Packaging and labelling

As a quick introduction, Macfarlane is a packaging and labelling business based in Scotland. After being established over 70 years ago, it has grown into one of the largest distributors of packaging products in the UK with over 1,000 employees. It also sells its products into Europe and the US.

So what’s happening with Macfarlane shares currently? Well, as I write, they’re trading for 118p. At this time last year, the stock was trading for 112p, which equates to a 5% return over a 12-month period.

The best shares to buy have risks too

The biggest risks to Macfarlane’s growth currently are macroeconomic headwinds. Soaring inflation has led to rising cost of raw materials. Furthermore, there is currently a global supply chain crisis that has affected many sectors and industries.

Macfarlane could be adversely affected by rising materials costs. Packaging products require lots of raw materials to manufacture. These rising costs could squeeze profit margins, which in turn could affect performance and investor returns. If it decides to put prices up, it could lose business to competitors too.

The global supply chain crisis has led to many businesses being unable to provide products to their customers. Macfarlane’s sales, performance, and returns could be affected if this crisis continues.

The bull case

So to the positives then. Firstly, the packaging and labelling market has grown massively in recent years. This is linked to the e-commerce boom and the explosion of online shopping, which has been exacerbated by the pandemic. Macfarlane should be able to leverage its dominant market position to grow its business and performance.

Next, let’s take a look at Macfarlane’s performance, although I do understand that past performance is not a guarantee of the future. Looking back, Macfarlane has grown revenue and profit in three out of the past four years. The only year when levels dropped was 2020, this was due to the pandemic. 2021 performance was higher than pre-pandemic levels, which is encouraging.

So on to the Macfarlane share price. At current levels, the shares look decent value for money on a price-to-earnings ratio of 13. Many of my best shares to buy have pulled back in the past few months which has thrown up some bargain buys.

Finally, Macfarlane shares would boost my passive income stream through dividend payments. The current dividend yield on offer is 2.7%, which is higher than the FTSE 250 average of just under 2%. I am aware that dividends can be cancelled at any time, however.

Overall I do believe that Macfarlane shares could be a great addition to my holdings for long-term growth and consistent returns. I would buy the shares and hold on to them.

Labelling and packaging

Macfarlane Group is a Scottish-based packaging and labelling business with roots stretching back over 70 years. It is one of the largest distributors of protective packaging products in the UK. Supported by 1,000 employees, its customer base spans the UK, Europe, and the US.

As I write, Macfarlane shares are trading for 127p. At this time last year, the shares were trading for 110p, which is a 15% increase over a 12-month period.

Labelling and packaging may sound a bit boring. But I’m not looking for thrills, I’m looking for a growth stock with a good track record of performance and one eye on the future. I believe Macfarlane ticks all these boxes.

Risks involved

Macfarlane Group could see profit margins squeezed due to rising costs of raw materials and the supply chain crisis.

These two macroeconomic factors are affecting many businesses across lots of different sectors currently.

If Macfarlane cannot fulfil orders due to the supply chain crisis, this could affect performance, growth, and returns. Furthermore, if raw materials are costing more, it may need to charge more to keep profits up. This could result in a loss of customers to competitors.

A growth stock I’d buy for my holdings

For any stock to continue growing organically along with acquisitions, I believe it must be on sound financial footing. I usually review a firm’s trading record and balance sheet. I do understand that past performance is not a guarantee of the future, however.

Macfarlane has increased revenue and profit year-on-year between 2018 and 2021 (aside from a small drop in 2020 due to the pandemic). Its 2021 annual report was released last month and made for excellent reading, in my opinion.

Another reason I believe Macfarlane is a growth stock with lots of potential ahead is due to the market it operates in. Packaging and labelling is thriving right now due to the rise of e-commerce and is set to grow. In fact, the pandemic only exacerbated online shopping and the demand for packaging and labelling products.

At current levels Macfarlane Group shares look cheap to me with a price-to-earnings ratio of 14. In addition to this, buying the shares now would help me build a passive income stream. Macfarlane has a dividend yield of over 2.5%, which is already higher than the FTSE 250 average yield.

I do believe Macfarlane Group is an exciting growth stock with lots of potential ahead. At current levels the shares are cheap and pay a dividend. Macfarlane has a consistent record of growing performance and completes acquisitions to enhance its offering too. It is also operating in a burgeoning sector thanks to the rise of e-commerce. I will be buying the shares for my holdings and holding them for the long term.

UK shares primed for a Santa Rally?

The first UK share that I think could do well this year and in subsequent years is MacFarlane (LSE: MACF). This month, in particular, should see high demand for packaging, benefitting the Scotland-based packaging manufacturer and distributor.

