Royston Wild: SSE

The possibility of more extreme stock market volatility would encourage me to buy FTSE 100 stock SSE (LSE: SSE) for April. Soaring inflation in the UK means that many consumers may have to trim their spending. But light and heat are two of the last things people will want to cut down on, meaning profits at companies like SSE should remain rock solid. Utilities shares like this could become popular lifeboats for investors as macroeconomic and geopolitical fears increase.

I think SSE’s essential operations make it a great investment for investors seeking healthy passive income streams like me, too. Dividend yields here sit at a bulky 5.2% and 5.4% for the financial years to March 2022 and 2023 respectively.

Royston Wild does not own shares in SSE.

Stuart Blair: National Express

It finally seems that National Express (LSE: NEX) is overcoming the worst of the pandemic. In fact, in 2021, the coach operator managed to report an underlying operating profit of £87m, in comparison to a £50m loss in 2020. At the same time, free cash flow became positive, reaching over £120m. While the dividend has not yet returned, this is expected next year.

Risks include the rising costs, due to soaring prices of oil and wage inflation. But National Express has fully hedged oil through 2022 and 2023, which reduces its current exposure to the high prices. I’ll continue to buy this FTSE 250 stock for my portfolio.

Stuart Blair owns shares in National Express.

Stephen Wright: Endeavour Mining

My top stock for April is Endeavour Mining (LSE:EDV). The company owns and operates gold mines in West Africa. I like this stock because I think that the underlying business has some really attractive qualities.

With mining companies, I look for an ability to extract its product cheaply. Endeavour has one of the lowest costs of operations of any gold miner. The last time I checked, Endeavour’s cost per ounce was around $873. With the price of gold currently at $1,915 per ounce, I think that Endeavour is in a strong position.

Stephen Wright does not own shares in Endeavour Mining.

Zaven Boyrazian: Domino’s Pizza Group

With the pandemic loosening its grip on the world, Domino’s Pizza Group (LSE:DOM) has resumed its traditional double-digit growth in gross pizza sales. And now that the long-standing dispute with franchisees has finally been resolved, the group is primed to boost its total sales to as high as £1.9bn!

What’s more, the digitalisation of operations has simultaneously improved customer experience, as well as profitability. This does make the group more susceptible to cyber-attacks. But with the engine seemingly firing on all cylinders, Domino’s looks like it could be an excellent addition to my portfolio.

Zaven Boyrazian does not own shares in Domino’s Pizza Group.

Rupert Hargreaves: Intercontinental Hotels

My top stock for April is Intercontinental Hotels (LSE: IHG).

This is one of the best companies to play the global reopening trade, in my opinion. Analysts expect the group’s earnings to jump 60% this year and 25% in 2023. Based on these projections, the stock is dealing at an undemanding forward price-to-earnings (P/E) multiple of 20.

Of course, this growth is far from guaranteed. The pandemic is not over yet, and there could be further disruption on the cards for the global economy. Rising prices may also hit the firm’s bottom line.

Despite these risks, I would buy the stock today.

Rupert Hargreaves does not own shares in Intercontinental Hotels.

Christopher Ruane: JD Sports Fashion

With a simple business model, strong brand and large potential market, I continue to like the look of JD Sports (LSE:JD). But the shares have lost around a third of their value so far in 2022 and are down 15% in the past year at the time of writing.

That fall partly reflects concerns of reduced consumer spending hurting revenues and profits. But I think it gives me a buying opportunity in a well-run company with global ambitions. Its brand and retail expertise help set it apart from rivals.

Christopher Ruane owns shares in JD Sports.

Roland Head: HSBC Holdings

I think Asia-focused banking giant HSBC Holdings (LSE: HSBA) could benefit from rising interest rates and the easing of pandemic restrictions over the coming months.

The FTSE 100 bank’s underlying profits returned to 2019 levels last year. I think the changes being pushed through by CEO Noel Quinn should help to support more focused and profitable performance in the future.

