications

My best stock for October is Gamma Communications (LSE: GAMA), which specialises in remote work solutions. Its share price has fallen recently and I think this has created a nice entry point for long-term investors like myself.

Gamma’s recent first-half results were good. Revenue was up 23% year on year while adjusted earnings per share were up 30%. The dividend was increased 13%.  Looking ahead, Gamma said it was “optimistic” about future growth.

Gamma does have a higher valuation. So, this adds some risk. Overall, however, I think the long-term risk/reward proposition here is very attractive.  

Edward Sheldon owns shares in Gamma Communications

Roland Head: Synthomer

My pick for October is chemicals group Synthomer (LSE: SYNT). This FTSE 250 business produces a range of products, including medical latex gloves.

Demand has surged due to Covid-19 and Synthomer’s pre-tax profit rose by 40% to £160m last year. The company has reported further gains during the first half of 2021.

The risk is that when demand returns to normal, profits will collapse. But with the stock trading on just 10 times 2022 forward earnings, I think a cautious outlook is already priced in. I believe Synthomer could do well over the next few years.

Roland Head owns shares of Synthomer.

Zaven Boyrazian: Alpha FX

In today’s global economy, being able to manage foreign currency exchange risks has become paramount. That’s where Alpha FX (LSE:AFX) steps in.

The firm provides exchange risk-management services using a commission-based cost structure. This makes it far more accessible for smaller and medium-sized businesses compared to traditional corporate banking solutions. But beyond currencies, Alpha FX has launched a payment processing network for rapid international large-scale transactions.

In the last six months, revenue from its currency services grew by 48%. But its payments solution saw sales surge by 600%!

The company faces some fierce competition from corporate banks and rival financial service firms. However, Alpha FX continues to expand its market share nonetheless.

Zaven Boyrazian owns shares in Alpha FX.

Christopher Ruane:  Stagecoach

You wait ages for buses, then three come at once. Might this also describe bus company takeover bids?

News that rival National Express may bid for Stagecoach (LSE: SGC) could flush out other potential suitors for the Perth-based bus giant. Like we saw at Morrisons, it could be “all aboard” for a bidding war. In that case, I see short-term upside for Stagecoach shares – which is why I’ve made it my best stock to buy in October.

Even without a bid, I like Stagecoach for its large network, well-established brand and industry experience. One risk is takeover talks distracting management and slowing revenue recovery.

Christopher Ruane owns shares in Stagecoach.

Charles Archer: Centamin 

I think gold stocks like Centamin (LSE: CEY) are a good hedge against rising inflation. And while gold is down 13% over the past year, it’s still near record levels.  

The company is mining 400,000 ounces of gold in 2021. It has no debt, $312m in liquid assets, and pays a reliable 5% dividend. However, its share price is volatile. But at 92p today, analyst consensus is upbeat for the gold miner.  

There is a risk that the gold spot price will continue to fall. But I think Centamin is a safe long-term investment in this inflationary environment. 

Charles Archer does not own shares in Centamin.

Andy Ross: Vertu Motors 

Shares in car dealer Vertu Motors (LSE: VTU) have fallen from recent five year highs. This seems primarily due to the wider market weakening through much of September and potentially also some profit taking because the shares accelerated.   

The slight share price fall could be an opportunity though October and beyond. The shares are undoubtedly cheap on a P/E of six. That’s plus point number one.  

Number two is that car dealers are posting exceptional results at the moment across the board. This is due to the semiconductor shortage pushing up the prices of used cars. These conditions could well persist and boost Vertu’s profits.  

Andy Ross owns shares in Vertu Motors.  

Royston Wild: Prudential 

Okay, the Prudential (LSE: PRU) share price has bounced following the heavy falls it experienced towards the end of September. But the FTSE 100 stock still trades at a 7% discount to levels printed at the start of the month. This provides a chance for UK share investors to engage in some shrewd dip buying. 

Prudential’s share price slumped as fears over the Chinese economy blew up. The life insurance giant has famously made Asia the nucleus of its growth strategy. So naturally concerns over the region’s largest economy shook investor confidence in the company. 

