Fast forward to today, and that now looks like a great call. Last week, GB Group’s share price shot up more than 30% after Chicago-based private equity firm GTCR said that it is considering a possible cash offer for the AIM-listed technology company.

I hold GB Group shares in my own investment portfolio. So, I’m pretty happy that the share price has received a boost on the back of the takeover talk. But what’s the best move now, though? Should I take my profits and move on to other investment opportunities? Or hold on to see what happens?

GB Group takeover: what we know

Let’s start by looking at what we know about the potential takeover.

To be clear, a formal takeover offer has not yet been made. In a brief statement, GTCR said: “There can be no certainty that any firm offer will be made, nor as to the terms on which any firm offer might be made.”

However, GB Group has said that any proposals received will be evaluated by its board of directors along with its advisers.

It’s worth noting here that, in accordance with Rule 2.6(a) of the UK Takeover Code, GTCR has until 5pm on 4 October 2022 to either announce a firm intention to make an offer for GB Group or announce that it doesn’t intend to make an offer for the company.

This means that we should have more details about this potential takeover offer in the next few weeks.

What I’m doing now

In light of the information above, I’m going to be holding on to my GB Group shares for now. There are a couple of reasons why.

Firstly, I’ve been burnt in the past by selling shares soon after a takeover was announced. I did this with Sky shares back in 2016, and they ended up rising much higher after multiple bidders emerged.

If GTCR does make a bid for GB Group, I wouldn’t be surprised to see more bidders emerge. To my mind, there’s a lot to like about this company. Not only does it operate in a high-growth industry, but it also has a wide range of blue-chip customers such as Revolut, Volkswagen, and BNP Paribas.

Secondly, I’d expect GB Group’s board to negotiate a good deal if an offer is made. It’s worth noting here that last year, shares in GB Group were trading above 900p. Now, tech valuations were excessive last year and market conditions have changed this year. But I would have thought 750p+ is achievable for a takeover offer. That would equate to around 35 times this year’s earnings forecast.

Now, of course, this approach of holding on for further gains could backfire on me. If no offer is made, GB Group’s share price is likely to fall back.

However, given that I’m a long-term investor and I’m bullish on the company and its growth prospects, that would not be the end of the world for me.

The good news for long-term investors like myself is that the weakness across the AIM has thrown up some very attractive investment opportunities. With that in mind, here’s a look at three stocks I’d buy today.

A top FinTech company

One of my top picks right now is Alpha FX (LSE: FX). It’s a fast-growing, founder-led provider of financial solutions that specialises in FX risk management and mass payments.

A trading update posted last month showed that Alpha FX has plenty of momentum at present. For the six months to 30 June, revenue was up 35% to £46m. Meanwhile, the company grew its client base significantly over the period, increasing its alternative banking accounts by 239%.

After a share price pullback this year, Alpha FX shares are valued attractively, in my view. With analysts expecting earnings per share of 62.2p for 2022, the forward-looking P/E ratio is about 29. I don’t see that as high, given the strong level of growth here.

Of course, if growth slows, the share price could decline given the high valuation. I’m comfortable with this risk however, given Alpha’s track record.

A cybersecurity play

Another AIM stock I’d snap up today is GB Group (LSE: GBG). It’s a leading provider of identity management solutions that serves blue-chip companies globally (HSBC, Volkswagen, and ASOS are just some of its customers).

GB Group shares have plummeted this year and I think the fall is overdone. In the company’s recent full-year results, for the year ended 31 March, it posted record revenue of £242.5m (up 11.4% year-on-year) and adjusted operating profit ahead of original market expectations. And looking ahead, the group said it’s well-placed to successfully achieve its strategic and financial objectives in FY2023 and beyond.

A risk to consider here is that the company could be impacted by the weakening economy. With the stock now trading on a P/E ratio in the low 20s however, I think the risk/reward profile here is attractive.