The group has historically had consistent revenue growth, alongside a return on capital employed of 15%. Combined, this indicates to me that management has run the group well, which is why it may be a good addition to my portfolio. It’s a steady and dependable kind of company. On the downside, it’s hard to really differentiate it from the competition but management has managed to grow, which is a credit to their ability.

MacFarlane is almost certainly going to be hit by the lorry driver shortage. If it can pass on these costs then it’s not a problem. If it can’t, margins will be hit. So far, the impact seems to have been contained because in November the group’s management said they expect annual profit to exceed previous expectations.

Nonetheless, MacFarlane as a packaging manufacturer could be hit financially by any raw material price increases, which may be the result of the current, well-documented supply chain issues.

I’ve been a fan of MacFarlane for a while. It seems to have the hallmarks of a quality company that is well managed and able to grow. It also pays a dividend, which is very welcome. I’m still likely to buy the shares if there’s room in my portfolio, but there are a lot of shares that I like. 

The share with phenomenal margins

Mining is an inherently tricky industry. However, I like the look of iron ore miner Ferrexpo (LSE: FXPO) and already hold the shares. The share price has declined as the commodity price of iron ore on international markets has fallen. This is partly due to fears around the Chinese economy and the health of its property market after Evergrande missed debt repayments. That is an issue that is ongoing.

So there are risks to investing in Ferrexpo, without a doubt. I’ve invested despite being aware of that. Those risks include that it operates in Ukraine and that the market dictates the price of iron ore.

On the flip side, Ferrexpo is a solid miner. It has operating margins of around 55% and huge amounts of cash on the balance sheet, giving it financial stability, as well as enabling management to pay a dividend. The dividend yield is now above 10%. Combine that with a P/E ratio of around four and I think Ferrexpo is a UK share that provides a rock bottom valuation, a high income, and the potential for short-term share price recovery.

With all that in mind, I’m likely to be adding to my holding in the miner both for yield and because the shares have become much cheaper and could bounce back. 

Packaging and labelling

Macfarlane Group is a packaging and labelling business headquartered in Glasgow, Scotland. The company was founded over 70 years ago and joined the London Stock Exchange in 1973. It has close to 1,000 employees and has customers throughout the UK, Europe, and the US.

Macfarlane operates in three key areas. These are the supply of packaging materials, design and manufacture of bespoke packaging, and design and print of self-adhesive and resealable labels.

As I write, Macfarlane shares are trading for 131p. A year ago, shares were trading for 82p, which is a nice return of 59% over 12 months. Year-to-date, the share price is up by 45% from 90p per share to current levels. It is worth noting that the shares have surpassed their pre-pandemic market crash level.

Why I like Macfarlane Group

I have pinpointed two primary reasons I like Macfarlane right now.

1. I believe that Macfarlane operates in a ‘staple’ industry which offers it defensive qualities. Its products and services will always be in demand irrespective of how the wider economy is performing. In fact, I believe demand for packaging will only continue to rise as the shift from high street shopping towards online convenience shopping continues. I for one always wonder how much effort and packaging goes into my regular Amazon Prime deliveries!
2. Many of the FTSE stocks I tend to like are consistent performers. I must note that historic performance is by no means a guarantee of the future but I find it a useful gauge nevertheless. Reviewing Macfarlane’s history, I see that revenue and gross profit have increased year on year for the past four years. This includes during the time of the pandemic which is impressive and solidifies my first point. Macfarlane’s half-year report for the six months to 30 June announced in August was also impressive. Sales grew by 26.5% compared to the same period last year. As a result, operating profit more than doubled! It also declared an interim dividend as well, which would make me a passive income if I were to buy shares.

All FTSE stocks carry risks

Despite my bullish attitude towards Macfarlane, I must note the risks involved too.

The main risk that springs to mind is the current lorry driver shortage and UK haulage crisis. The well-documented issues have seen deliveries affected and firms that rely on such services struggling. Macfarlane is not immune to this issue. The only upside to the bad news is that all its competitors are similarly affected.

In addition, the rising cost of paper and other raw materials could affect Macfarlane’s bottom line. Again, this would be an industry-wide issue and not just an problem for Macfarlane alone.

Overall, I believe Macfarlane is a great FTSE small-cap option right now. At current levels it is trading just below all-time highs and I believe it could continue to climb further. I would happily add its shares to my portfolio just now.

So as we reach deeper into autumn (and the rain becomes even more frequent), which UK shares do I think could be strong candidates for finishing the year much higher? Here are two that have good prospects and that I might buy. 

Primed for a rally?

Scotland-based packaging manufacturer and distributor MacFarlane (LSE: MACF), although facing some (hopefully) short-term challenges, looks to me to be a good long-term investment.

Consistent revenue growth, alongside a return on capital employed of 15%, shows to me that this packaging company does what it does well.  

The fact the shares have just dropped from all-time highs potentially creates an opportunity to buy the shares before any Santa rally.