The risk of a global slowdown is a concern, as are reports of further lockdowns in China. But I think HSBC shares continue to offer good value, trading below book value with a dividend yield of 4.2%.

Roland Head does not own shares in HSBC Holdings.

Andrew Mackie: Glencore

My top stock for April is Glencore (LSE: GLEN). Having recently hit a 10-year high on the back of soaring base metal prices, analysts have been rushing to upgrade their outlook for this leading commodities producer and marketer.

In its full-year results, it declared a combined dividend and share buyback amounting to $0.30 a share. At today’s price, that equates to an impressive dividend yield of 4.7%.

As institutional investors continue to rotate out of growth and into value stocks, together with many of the 60+ commodities that it produces playing a critical role in the energy transition, I expect to see its share price continue to rise not only this month, but well into this decade too.

Andrew Mackie owns shares in Glencore.

Paul Summers: Polar Capital Holdings

The share price of investment manager Polar Capital Holdings (LSE: POLR) has tumbled in value in 2022 so far, partly due to investors’ sudden aversion to high-growth tech stocks. I’m tempted to begin loading up.

The valuation of 10 times forecast earnings is certainly attractive. Throw in a monster dividend yield of 7% for FY23 (at the time of writing) and a strong balance sheet, and I can think of worse places to leave my capital.

Although a swift rebound in the shares is far from guaranteed, this is one ‘value’ stock I’d be happy to own.

Paul Summers has no position in Polar Capital Holdings

Andrew Woods: Rio Tinto

My stock pick for April is Rio Tinto (LSE:RIO). This is a mining company specialising in iron ore, copper, and aluminium. It operates in Australia, Guinea, and Brazil.

During the 2021 calendar year, pre-tax profit nearly doubled to $30bn. The firm then paid a record dividend of $10.40 per share.

As commodity prices remain high due to global events, I fully expect this trend to continue, with demand outweighing supply.

What’s more, many metals and minerals mined by the company may be used in decarbonisation efforts, with copper being a central component in electric vehicles.

Andrew Woods has no position in any of the shares mentioned.

Alan Oscroft: Purplebricks

Why would I buy into an estate agent whose share price has crashed over the past 12 months? Well, at the interim stage, Purplebricks (LSE: PURP) revealed a disappointing operating loss. But it reported only a very small underlying EBITDA loss.

Oh, and company insiders have bought up nearly a million shares between them in the past couple of weeks.

It’s obviously risky buying into a property business while inflation is soaring and interest rate rises are pushing up mortgage costs. But Purplebricks’ year ends in April, and I’m cautiously optimistic for decent results.

Alan Oscroft has no position in Purplebricks.

One of best shares to buy now

SSE (LSE: SSE) is a value share that seems to combine income with steady future growth potential. A dividend yield of 5.2% is very healthy and well ahead of the average for the FTSE 100, which is 3.6%.

According to the SSE website, it has 4GW of onshore wind, offshore wind, and hydro. It’s currently very focused on the UK and Ireland, but the group says that it’s actively exploring opportunities to extend into new markets. If successful, that could boost growth and help the company keep paying a high level of dividends. 

Investors like companies that can upgrade earnings. In most cases, it leads to share price rises. In February, SSE told investors that it was upgrading its full-year 2021/22 adjusted earnings per share to at least 90p from at least 83p. 

Regarding the dividend, it is expected to be rebased, so it will fall. Nonetheless, that does not affect my perception of SSE as a good income share.

SSE does carry a lot of debt (£9bn at 31 March 2022), which as interest rates increase could put pressure on its profits and the dividend, even if it’s lowered.

The income from SSE is very healthy and currently well above the FTSE 100 average, but it does also offer growth because of its significant involvement in helping the UK reach net zero on emissions and the possibility of international expansion. I’m very tempted to buy SSE shares.