Video game champion

Finally, I’d also buy Keywords Studios (LSE: KWS). It’s a leading provider of technical services to the video gaming industry. This is another AIM company that has momentum.

Recently, it said it expects to post total revenue growth of around 34% for the six months to 30 June. Adjusted profit before tax is expected to be up around 35% year-on-year. It added that it had seen “robust demand” for all of the group’s services.

“Keywords has started the year very strongly, building on the momentum achieved in 2021,” commented CEO Bertrand Bodson.

It’s worth noting that the growth of the gaming industry could slow down a bit after Covid. This could potentially impact Keywords Studios’ growth. The forward-looking P/E of 32 here doesn’t really leave a margin of safety, so this is a risk to keep in mind.

I’m thinking long term here however, and I reckon this AIM stock should do well as the gaming industry grows over time.

This AIM stock is cheap

First up, Volex (LSE: VLX). It’s a British manufacturing company that specialises in power cords and cables. Its products help power a range of electronic devices including computers, medical equipment, and electric vehicles (EVs).

Volex’s recent full-year results, for the year ended 3 April, showed the company has a lot of momentum right now. For the year, group revenue was up 39% to $614.6m, while EV revenue alone surged 96% to $104.2m. Underlying profit before tax rose 24% to $51.4m.

This momentum is not reflected in the company’s valuation however. Right now, the stock trades at just 11 times this year’s earnings forecast. At that multiple, I see a huge amount of value.

It’s worth pointing out that debt has risen in recent years as a result of acquisitions. This adds risk.

All things considered however, I think the risk/return proposition here is attractive.

High-growth market

Next is GB Group (LSE: GBG). It’s a leading provider of identity management solutions that serves over 20,000 customers globally.

In recent years, this AIM stock has often had a very high valuation. Today however, it’s a different story. After a big share price fall in 2022, GB now trades at just 19 times this year’s estimated earnings.

At that level, I see a lot of value on offer. GB has a good track record when it comes to revenue growth. Over the last five years, it has grown its top line by about 180%. Meanwhile, the growth potential ahead is significant, given the growing prevalence of online fraud.

It’s worth noting that GB has made a major acquisition recently. So there’s some integration risk here.

With the P/E ratio now under 20, I think the stock is worth buying though. At that valuation, I wouldn’t be surprised if GB attracted takeover interest.

Major opportunities ahead

Finally, I’d also buy Alpha FX (LSE: AFX). It’s a founder-led financial services company that offers FX risk management and payments.

Alpha FX has grown at a phenomenal rate in recent years, registering three-year revenue growth of about 230%. And looking forward, the company expects to keep growing. In March, management said it sees “major opportunities” across all of its businesses.

Yet like a lot of other AIM stocks, Alpha FX has seen its share price fall significantly in 2022 as sentiment towards small-caps has deteriorated.

I’m looking at this share price weakness as a buying opportunity as I expect the stock to rebound when the economic backdrop improves.

This stock isn’t the cheapest around. Currently, the forward-looking P/E ratio is about 25. So the company will need to keep growing at a strong rate or its share price could fall.

But I’m confident it will, as its CEO is very ambitious.

Here, I’m going to highlight two UK growth stocks that have substantial share price upside right now, according to City analysts. I own both of these stocks, and I’d be comfortable buying more shares in each at current levels.

Significant share price upside

Let’s start with online fast-fashion retailer Boohoo (LSE: BOO), which owns a number of popular brands including Boohoo, PrettyLittleThing, and Debenhams.

It currently trades at around 89p. However, analysts at Deutsche Bank have a 12-month price target of 230p. If Deutsche’s analysts are right, a £1,000 investment in BOO could grow to around £2,585 (ignoring trading commissions).

Like many other e-commerce retailers, Boohoo has experienced recent challenges. Costs have risen and supply chain issues have meant that the company has been unable to get goods to customers. As a result, the group has had to downgrade its growth forecasts. It now expects growth of 12-14% for the year ending 28 February 2022.