That said, as a distributor, MacFarlane is likely to be hit by the lorry driver shortage. If it can pass on these costs then it’s not a problem. If it can’t margins will be hit. Although one saving grace is that all its competitors are likely to be in the same boat. Cost pressures are a whole industry problem, not one specific to MacFarlane so I feel it shouldn’t be disproportionately affected.

I’ll consider adding the shares to my investment portfolio.

A riskier UK share

Iron ore miner Ferrexpo (LSE: FXPO) seems to me a riskier proposition. On the one hand, the shares are very cheap if I look only at the numbers. The P/E is three, the price to book value is 1.33 and enterprise-value-to-EBITDA ratio is 1.61. All of these numbers (the lower the better) suggest to me that the shares are very good value.

The shares could do well if the Chinese economy grows strongly and the immediate crisis over Evergrande’s debts, which threaten the Chinese property sector, blow over.

However, if demand for steel (for which iron ore is key) fades, then the Ferrexpo share price could tank. The fact that its shares are already cheap won’t, in the short term at least, affect investors’ perceptions that it’s worth avoiding iron ore miners. Even cheap shares can still fall further. Ferrexpo has a challenge in that it’s not a diversified miner like a BHP. Its fortunes are very tied to the global demand for and price of iron ore.

At the moment I won’t add to my holding in Ferrexpo. That doesn’t mean that there isn’t the potential in the right circumstances for this UK share to grow massively. As a shareholder, I’m keeping my fingers crossed.

I’m hoping for a Santa rally this year. If it does come, then I think MacFarlane because of its quality and Ferrexpo because it’s cheap, could both be positioned to do well.  

To generate a passive income of £500 a month, I would need to build an investment pot worth around £150,000. Then, if I can achieve an average dividend yield of 4% on my investments, it would be possible to earn £500 a month without doing anything further. 

If I invested the maximum Stocks and Shares ISA allowance each year (£20,000), even without any capital and income growth, it would take less than eight years to reach this goal. It ought to be possible to achieve this passive income much more quickly though and here’s how.

Finding dividend growth shares to fuel passive income

The first step of my plan for passive income is to invest largely in dividend growth stocks. I want to invest in UK shares that are able to grow profits and their dividends year after year, even when the market struggles.

MacFarlane, the packaging manufacturer and distributor is one of only a few companies that has consistently met these criteria (although it isn’t guaranteed to do so in future, of course). Other possible options that have in some years seen profits dip but have a good dividend growth track record are FTSE 100 companies Ashtead and National Grid. 

Investing in UK shares with resilient business models

To make sure a company is able to grow profits and dividends sustainably and to reduce the costs of buying and selling shares too frequently, I’ll focus on UK shares with business models that should continue to prosper many years into the future.

This isn’t necessarily about trying to pick companies that could double their share prices overnight or searching for the ‘next big thing’. It simply means I want to screen out companies, and indeed industries, that could really see their share prices decline in the coming years.

I’m not looking to be contrarian in my search for a passive income portfolio. I want to buy good companies, at a good price, with a decent dividend yield and providing dividend growth.   

Reinvesting dividends

Once that’s been done, it’s important to reinvest my dividends. This is how compounding works. By reinvesting dividends it’s possible to get a snowball that builds momentum and grows and grows. Consider this. A £4,000 investment in the FTSE 100 in 1987 with dividends taken out, rather than reinvested, would now be worth around £32,000 (excluding fees). Seems impressive. 

And yet with dividend reinvestment, it would be worth more than £59,000 (excluding fees) had it matched the total return from the index. That clearly illustrates the benefits of compounding.

Another example is how Warren Buffett’s wealth has grown massively in recent years. This is the snowball in action.

So, achieving passive income from investing in dividend shares is doable. I certainly plan to have a passive income portfolio, which will have UK shares in it that I hope will do well for many years and provide dividend growth. And most importantly of all, those dividends will be reinvested.

A ‘nearly’ penny stock for the e-commerce age

Having exposure to e-commerce is one of the hottest games in town today. One of the ways I’ve sought to embrace the stunning rise of online shopping is by buying FTSE 100 cardboard box manufacturer DS Smith.

I think Macfarlane Group (LSE: MACF), which trades at 116p per share, could be another great UK share with which to play rising packaging demand. It designs and prints self-adhesive labels and creates protective packaging products.

Rising paper prices are a constant threat to companies in this sector. And the problem of soaring raw material values is particularly problematic today as the economy bounces back and supply issues persist.

Still, I think the rate at which e-commerce is tipped to keep expanding makes Macfarlane a top growth stock to buy. Insider Intelligence thinks global online retail sales will reach $6.5trn in 2023, up from $4.9trn today.

Testing titan

A recent price spurt has taken Calnex Solutions (LSE: CLX) above penny stock territory, recently trading at 103p per share. I think this could be a top UK share to buy as the digital revolution gathers pace.