As a long-term investor I wasn’t readying to sell my own Prudential holdings, however. I remain bullish over the FTSE 100 firm’s huge Asian bias, a plan that should allow it to exploit soaring wealth levels in those far-flung regions in the years ahead. I continue to think it’s one of the best stocks to own in October despite the threat posed by a Chinese slowdown in the more immediate future. 

Royston Wild owns shares in Prudential.

Paul Summers: Avon Protection

Supply chain issues, a tight labour market and product approval delays have collectively tanked the share price of respirator maker Avon Protection (LSE: AVON). While a full recovery will take time, I think the margin of safety is now sufficiently attractive for me to begin building a position.

With customers including the US Department of Defense, Avon is the global leader at what it does and, 2021 aside, has shown itself to be a quality business over the years. Given recent consolidation in the sector, I wouldn’t rule it out as a potential bid target. 

Paul Summers has no position in Avon Protection

Gamma Communications (LSE: GAMA) made an all-time high of 2,335p earlier this month but has dropped 21% to 1,856p. Should I buy BT and Gamma at these discount prices?

Contrasts in the BT and Gamma share prices

While both stocks have seen recent heavy falls, their performances have diverged markedly over longer periods. Just look at the table below.

Investors in BT have suffered a falling share price for years. By contrast, Gamma shareholders have enjoyed spectacular gains. However, past performance is not necessarily a good guide to future returns. And it’s the future I’m interested in as a potential investor today.

Gamma’s long growth runway

Gamma was founded in 2002 and listed on AIM in 2014. It’s established itself as a UK leader in the fast-growing market of Unified Communications as a Service (UCaaS). Its suite of products enables employees to collaborate with colleagues and communicate with customers, whether in the office, at home or on the go.

The company is now looking to conquer the large European market. Europe is behind the UK in the adoption of cloud-based UCaaS and Gamma sees a long-term growth opportunity.

Is it time to buy Gamma?

In its recent half-year results, the company said it has “begun to successfully knit together our desired Western European footprint.” However, I think the market may have been expecting higher growth from Europe.

For me, it’s early days in the expansion and the long-term growth story remains intact. Certainly though, there’s a risk the company may not be able to replicate its UK success abroad. Another risk is that competition from new entrants in the attractive UCaaS market could pull down profit margins in the sector.

Nevertheless, due to the size of Gamma’s growth opportunity, and despite an earnings multiple in the mid-30s, I’d be happy to buy a slice of the business after the pullback in the share price.

BT gets a new chairman

BT needs no introduction, being a FTSE 100 blue-chip with a market capitalisation of £15.5bn at its current share price. Earlier this year, chairman Jan du Plessis announced he would be stepping down.

According to Sky News — denied by BT — chief executive Philip Jansen had given the board an “either-he-goes-or-I-go” ultimatum. Jansen was reportedly “frustrated with the speed at which BT was taking key strategic decisions.”

Whatever the ins and outs, the company announced last month that experienced business-transformation specialist Adam Crozier will take over as chairman on 1 December. I think Crozier is a good appointment.

Is the BT share price good value?

I like BT’s modernisation plans and investment in strategic growth areas. Clearly, there’s execution risk in transforming a business and no guarantee investment will pay off. Net debt of £18.6bn could also be a hindrance and risk.

However, with Jansen “confident that BT is on a path to growth,” and the arrival of Crozier as chairman, I’m hopeful the company — and its share price — can do well. The recent fall has left the stock trading at less than nine times earnings, and I’d be happy to buy it for the long term.

A top UK stock to buy now

The first UK stock I want to highlight is Gamma Communications (LSE: GAMA). It’s a leading provider of ‘unified communication’ solutions. Unified communication incorporates voice and video calling, video conferencing, messaging, team collaboration, file sharing, and more. I see Gamma as a great way to play the remote working boom.

This week, Gamma’s share price has fallen on the back of the company’s half-year report. The thing is, the H1 results were actually pretty good. For the period, revenue was up 23% year-on-year while adjusted earnings per share were up 30% year-on-year. The dividend was hiked 13%.