Well out of favour and with poor momentum

Polar Capital (LSE: POLR) is a share that is well out of favour with investors. The shares have very poor momentum, but possibly much better long-term potential. The recent share price slump does mean the shares now yield 7%. The share price fall also provides the opportunity for a recovery – perhaps later on this year once inflation becomes more normal and tech valuations reach a lower level.

To understand why Polar Capital may be poised for share price growth, it’s worth understanding why it’s currently falling. It’s primarily because it has a large tech fund. As tech shares fall, investors fear that fund will shrink with a knock on impact on Polar’s profitability and earnings per share. It seems though like a short-term issue.

Actually, Polar Capital has a very decent track record. It has been expanding organically and by acquisitions and is more than just a tech fund. It has funds across other areas, notably healthcare.

Valuation-wise it seems cheap. The P/E is nine and the EV to EBITDA, which contrasts a company’s enterprise value with its EBITDA, is five. For comparison, Liontrust Asset Management‘s figures are 15 and 10.5 respectively.

Polar Capital shares have poor momentum and sentiment has turned against them. There’s a very real risk the shares could fall further. However, the combination of a high and rising dividend yield, well covered by earnings (cover is about 1.5x), along with a low valuation, make me think it could be a top income and growth share. That’s why I’ll keep adding to my holding.

Why has the share price been falling?

The Polar Capital share price has had a torrid six months. Over that timeframe, the shares have fallen 35%, and over the last three months by 25%. Over the last 12 months, the share price is down about 14%. The shares peaked last summer, but since the trajectory has been downwards.

What’s been driving the falls most recently, I think, is the fact that Polar Capital has a big technology fund under management. With share prices falling, I’d imagine investors are concerned that this fund and its associated fees may shrink. That would possibly make Polar’s future growth lower than previously expected.

Yet a trading update in July last year was pretty positive so I don’t see a really good reason why the shares started falling. My best guess is a good run for the shares that potentially led to some profit-taking. This was coupled more recently with inflation and falling tech stock prices to add to the damage.

Is it a good long-term buy?

This all makes me think the situation is not going to last too long. Polar Capital could well be a good longer-term buy, given its high dividend yield and low valuation. Turning to the former, the dividend yield is now 7%, much higher than just a few months ago because the share price has dropped. And the shares trade on a P/E of nine. That’s low in itself but really low compared to a competitor like Liontrust, which trades on a P/E of 17.

Polar Capital has been acquisitive in recent years, diversifying its assets under management and growing. It has 25 funds that aren’t specifically related to technology. So there’s a lot more under the bonnet. The healthcare opportunities fund, for example, has assets under management of £1.4bn, although it should be said it’s one of the larger non-tech funds. Other funds have a lot of room to grow. 

It has historically had a strong run of revenue and profit growth, along with high margins. Combined, these potentially show it to be a high-quality business and probably not one that deserves to see its shares down 25% in just three months. To me, the sell-off looks overdone.

Polar Capital — a top UK share? 

Nonetheless, the Polar Capital share price could remain under pressure for a while if technology stocks also remain under pressure because of inflation and interest rate rises. Yet I believe the shares are good value and the business is much more than a technology fund. For these reasons, I’m going to keep adding to my holding. For me, the share price has become disconnected from the performance of the business. It appears to be a top UK share and I think it should do very well in the coming years. 

Let’s look at a couple, one of which reported to the market this morning.

Cheap dividend stock

I think self-styled “purpose-led global financial technology business“ IG Group (LSE: IGG) is a great way of tackling inflation. The online trading provider has actually been a core holding in my own Stock and Shares ISA for quite a while, partly due to the cash it keeps churning out. And based on today’s half-year results, I have no concerns about this trend continuing.

This morning, IG announced a record first-half performance. Net trading revenue increased 16% to £471.9m over the six months to the end of November. Pre-tax profit also rose 8% to £245.2m. That’s pretty impressive stuff considering that markets were fairly stable over the period (IG makes money when traders try to capitalise on volatility).