And I think it’s particularly attractive at current prices. It trades on a forward price-to-earnings growth (PEG) ratio of just 0.7.

Calnex manufactures specialist testing and measuring equipment for telecoms customers across the world. This means it’s in great shape to exploit the rise of 5G and booming demand for cloud computing.

Revenues here leapt 31% in the last fiscal year as repeat business jumped and new customers came on board. I’d buy it despite the fact that almost all revenues are generated in US dollars. This could create a problem if the greenback falls in value against the pound (as many economists are predicting).

Sun king

I believe Bluefield Solar Income Fund Limited (LSE: BSIF) could be another top ‘nearly’ penny stock for me to own during the 2020s. As the name suggests, this UK share (which trades at 119p) acquires and then manages solar energy farms. This puts it in one of the prime seats to ride the green energy revolution.

Experts at Allied Market Research think the solar industry will be worth $223.3bn five years from now. That’s more than four times larger than the market was worth back in 2018.

It’s important to remember that operating solar farms is hugely expensive and costs can take a huge bite out of earnings. Another risk to Bluefield Solar is the energy industry is highly regulated and any changes on this front could severely damage its long-term prospects.

That said, the landscape currently looks promising enough to suggest cheap UK shares like this could generate terrific investor returns in the 2020s.

Alan Oscroft: Greencore

My pick is Greencore (LSE: GNC), the food-to-go specialist, whose share price plunged on interim results day. The company reported a £7.9m pre-tax loss for the first half, in a business still devastated by the Covid-19 pandemic. The market hated it.

But Greencore expects to turn things round by the end of the year, and the liquidity is there. If the company can get back to 2019 earnings levels, we’d be looking at a P/E of around nine. I think that’s cheap. I rate Greencore a buy, and I’ve added it to my ISA shortlist.

Alan Oscroft has no position in Greencore.

Roland Head: IG Group Holdings

Online financial trading firm IG Group Holdings (LSE: IGG) has delivered a bumper performance over the last 12 months. Last year’s market crash was followed by a stock trading boom that’s seen the company’s profits double.

Markets are pricing in a return to more normal levels of trading over the coming year, and IG’s share price has been in retreat recently.

This sell-off has left IG shares trading on 13 times forecast earnings for the year ahead, with a dividend yield of 5%. Although IG faces some challenges this year, I think the stock offers good value at this level.

Roland Head owns shares of IG Group Holdings.

G A Chester: Fresnillo 

Silver and gold miner Fresnillo (LSE: FRES) recently reiterated its 2021 production guidance, despite continuing uncertainty presented by Covid-19 in Mexico. 

This FTSE 100 giant, with seven operating mines, is a low-cost producer and has a strong balance sheet. Furthermore, I think its pipeline of new mines and projects, together with a series of improvement programmes, bode well for the longer term. 

I reckon recent weakness in the share price is giving me an opportunity to buy in to the world’s largest primary silver producer at an attractive level. That the dividend yield is now above 2% is an added bonus. 

G A Chester has no position in Fresnillo. 

Harshil Patel: ITV 

ITV (LSE:ITV) looks well placed to benefit from a global economic recovery. Advertising revenues are rebounding from last year, and the majority of ITV’s shows are back in production.  

Several strategic and cost-cutting measures are on track. This is allowing ITV to invest in the acceleration of its strategy to become a digitally-focused media and entertainment company. 

ITV is a quality consumer cyclical stock that offers double-digit margins and return on capital. It’s cash generative and shares trade at an undemanding valuation. It also offers a forecasted dividend yield of 4%. Overall, I’d make it a top stock pick for June. 

Harshil Patel does not own shares in ITV.

Edward Sheldon: Experian

My top British stock for June is Experian (LSE: EXPN). It’s the world’s latest credit data company.

Experian posted a solid set of results for the year ended 31 March recently. For the year, revenue was up 7% on the back of strong demand for its analytics services while earnings per share were up 4%.

Looking ahead, the group said that it expects organic revenue growth in the range of 7% to 9% for FY2022. It noted that it had made a strong start to the year.

Experian is not the cheapest stock, and its valuation does add some risk to the investment case. Overall, however, I think the stock has a lot of appeal right now.

Edward Sheldon owns shares in Experian.

Kirsteen Mackay: Macfarlane 

Macfarlane (LSE:MACF) produces protective packaging for businesses. It mainly has a UK focus, with a growing presence in Europe. A sustained growth in ecommerce is increasing demand for packaging and Macfarlane counts both Hobbycraft and Halfords as customers. Then there’s the climate initiative increasing pressure for sustainable solutions, from which Macfarlane stands to benefit.  