Looking ahead, Gamma said it was “optimistic” about future growth prospects. Given these strong results, I see the share price pullback as a buying opportunity.

One risk to consider here is that the company’s valuation is still quite high. Currently, Gamma sports a forward-looking P/E ratio of about 34. But I’m comfortable with that and I think this stock has a lot of growth potential.

Too cheap

Another British stock that strikes me as a ‘buy’ right now is online fashion retailer ASOS (LSE: ASC). Its share price has taken a huge hit recently (it’s fallen from £60 to £34 in six months) and I think the share price dip’s unjustified.

There are a couple of reasons ASOS’ share price has tanked recently. One is that investors expect growth to slow as the world reopens. Another is that several brokers have reduced their price targets for the stock.

In the near term, the slower growth and lower broker targets could continue to impact the share price. I’m looking to the long term here. however. In the long run, I expect the company’s revenues and profits to expand significantly, pushing its share price up.

ASOS shares currently trade on a multiple of just 22 times this financial year’s forecast earnings. For ASOS, that’s a very low valuation, so don’t think the shares will be this cheap for long.

A FTSE 100 growth stock

The third UK stock I want to highlight is London Stock Exchange (LSE: LSEG). It’s a leading financial markets infrastructure and data company. This year, LSEG shares have underperformed and I think this has created a good buying opportunity.

One reason I’m bullish on London Stock Exchange is that the company recently acquired financial data powerhouse Refinitiv. The aim is to transform itself into a one-stop shop for financial data and analytics. I think this is a smart strategy. Going forward, the demand for high-quality data and analytics is likely to rise.

One risk here is that the Refinitiv acquisition may not go as planned. For example, integration costs could be higher than originally anticipated. It seems this issue is currently worrying investors.

However, I think this risk is factored into the share price now. With the stock currently trading on a forward-looking P/E ratio of under 28, I think it’s a good time to be building a position.

A high growth stock

Gamma Communications (LSE: GAMA) is a UK tech share I added relatively recently to my portfolio. It develops and sells communications and software services to small, medium and large businesses, enabling home working and effective customer contact, for example.

The Gamma Communications share price has momentum and there are a few reasons to think the shares, although expensive already, could re-rate higher.

The main catalysts for continuing strong growth that I see are new product development, expansion into new European markets, increasing the number of channel partners it sells through and increases in hybrid and home working.

The company still has a lot of room to grow outside the UK. It only gets about 12% of revenues from Europe, the rest is from the UK.

The main risks with this company from an investor perspective, I think, are the possibility it expands too quickly and management takes its eye off the ball, or overstretches the balance sheet. This is always a risk for fast-growth companies. The other is overpaying for acquisitions. I have some concerns about the £40.2m purchase of Mission Labs, as that company only has revenues of £3.4m.

Overall though, I think Gamma Communications is a company that can continue to grow strongly and I’ll likely add further to my currently very modest position.

Facing problems but with massive growth potential

I’ve not always had the most positive opinion on fast fashion retailer Boohoo (LSE: BOO), especially following its well publicised ESG failings. It was found that manufacturing outsourcers were paying workers less than the minimum wage. These failings have hit the share price – and any further revelations could do so further.

There is an ongoing risk of legal action in the US in relation to alleged misleading discounts. Another risk in my view is consumers demanding fast fashion becomes more environmentally-friendly, especially as Boohoo caters to a younger demographic.

That said, customers continue to like it and this translates into its strong, consistent growth. For me, the ongoing growth potential is the main reason I’d consider buying the shares.

The shares have become much better value and now trade on a forward P/E of 22. Before the bad press, the P/E would have been well over 40, and sometimes more than triple where it is now. 

Revenue has gone from £195m in 2016 to £1.24bn in 2020. Over the same timeframe, operating profit went from £15m to £91m. Return on capital employed has been steady in recent years at around 25%, which is very good.

While it faces some challenges, which could tarnish the brand, it remains probably one of the fastest growing UK companies. For that reason, I’ll at least consider adding it to my portfolio this month.