As encouraging as all this is, it’s the dividends I’m after. Today, the FTSE 250 member elected to keep its interim payout steady at 12.96p per share. Assuming the full-year cash return stays at 43.2p, that means IG yields 4.9% — eight times what the best Cash ISA will give me.

Will this be sufficient to beat inflation? I don’t know. But it’s definitely worth the extra risk that comes with investing, in my opinion. This is especially true given how much (or how little) buyers are being asked to pay to acquire this quality stock.

At yesterday’s close, IG shares traded at just 11 times earnings. While the threat of further industry regulation may go some way to explaining this valuation (and dividends are never guaranteed), I’d have no issue buying more. 

Another option

Of course, IG isn’t the only cheap dividend stock out there. Shares in Polar Capital Holdings (LSE: POLR) also grab my attention.

The fund manager’s price has tumbled 19% in 2022 to date as investors have become increasingly skittish. As far as I can see, it’s nothing to do with Polar itself.

To be frank, none of this should really bother me if I’m looking to generate passive income and/or beat inflation. Analysts believe Polar will return 42.4p to investors in the current financial year. At today’s share price, that becomes a monster yield of 6.6%. 

Too good to be true? Well, the recent volatility in markets will likely mean that the mid-cap’s next set of numbers may not impress. Asset managers typically don’t do very well when clients are clamouring to withdraw their cash. 

Still, the extent to which dividends will be covered by expected profits (1.4 times) looks reasonable. Polar is not one to slash its payout anyway. Based on its track record over recent years, the company is more likely to maintain rather than reduce cash returns when times get tough.

Also changing hands for 11 times earnings, I’d be happy to add Polar Capital to my ISA today.

A top UK share

Polar Capital Holdings (LSE: POLR), the boutique asset manager, is a company I’ve felt good about for a while. I’ve added the shares to my portfolio and am almost certain to buy more in 2022.

In the six months to 30 September, assets under management (AuM) — a key metric in analysing asset management companies — increased from £20.9bn to £23.4bn, a rise of 12% over the period. And then AuM have increased to £25bn as of 12 November.

Core operating profit (excluding performance fees, other income and exceptional items) was up 65% to £36.3m compared to the comparable half-year period.

When combined with opportunities to grow internationally, add new investment teams and funds to its roster and its already high margins, I think the future looks very bright for Polar Capital. The stock combines a dividend yield of 5% with the potential for the share price to grow dramatically.

Of course, there are risks. If its funds start to underperform then Polar Capital shares could suffer as investors pull out their money. Polar is also quite reliant on its tech fund, although it does have some diversification outside of tech too.

For me, the potential upside of the shares far outweighs the risks and I’m very likely to keep adding to my holding.

Jim Slater-style growth stock? 

UP Global Sourcing Holdings (LSE: UPGS) is a share that has no doubt been hit in recent months by concerns over shipping issues. This may carry on for a while into 2022, but at some point it should normalise. One of the best times to invest is when others are fearful, according to none other than Warren Buffett.

There’s a potentially attractive entry point now into the shares as they trade on a forward P/E of just 13. The price-to-earnings-growth ratio, on a forward basis, is just 0.5, making it potentially a Jim Slater ‘Zulu-style’ undervalued growth share, that is, a share with a PEG under 0.7. 

UP Global Sourcing has been growing revenue and profits at an impressive rate, even through the pandemic. With a market cap below £200m it has plenty of headroom to grow further.

The company is an owner, licensee, designer, developer and manager of a series of brands focused on the home. These brands include Salter and Russell Hobbs. The former was acquired in July 2021 for an initial cash consideration of £32m, with a further deferred consideration of £2m potentially to be paid over two years. Acquisitions are both a source of growth, but also pose a risk if they are poorly managed. 

Another risk is that shipping costs and inflation persist and this hampers its growth. That in turn would hit the shares.

But I think the risks are small and that this growing company could provide a very healthy return in 20202 and beyond. That’s why I’m very likely to buy the shares.

So what other options are there besides miners?