The MACF share price has risen 88% in five years. It has a price-to-earnings ratio of 18, earnings per share are 6p and it doesn’t offer a dividend yield. I’d consider buying MACF shares as I think it has good growth opportunities ahead. 

Kirsteen Mackay has no position in Macfarlane.

Andy Ross: Sylvania Platinum  

Sylvania Platinum (LSE: SLP), the South African platinum group metals miner has fallen from its year high. I think it’s a really great company and see the share price weakness as an opportunity. The company has a tailwind behind it because what it mines is very likely to be used in electric vehicle batteries in the future.  

On top of that, there is a belief amongst some investors that we might be in a commodities supercycle. Even if that’s not the case, I back the shares to do well. It’s a low cost miner, which should be good for margins.  

As always with a growing miner, there are risks to bear in mind. Notwithstanding that though, Sylvania Platinum is my top stock for June.  

Andy Ross does not own shares in Sylvania Platinum.  

Rupert Hargreaves: Glencore

Commodity prices have been ripping higher this year. For example, the price of copper is up around 29% year-to-date. I think Glencore (LSE: GLEN) could benefit from this trend.

Not only does the company produce commodities such as copper, but it also trades them.

This trading business can be highly profitable. As the world’s largest trading business, I expect the demand for Glencore’s services to increase in line with the rising demand for commodities.

The most considerable risk facing the company is the potential for a sudden fall in commodity prices. This could have the opposite effect on the business.

Rupert Hargreaves does not own shares in Glencore.

Manika Premsingh: Volex

Power cords and cable assembly solutions provider Volex (LSE: VLX) has more than doubled its share price in the past year, driven by positive stock market sentiment and its own robust performance. According to its latest trading update, full year revenue for the 52 weeks ending April 4, 2021 will be ahead of market expectations.

For this reason, I am looking forward to its results due in June. I’d also check details of its exploding demand from electric vehicle (EV) customers, which can be a potentially big growth driver for the future.

I would also look at the impact on debt from its acquisition of Turkey’s DE-KA, which may be risky, if high, at a time of continued economic uncertainty.

Manika Premsingh has no position in Volex.

Stuart Blair: Diageo

Diageo (LSE: DGE) is an alcoholic beverages company, with a portfolio of over 200 brands. Its share price has already recovered strongly since last year, and I believe further gains are likely.

Indeed, the company recently announced an improved profit forecast for 2021 and decided to restart its return of capital programme. As the company is now actively returning more money to the shareholders, it’s clearly in a strong financial position.

Diageo’s extensive product range and market-leading position should also help protect it against the risk of another economic slowdown. This is why Diageo is my top stock for June.

Stuart Blair owns shares in Diageo.

Christopher Ruane: Renalytix AI

I recently bought into Renalytix AI (LSE: RENX) despite its limited commercial history. I was impressed by prospective new business opportunities including a US government deal, as well as clinical study results.

The company specialises in kidney diagnostics. That is a significant market with resilient customer spending. The company’s AI-enabled technology gives it a compelling position. As revenues grow I expect Renalytix’s profits to benefit from the scaleability of its technology.

One risk is that competitors could develop their own solutions and reduce Renalytix’s competitive advantage. 

Christopher Ruane owns shares in Renalytix AI.

Royston Wild: Bloomsbury Publishing 

I reckon Bloomsbury Publishing (LSE: BMY) could be a top UK stock to load up on this June. In fact I’d get my skates on and buy it before the release of full-year results on Wednesday, 2 June. 

The Harry Potter publisher has a history of lifting its profits projections in recent times. And it was at it again last time it updated the market with a pre-close update in March. Bloomsbury has benefitted from the uptick in reading during Covid-19 lockdowns. But I reckon the company’s high-quality stable of titles — along with its foray into academic publishing — will keep the top line fizzing. 

Royston Wild does not own shares in Bloomsbury Publishing.

Dan Peeke: HSBC

My favourite UK share for June 2021 is HSBC (LSE:HSBA).

I mentioned in an article towards the end of April that HSBC’s price-to-book ratio was 0.6. It still is, and I think that’s a bargain. On top of this, the company is beginning to focus on its Asian ventures. This is where more than 80% of its 2019 profits came from, so I think that’s the perfect approach.  

The company’s withdrawal from the US and difficulty generating revenue thanks to low interest rates are setbacks, but I’m still confident that it’ll make a good long-term investment.

Dan Peeke doesn’t own shares in HSBC.

Paul Summers: BlackRock World Mining Trust

My top stock for June is the BlackRock World Mining Trust (LSE: BRWM). As it sounds, this invests in a basket of the biggest miners in the world. It also pays an attractive dividend (currently 3.3%). 

Naturally, investing in the cyclical commodities market won’t suit all investors. Some may also baulk at the 1% ongoing charge. Even so, this is arguably the least risky way of getting exposure to the huge demand for metals such as copper from electric vehicle manufacturers in the years ahead.  So, despite rising 80% in the last year alone, I think there’s more upside ahead. 