I’m convinced that the group has what it takes to bounce back however. Brand power remains strong. This is illustrated by the fact that on Instagram, Boohoo and PrettyLittleThing have 11m and 17.6m followers respectively. That compares to figures of 6.7m and 12.5m in September 2020.

Meanwhile, the group recently started production at its own factory in Leicester. This should help ease supply chain issues, and also help fix some of the ESG issues the company is facing.

I’ll point out that not all brokers are so bullish on Boohoo. Analysts at Barclays, for example, have an ‘underweight’ rating on the stock and a price target of 85p. They believe things could get worse before they get better.

I’m in Deutsche’s camp here however. With the stock currently trading on a forward-looking P/E ratio of less than 15 after a big fall over the last year, I see considerable share price upside here.

Growth star

Another UK stock that has plenty of upside, also according to the City, is GB Group (LSE: GBG). It’s a leading provider of identity management and fraud prevention solutions that counts the likes of HSBC and Betfair among its customers.

Its share price is currently around 581p. However, analysts at Barclays have a price target of 1,000p. That means that £1,000 invested could grow to about £1,720, if Barclays’ analysts are right (there’s no guarantee, of course).

GB Group has a great track record when it comes to growth. Over the last five financial years, revenue has climbed from £73m to £218m. I think the top line is likely to climb much higher in the years ahead, however. That’s because the company is well-placed to benefit from the growth of e-commerce, as well as the rising risk of digital fraud. For the year ending 31 March 2023, analysts expect revenue of £291m.

GB’s valuation does add risk to the investment case. At present, the forward-looking P/E ratio is about 27. If future growth is below investors’ expectations, the stock could underperform.

Overall however, I think the risk/reward here is attractive. With it down considerably over the last six months, I think it’s a good time to be buying.

An AIM share for digital identity

The first company is GB Group (LSE: GBG), a software provider for digital identity solutions. It operates through three divisions: Identity, Location, and Fraud.

There are a lot of reasons I like the stock. Firstly, it’s able to generate excellent quality metrics, such as consistently high (and increasing) operating margins. This shows me that the company is becoming more profitable over time, which gives scope for things like share buybacks and dividends.

I also see a structural tailwind for the company in the months and years ahead. Customer activity is moving online more nowadays, so GB Group’s identity software solutions will be in increasing demand, in my view. Looking ahead into next fiscal year (the 12 months to 31 March 2023), and growth seems to be improving. Revenue and net profit are expected to grow by 26% and 24%, respectively. This means the shares trade on a price-to-earnings multiple of 27, which is reasonable for a technology company growing by double-digits to my mind.

There are still risks to consider, of course. For one, GB Group disposed of two businesses recently – Marketing Services and Employ & Comply – which could have disrupted the overall Group performance. GB Group is also acquisitive, so this brings execution risk.

But on balance, I think this is a top technology company on AIM. So I’d buy the shares today.

A real estate investment trust

The next AIM share is Warehouse REIT (LSE: WHR), which is a real estate investment trust (REIT) specialising in managing a portfolio of warehouse properties.

A main reason I’m bullish about Warehouse REIT is the growth in e-commerce. This was given a huge boost during the pandemic. Indeed, online retail sales in the UK reached just under £100bn in 2020, and up from £76bn in 2019. A crucial part of e-commerce is the logistics infrastructure behind the scenes. Warehouse REIT operates a portfolio of urban warehouses across the UK as part of this infrastructure. Its tenants include big names such as Amazon, DHL, and Asda.

Profit growth has been excellent recently. For the 12 months to 31 March 2022 (FY22), earnings per share (EPS) is expected to increase by 18%. In the following FY22, EPS is forecast to grow again at a still reasonable 12%. Based on a forward price-to-earnings ratio, the shares are valued on multiple of 23. I consider this fair for the earnings growth. Not only this, but the price-to-net-asset-value is only 0.9, which I view as cheap relative to Warehouse REIT’s high-quality property portfolio.