Polar Capital Holdings (LSE: POLR), the boutique asset manager is one AIM-listed company that I own that I think really fits the bill in that case.

The shares have a dividend yield of 4.75%. The payout is covered by earnings, and in my opinion, has the potential to grow further given the strong performance of the business. Assets under management continue to grow, so Polar Capital should likewise be able to grow.

Polar Capital shares trade on a price-to-earnings ratio (P/E) of 12, indicating the shares aren’t expensive. Compared to competitors such as Liontrust Asset Management, which has a P/E of 17 and Tatton Asset Management with its P/E of 26.5, the stock appears even better value.

There are a couple of things that could hit the share price though. Polar Capital’s biggest fund is technology-based. So any further weakness in that sector could hit its performance fees and see it lose clients. It also acquires other businesses, introducing the risk that it could pas too much for acquisitions or fail to integrate them properly into the group.

However, as an asset manager, its high margins, returns on capital and a lot of cash on the balance sheet (£194m) all make me confident in Polar Capital’s prospects.

Is Ferrexpo a great dividend stock?

I mentioned I added iron ore miner Ferrexpo share to my portfolio. This was partly because I think concerns over iron ore demand fading are overblown, but even more because the shares are yielding 6%.

Notwithstanding the cyclical nature of the mining industry, I think Ferrexpo is a dividend stock I’d potentially buy more of. The share price has fallen, making the shares even cheaper. They now trade on a P/E of 3.5, which is incredibly low. Outside of the mining sector, it’s hard to find P/E ratios as low as this.

When you add in that it’s a profitable, cash-generative, high-margin business there’s a lot to like, in my opinion.

Concerns over an economic slowdown in China have once again provided an opportunity to pick up the shares for far less than they were worth just a few months ago. That’s despite strong results from Ferrexpo. My belief is that over the coming years China will need vast amounts of steel to build, which is why iron ore will remain in demand.

The downside, and it’s potentially a big one, is that Ferrexpo’s facilities are in Ukraine. The country remains a politically sensitive area and still, in the eastern parts of the country, a war zone.

Overall though I think Ferrexpo has the potential to see its share price recover and provide a high dividend yield. 

Passive income…on the cheap

Online trading platform CMC Markets (LSE: CMCX) is a great example of just how fickle investor sentiment can be. Prior to the Covid-19 outbreak, its stock traded for pennies rather than pounds.

Following the huge increase in online trading over multiple UK lockdowns however, the very same shares were changing hands for as much as 559p a pop by April this year. Fast forward to today and the price has more than halved from this peak, as investors have rushed to bank gains following more “subdued” market activity over the summer.

Despite this rocky ride, I think CMCX could be a great choice for passive income-seeking investors. Right now, analysts are predicting the company will return 10.6p per share to owners in the current financial year (ending 31 March). Using today’s price, that’s a 4% yield. This should also be covered well over twice by expected profit, making the payout secure (at least for now).

CMC’s stock also looks inexpensive to pick up, with the company trading at just 11 times forecast earnings. Why is this company so cheap if it’s such good quality you may ask? I suspect a lot of it is due to CMC operating in an industry that’s susceptible to regular meddling from regulators. Larger peers trade on similarly low valuations. With its purple patch likely over, traders will also be looking for other opportunities to grow their capital at a faster clip.

Not that this would bother me if generating income were my primary goal. With its solid finances, I’d be happy to add CMCX to my passive portfolio today.

Chunky 5.4% yield

A second passive income candidate that’s looking cheap to me is fund manager Polar Capital Holdings (LSE: POLR). Its shares can currently be snapped up for less than 13 times expected earnings, and yield a chunky 5.4%. That’s despite the stock rising a little over 40% in value over the last 12 months as profits at the mid-cap company have surged.

Again, there’s are a few things worth bearing in mind. In contrast to the possibility that CMC will likely see more trading from clients as market volatility increases (as it has in September), POLR might see the complete opposite as investors reduce their equity exposure. This means the Polar Capital share price could get cheaper in the months ahead. It could also mean that dividends may not rise as quickly as they have in recent years.