Paul Summers has no position in the BlackRock World Mining Trust

Nadia Yaqub: Premier Foods

I think things are turning around for Premier Foods (LSE: PFD). Its recent full-year results were impressive, which saw a strong increase in revenue and operating profit. Even net debt has fallen to a manageable position.

The key thing to note is the reinstatement of the dividend. The company will pay its first income payment in 13 years. Clearly the firm’s financial position is improving. It’s also ramping up growth with new product launches. I reckon this is a sign of good things to come and the stock could rise further.

Nadia Yaqub does not own shares in Premier Foods

Ben Hargreaves: Polymetal International 

With concerns over inflation causing a degree of volatility in the market, I think holding shares of a solid dividend earner like Polymetal International (LSE:POLY) is a good idea. At 5.7%, the dividend is healthy and the business itself is well-positioned, as a miner of precious metals.  

The bulk of the company’s revenue comes from gold mining and the price of the metal is currently up 11% over the last year. In addition, the company is in the top five silver producers worldwide whilst its price has increased 62% in the same time period. Though the company’s shares can fluctuate on the price of precious metals, I believe the strong dividend still provides an adequate cushion to make it a solid investment. 

Ben Hargreaves does not own shares in Polymetal International.

Edward Sheldon: Calnex Solutions

My top micro-cap stock is Calnex Solutions (LSE: CLX). It’s an under-the-radar technology company that specialises in testing and measurement services for telecommunication networks.

Calnex is benefitting from the rollout of 5G networks and the widespread adoption of cloud computing. The company’s H1 results for the six months to 30 September 2020, for example, showed revenue growth of 37%. Meanwhile, the company recently advised that its revenue for FY2021 would be ahead of market expectations. It also said that it is well positioned to deliver its historical growth rates over the long term.

Like any micro-cap, this stock could be volatile. However, overall, the investment case looks attractive, in my view.

Edward Sheldon owns shares in Calnex Solutions.

Christopher Ruane: Foxtons

Estate agent Foxtons (LSE: FOXT) offers exposure to any rebound in the London property market.

The pandemic had an impact and revenue fell 12% last year. However, the pre-tax loss was sharply reduced from the prior year despite the difficult market. The company moved back into profitability in the second half of last year and says financial performance has continued to improve. Revenue in January and February was well ahead of the prior two years.

Its well-known brand is an asset in the crowded London market. I would consider buying Foxtons at its current price.

Christopher Ruane does not own shares in Foxtons.

Jonathan Smith: McBride 

McBride (LSE: MCB) is a UK-based manufacturing firm that offers private label services as well as producing some own-label products. This is mostly in the household cleaning area. 

The share price is up over 40% over the past year, thanks to increased demand from lockdown for many lines. Fiscal half-year operating profit (H2 of 2020) was up 83.6%, which impressed me.

Going forward, I think the business is well diversified with operations in 12 countries. It also appeals to ESG investors, given that 99% of packaging produced is recyclable.

Jonathan Smith has no position in McBride.

Royston Wild: Michelmersh Brick Holdings 

Continued strength in the UK housebuilding industry leads me to believe that Michelmersh Brick Holdings (LSE: MBH) will release encouraging trading news later this month. The AIM-quoted company is due to unveil full year results on Tuesday, March 30. 

Michelmersh certainly impressed when it last updated the market in November. Then it said that production capacity had returned to pre-coronavirus levels and that trading had remained “resilient” since June. Consequently it said that underlying revenue and profit would beat market estimates for 2020.

Today Michelmersh trades on a price-to-earnings growth (PEG) ratio of just 0.9 for 2021. This suggests that the company is being undervalued by market makers. And it’s a reading so low that I think another positive update in the coming days could prompt a sharp re-rating of the brickmaker’s shares.

Royston Wild does not own shares in Michelmersh Brick Holdings.

Conor Coyle: MacFarlane Group 

MacFarlane Group (LSE:MACF) is a micro-cap stock I think could be set for significant long-term growth. The company designs, manufactures and delivers packaging to businesses throughout the UK. Demand for packaging products has shot up as the number of online deliveries has increased due to the pandemic.

The Glasgow-based company is a well-established business and has continued to post strong profits despite economic uncertainty in the last year. I think its online retail profits will continue to grow, and with key customers in the aerospace industry bouncing back this year I see further growth ahead.

Conor Coyle does not own shares in MacFarlane Group.

Roland Head: UP Global Sourcing

One small-cap stock whose prospects excite me is UP Global Sourcing (LSE: UPGS).

This firm owns and licences a range of consumer goods brands, such as Russell Hobbs, Salter, Beldray and Constellation. Demand for kitchen, laundry and cleaning products has been strong during lockdown, with sales up 11% during the six months to 31 January.