One thing to bare in mind about REITs is the occupancy rate. Currently, Warehouse REIT’s occupancy rate is high at 94.6%. But it still means over 5% of the property portfolio is untenanted. If this occupancy rate declines, then the profits will certainly fall.  

Overall, though, I think this is a quality AIM share to add to my portfolio today.

High-yielding share

As I recently pointed out, mining giant Rio Tinto (LSE: RIO) is a FTSE 100 share with a dividend yield of over 6%. When I’ve filtered for quality dividends, it comes up alongside only three other investments based on my criteria. For background, my criteria were: dividend cover of more than 1.5 times; five-year EPS compound annual growth rate (CAGR) of more than 15%; return on capital employed (ROCE) of more than 10%, dividend per share CAGR of more than 9% and a price-to-earnings (P/E) ratio of 0.8 or under.

The fact that Rio Tinto came up after this screening, could indicate it’s a passive income share worth adding to my portfolio. It could do well if iron ore prices recover, which is a significant part of its income.

On the flip side more money going into ESG investing, (investments with solid environmental, social and governance records), could hold back the share prices of miners. The price of iron ore is also beyond its control and could continue to fall, this would very likely hit the share price. 

Two dividend growth shares

When it comes to passive income I also want to see very sustainable dividends. There are two dividends I think have room to grow for many years to come because there’s a high level of dividend cover, reasonable dividend growth and a business model that should support earnings growth. They come from Sureserve (LSE: SUR) and GB Group (LSE: GBG).

The former is a property services group. It should benefit from the growth of smart meters and the drive to make buildings greener.

Dividend cover is over four, showing there’s plenty of room for bigger dividends in the future. This is part of what makes it a top passive income idea from my perspective. 

In summer 2020, the group paid off all its borrowings, putting it on a much better financial footing. That should also help more earnings filter through to dividends because less money goes towards repaying loans.

However, Sureserve is a pretty low-margin business and its work can be replicated by other groups, so it does not have much of a competitive moat. I think these risks are partially offset by its size and the large contracts it has with social housing groups.  I’m keen to add more shares to my portfolio.  

Technology group GB Group is another dividend growth passive income idea that I like. As with Sureserve, it also has dividend cover of around four. Dividend per share CAGR has been 34% over the last three years, which is good. The payout ratio is only 25% meaning the business is reinvesting well for future growth and not paying out too much money as income.

As with any tech stock, there’s a risk its technology gets out-innovated and competitors steal market share. Also, earnings per share growth have taken a hit recently. But I back GB Group to get back in the groove. I’m tempted to add it to my own portfolio for sustainable passive income. For me, it’s a top passive income idea, when it comes to getting dividends from UK shares. 

A growth stock for the e-commerce boom

The e-commerce boom has pushed the levels of online fraud to endemic levels. Lawmakers and businesses are fighting back and today, the Financial Conduct Authority announced it will be rolling out Strong Customer Authentication rules from 14 March. This will require shoppers to verify their identity when purchasing online, for example “through their banking app or a one-time passcode via text or phone call”.

This increased focus on fraud has plenty of upside as the levels of online shopping steadily grow. It’s why I’m considering buying GB Group (LSE: GBG) shares for my investment portfolio. This UK growth stock provides retailers and product manufacturers with address and identity verification services. Organic sales here rose 12.6% in the six months to September, latest financials showed.

GB Group also has a long record of double-digit annual earnings growth behind it. And I’m expecting the company (along with City analysts) to get firmly back on the front foot following a likely profits reversal in this fiscal year (to March 2022). I’d buy the business even though the introduction of online sales taxes could hit revenues hard if e-commerce volumes subsequently slip.

A top FTSE 100 share!

House price growth has been explosive over the past year. According to Halifax, the average UK property rose 9.8% in value in 2021, the fastest rate of annual growth for 17 years. However, Halifax thinks house price growth could slow “considerably”, given the prospect of interest rate rises to curb inflation, along with rising stresses on household budgets.