There’s obviously a risk that demand could slow as the UK exits lockdown. But the firm recently upgraded its sales guidance for the year ahead, reporting “strong momentum” in new orders.

UPGS shares are up by 50% from their pre-pandemic levels. I believe they have further to go.

Roland Head owns shares of UP Global Sourcing.

Tom Rodgers: Alumasc

Sustainable building materials producer Alumasc (LSE:ALU) is one of my favourite kinds of stocks. The kind that no-one’s heard of until suddenly everyone’s heard of it.

Established in 1945, the AIM-listed firm’s shares are trading at a three-year high, and it will pay a hefty 5.4% dividend yield next year. It boasts a forward P/E ratio of just 7.8 and a forward PEG of 0.4, making it seriously undervalued in my book. The fact that the company’s £61.7m market cap is well below its annual £80.4m revenue does it no harm at all, either.

Tom Rodgers has no position in Alumasc.

Jabran Khan: Yourgene Health

Yourgene Health (LSE:YGEN) is a genetic testing firm that produces non-invasive products for male fertility and prenatal screening for cystic fibrosis and more. Yourgene joined the Covid-19 products market with a testing solution.

It has established a presence in the UK, Europe, the Middle East, Africa and Asia. YourGene relies on commercial partnerships with larger firms, which I see as a positive.

Trading in the past year has shown progression for the £117m market-cap business. FY results are due soon and are expected to be positive. At just 16p per share, Yourgene could be a micro-cap gem for the long term in my portfolio. 

Jabran Khan has no position in any of the shares mentioned.

Rupert Hargreaves: Belvoir Group

Property franchise group Belvoir (LSE: BLV) offers a range of services from lettings to sales and financial services.

Growth since 2014 has been outstanding. Net income has grown at a compound annual rate of 28%. And Belvoir is expecting to report revenue growth of 12% for 2020.

Despite its historical growth, Belvoir has its risks. If the UK property market should start to struggle, the firm’s income may begin to shrink. Still, I would buy this micro-cap stock considering its potential to grab market share over the next few years.

Rupert Hargreaves does not own shares in Belvoir.

G A Chester: Trans-Siberian Gold 

Trans-Siberian Gold (LSE: TSG) is a low-cost, high-grade producer from its Asacha mine in Far East Russia. It also has exploration and development assets in the region. 

Its strong balance sheet and cash generation enable it to invest for growth, and reward shareholders with dividends and share buybacks. It aims to pay a sustainable base dividend through the commodities cycle, and – as currently – higher payouts when cash flows permit. The running yield is near 8% right now. 

Operational risk is currently concentrated due to TSG’s single producing mine, but it does have ambitions to become a mid-tier, multi-asset gold producer. 

G A Chester has no position in Trans-Siberian Gold.

Andy Ross: Totally 

Shares in healthcare services provider Totally (LSE: TLY) have more or less trebled over the last 12 months. In my opinion, it’s a strong micro-cap business with long-term potential and room for more share price growth.  

I believe that the shares should continue to do well because the group has launched an insourcing business, has a strong relationship with the NHS and has made selective acquisitions that will boost earnings growth. It’s addressing a huge potential market across the UK & Ireland, and in time potentially further afield.  

The group is likely to become profitable shortly, has been growing revenues rapidly year-on-year and already pays a dividend, which is a bonus.  

Andy Ross does not own shares in Totally.

Nadia Yaqub: Scancell

I reckon things look promising for Scancell (LSE: SCLP). It’s an immuno-oncology company. That’s a fancy way of saying it develops treatments that stimulate the body’s own immune system to treat or prevent cancer. Some of Scancell’s products are being tested in clinical trials.

But I reckon the real gem is its second generation Covid-19 vaccine. According to Scancell, its version of the jab could develop long-term immunity to the virus and offer better protection against the variants. It’s still early days, but I think Scancell has bags of potential.

Nadia Yaqub does not own shares in Scancell.

Kevin Godbold: Ramsdens Holdings

Ramsdens Holdings (LSE: RFX) operates from around 157 stores in the UK, offering pawnbroking, financial, retail and foreign currency exchange services. It’s a decent business and the firm sports some impressive quality indicators. City analysts expect earnings to bounce-back by almost 60% in the trading year to September 2022.

With the share price near 172p, the forward-looking earnings multiple is just above 11. And the anticipated dividend yield is around 3.5%. I like the net cash position on the balance sheets and the positive outlook for growth in earnings. That’s why I’d buy this micro-cap stock to hold for March and beyond.

Kevin Godbold does not own shares in Ramsdens Holdings.

Kirsteen Mackay: Trans-Siberian Gold

My top micro-cap stock for March is Trans-Siberian Gold (LSE:TSG). I think gold stocks can help achieve a diversified portfolio. With low interest rates likely to stay low for some time, this provides a favourable environment for gold. And hints of inflation on the rise make me think gold remains a good hedge.