I own Barratt Developments (LSE: BDEV) shares. And the big question for me is whether or not property price growth will remain strong enough for the homebuilders to increase profits by a decent amount. I sincerely believe the answer is ‘yes’. In fact, I think the pace of growth could once again surprise to the upside in 2022.

Okay, the Stamp Duty holidays that boosted home values last year is no more. But a slew of other supportive factors remain in play to keep the market buzzing. Interest rates are still likely to remain well below historical norms, even if the Bank of England does tighten monetary policy.

Significant government support via the Help to Buy equity loan scheme remains in play. And, of course, a shortage of new properties entering the market should keep home prices rising nicely too.

These elements have driven yearly profits reliably higher at Barratt for a long time now. The only profits drop came in financial 2020 when Covid-19 hit sales and build rates and caused costs to balloon. City analysts expect the bottom line to continue growing healthily following this blip too.

However, the impact of rising costs on the builder’s profits can’t be taken lightly. But, all things considered, I think this FTSE 100 share is a white-hot growth stock for me to buy more of today.

Data driven

GB provides personal data verification tools as well as location services, ID document inspection, and fraud prevention services such as email address verification. GB’s services are driven by cutting-edge intelligence-based software.

As I write, shares in GB Group are trading for 694p per share. At this time last year, shares were trading for 934p, which is a 25% drop. This does not concern me. In fact, I see the current price as an opportunity to potentially add cheap shares to my portfolio. The fall in share price can be explained by a dip in demand for such products due to the pandemic. Analysts at Barclays believe GB Group shares will rise towards 1,000p.

The positives

GB Group is aiming to be a leader in its field and has the proprietary tech and strategy to succeed, in my opinion. The rise in demand for digital products and services is set to continue and therefore the demand for personal data based products will also increase.

A recent acquisition by GB Group has made me pay closer attention to it. I like when a firm I am reviewing for investment is acquiring competitors or firms to enhance its offering. It is a sign of ambition and growth. In November, GB announced it would be acquiring a US firm, Acuant. This acquisition has the potential for GB to cement itself as one of the biggest players in the identity management space in the world. The US market is extremely lucrative and this deal will only enhance its footprint in the US market.

Finally, GB’s performance recently has been positive and with the new acquisition, I expect it to continue on an upward trajectory too. In its most recent half-year report in November, GB announced that revenue grew by nearly 6% compared to the same period last year. This resulted in its small debt from last year’s half-year results turning into a healthy cash balance of £39m. Operating profit increased by 3.5% and two new products were launched to market as well.

UK shares have risks too

There are two main risks I see linked to GB that could affect progress and my investment. Firstly, competition in the tech market is intense. There are lots of large players that perhaps have a better brand recognition as well as footprint that could ramp up their identity management and data intelligence arms.

At current levels, GB shares still look a bit expensive despite dropping in recent months. There is a risk that future potential from the acquisition is already priced.

Overall, I like GB Group and think it could be a great addition to my portfolio for 2022 and beyond. It is making the necessary moves to enhance its footprint and become a market leader in its field. GB’s latest acquisition is exciting. I would not be surprised to see record results posted for the full year and its share price to increase. I would add GB Group shares to my portfolio at current levels.

Nonetheless, I think this often overlooked UK tech stock could have an amazing 2022. It could even, in my opinion, earn investors a bigger overall return than Nvidia in 2022.

Outperforming Nvidia

The stock I’m thinking of is GB Group (LSE: GBG). It provides global digital identity and location services. That helps organisations validate and verify the identity and location of their customers. In a digital age, it’s very well placed to keep growing.

The most recent half-year results showed a 5.4% improvement in revenue to £109.2m. Its organic revenue at constant currency was ahead 12.6% at £108.7m.

It aims to be a global leader in its field and analysts seem confident. Barclays has set a target price of 1,000p for the company, compared to the GB Group share price of 729p at the time of writing.

The recent fall in the share price, I think, makes buying the shares all the more tempting. That’s especially as GB Group remains a growth share, despite its recent slowdown in revenue growth. When looking at its growth year-on-year, it’s in an attractive niche that also pays a dividend.

But the shares are expensive. As such, any slowdown in growth could see the share price slide. As with all tech, it’s reliant on innovation in a very competitive industry. There’s always a risk that newer and better technologies from rivals could undermine the company’s appeal and new competitors could emerge. That could potentially hurting margins. 

Another strong tech stock

Electrocomponents (LSE: ECM) is another under-the-radar share I really like. I owned some of the shares many moons ago, but recent results have once again caught my eye. The latest interim results showed like-for-like revenue growth of 31% year-on-year, or 22% versus two years ago, at the electrical products distributor.

It’s another company well positioned to grow as technology evolves, I feel. Electrocomponents has many strong customer partnerships. It says it has 1.2m customers in 32 countries, so it’s a serious global business and isn’t reliant on just a few companies for its revenues, as some other tech companies are. It has a long history too as it was founded in 1937. 

Analysts at Berenberg raised their target price from 890p to 1,230p following the results, showing their view on its improving prospects. Electrocomponents isn’t flashy or well known so its share price growth is likely to be steady compared to some of the better known technology companies. However, overall I think it is a very good business, as shown by its revenue growth. I may add it to my own portfolio. 

Of course, there’s no knowing if GB Group will do better than Nvidia in 2022. No investor has a crystal ball. The point isn’t to say that Nvidia can’t also be a very profitable investment, it’s an exciting company. However, I prefer GB Group with its lower P/E ratio and because it’s not involved in the under-pressure computer chip production industry.

Overall, I  just think GB Group has a lot of potential, could be set for a fantastic 2022 and I’m very much considering buying the shares.

On song

The progress of audio equipment and software supplier Focusrite (LSE: TUNE) has been a thing to behold. In five years, the share price is up almost 900%! So much for the general belief among investors that risky AIM stocks never deliver.

A beneficiary of multiple UK lockdowns, the High Wycombe-based business now expects to report roughly £173m in revenue for the year to the end of August. That’s 33% up on the previous year. It’s also ahead of what the market was expecting. 

This is not to say the £1bn cap is risk-free. In addition to being susceptible to the global shortage of semiconductors, Focusrite recently warned on “significantly higher than normal” freight and shipping costs. This makes the current P/E of 44 look very rich, in my opinion.

Yes, it may boast eight brands and a net cash position, but I feel no stock is worth buying at any price. If a market correction comes, however, I’ll be first in the queue. 

Growth potential

Global identity specialist GB Group (LSE: GBG) is another AIM stock that has rewarded long-term holders. While unable to compete with Focusrite’s gains, the shares are still up over 175% since 2016. Again, this demonstrates how I might be able to generate above-average returns by looking for quality businesses on the junior, rather than the main, market.

I wouldn’t bet against GBG continuing to deliver. As the AIM stock highlighted in July, the huge growth in online activity should mean trading remains buoyant at each of its divisions: Identity, Location and Fraud. Indeed, the near £2bn-cap company said that it had already made a “good start” to its new financial year following record business in FY21. 

Defensive AIM stock

A final AIM stock on my buy list in the event of a significant market wobble is CVS Group (LSE: CVSG). Having doubled in value over the last 12 months, I remain convinced the veterinary services provider is a great play on the UK’s enduring love for pets. There certainly won’t be a lack of demand considering the huge number of households that have bought a puppy, kitten or (insert animal of choice) over the last 18 months or so. 

Once again, however, the valuation looks unattractive. CVSG shares trade on a forward P/E of 32. That’s still high, especially as margins in this line of work aren’t particularly large. Another potential risk here is that it may struggle to recruit the best talent to meet growth targets. I still regret not snapping up the stock back in 2019 when concerns over the shortage of suitably qualified vets following Brexit sent the share price down to just above the 400p mark. 

For now, CVSG stays on my watchlist.