Trans-Siberian Gold operates in Russia and recently reported a significant upgrade to the resources at its flagship gold mine following a successful drilling campaign. Its market cap is £81m and it has a price-to-earnings ratio of 14. The company pays a 7% dividend yield. 

Kirsteen Mackay does not own shares in Trans-Siberian Gold.

Zaven Boyrazian: Tracsis

The UK government recently unveiled its roadmap to ease lockdown restrictions within the UK. As more people head back to the office or go on a long-overdue holiday, the demand for Tracsis’ (LSE:TRCS) services is rising.

Tracsis engages in traffic data analysis, along with railway fault detection systems. Using its software solutions, optimised routes for vehicles can be plotted within pedestrian-rich areas.

The business is far from risk-free. Covid-19 led to a significant rise in operational expenses, and there are numerous competitors to outperform.

But despite these threats, I think the stock is on track to continue delivering long-term growth for my portfolio.

Zaven Boyrazian does not own shares in Tracsis.

Manika Premsingh: McBride

The private label household and personal-care goods’ manufacturer McBride (LSE: MCB) has made share price gains since late 2020. However, its price is still way below its pre-pandemic levels.

I could see it staying there if McBride was Covid-19 hit. But the opposite is the case here.

It has actually seen a rise in revenues for the six months ending December 31, 2020 as the pandemic drove up cleaning products’ demand. It is also profitable and expected its full-year pre-tax profits to be 10% ahead of the consensus estimate at the time it made the statement.

McBride’s profits have fluctuated in past years and its debt is growing. But on balance, I am optimistic about its prospects, making it my top micro-cap stock for the near term.

Manika Premsingh has no position in McBride.

Paul Summers: Ramsdens Holdings

My top micro-cap pick for March is Ramsdens Holdings (LSE: RFX).

Investing in a pawnbroker may not be everyone’s cup of tea but Ramsdens is also a jewellery retailer, precious metals buyer/seller and foreign currency specialist. Although there can be no guarantees, the last of these might recover strongly once UK holidaymakers are allowed to travel again. In addition to this earnings diversity, the company’s finances look strong and it makes great returns on invested capital. 

Shares remain far below the highs hit in early 2020. With lockdown restrictions set to end, I think we might see this gap close over the rest of the year. 

Paul Summers owns shares in Ramsdens Holdings.

A growth share the could turn around

I think one such company is Driver Group (LSE: DRV). It combines a cheap valuation, decent return on capital employed (ROCE), and, before the pandemic, strong operating profit growth. It has also promoted a new chief executive internally. In other companies, this has sometimes helped lift sentiment towards a company as the strategy evolves.

Driver Group provides construction industry expertise, particularly around dispute resolution. Given a lot of countries will boost infrastructure spending post pandemic the pipeline of work could well grow.

I think the reason this company is cheap is because it hasn’t always performed brilliantly in the past. It went a few years without paying a dividend. I believe new management will want to make sure the future is brighter. To achieve this they have made some changes.  

The group has opened an office in New York and restructured the Middle East and the Asia Pacific operations to meet the changing business demands in those regions. Given how cheap the shares are on a price-to-earnings ratio of only around 11, I think the shares could help me towards a £1m ISA.

Potential for growth and strong fundamentals 

Shares in the pawnbroking business Ramsdens (LSE: RFX) also combine many of the same features as Driver Group – cheap (the P/E is six), high ROCE (around 21%), and strong operating profit growth. Pawnbrokers also haven’t closed down during the pandemic, as they are classed as essential.

This isn’t the kind of company that would get investors excited. It’s a declining industry and yet Ramsdens, alongside H&T (also a listed business), seem like overlooked investments because of this.

Looking at the fundamentals I think it’s a strong business. It’s profitable, pays a dividend, and there’s real demand for its services.

Also, as the industry shrinks, it’ll consolidate into fewer players, so Ramsdens can pick up market share. This all means it could end up being added to my portfolio at some point in the future.

A distributor boosted by e-commerce growth under lockdown 

Packaging and distribution group MacFarlane (LSE: MACF) is another business I like the look of. The Glasgow headquartered business is the largest distributor of protective packaging products and services in the UK. The business has been hit by Covid-19, but not that hard and I think is well positioned to recover. For example, in the six months to 30 June 2020, operating profit was £4,264,000 versus £4,873,000 in the corresponding period the year before.

Given the huge impact Covid-19 has had on many businesses, this doesn’t strike me as being too severe. I think MacFarlane is helped by serving growth markets like e-commerce.

The board is now restoring the dividend, which is a boost for investors. I have a lot of confidence in the business in the future. I’m likely to add it to my own portfolio.