As a Foolish investor, all this is nothing new. I know it’s near impossible to consistently predict the market’s next move. Rather than worry, it’s best to assume that no dividend stream is ever safe and diversify accordingly. That means spreading my money around a reasonable number of stocks from various sectors.

That said, I sincerely doubt POLR will stop paying out income soon, even if dividends aren’t covered quite as well by profit. Like CMCX, it also looks to be in robust financial shape with a substantial net cash position.

Today, I’ve picked out two lesser-known dividend champions that, in addition to handing out cash to shareholders, still look great value.

Great dividend stock

Online trading provider CMC Markets (LSE: CMCX) has had a superb last year or so with volatile markets bringing a lot of new clients to its services. Net operating income was 63% higher over the 12 months to the end of March to £409.8m. Pre-tax profit rocketed 127% to £224m.  

Despite this, the shares look cheap considering CMC’s consistently high margins and returns on capital. They currently change hands for just 13 times forecast earnings.

Naturally, there will come a time when markets settle. Indeed, CMC has noted that “client trading activity has moderated from prior elevated levels” since the start of its new financial year. This may bring out a few sellers. The shares have climbed almost 400% over the last two years, after all. 

Then again, the company’s rapidly growing stockbroking arm should help make up for this. A forecast 3.8% yield easily covered by profits also makes this a great dividend stock, in my opinion.

Despite the risk of ‘buying at the top’, I’d feel comfortable adding this stock to my own portfolio now.

Ice cool income

Shares in asset manager Polar Capital (LSE: POLR) also look great value considering the mix of potential growth and income on offer.

Right now, these can be bought for 14 times forecast earnings. That looks a good deal based on fundamentals and recent trading. At the start of the month, Polar reported a 49% jump in pre-tax profit to £75.9m over the year to the end of March. A record 71% rise in Assets under Management (AuM) to just under £21bn was also announced.

However, the PEG (price/earnings to growth) comes in at 1. According to the celebrated investor Jim Slater, anything around this level or lower suggests investors are getting a lot of bang for their buck.  

Obviously, there’s no sure thing. The POLR share price could quickly lose its momentum if global markets experience another big wobble and investors take flight. Whether this is the result of a Covid variant really taking hold or some ‘unknown unknown’, we can’t say. CMC might welcome more volatility. Polar Capital, less so.

Then again, the dividends should make up for any short-term pain. The shares currently yield 4.7%. So, like CMC, I’d be a buyer today.

Receive, reinvest, repeat

Cheap dividend stocks can be appealing for older investors who want to generate income. However, we know that feeding these payouts back into the market has the potential to really grow a person’s wealth, whatever their age.

One risk is that I might not stick to this approach. Spending dividends means missing out on the benefits that compounding brings over time. If this were the case, I’d give serious consideration to asking my broker to automatically reinvest on my behalf.

As last year showed, this income is never entirely secure either. The pandemic forced many firms to slash their payouts to shore up cash. As such, spreading my money around a few dividend stocks is something I wouldn’t hesitate to do. 

Here, I’ll explain why owning shares in asset management companies can deliver above-market returns. I’ll also discuss the current valuations of these three stocks and reveal which one I’d buy today.

Turbocharged performance

In theory, asset managers like Jupiter, Liontrust and Polar are geared plays on the stock market. This is because their revenues come from levying a charge on their assets under management (AUM). As stock markets tend to rise over the long term, the value of managers’ AUM should rise, increasing their revenues with no extra effort or costs. Furthermore, successful companies also earn performance fees and attract inflows of new money into their funds.

One of the risks for investors in asset managers is falling stock markets. At such times, the aforementioned turbochargers of their profits go into reverse. And inevitably their share prices too. For this reason, I think it’s particularly important to look for a good margin of safety in the valuations of asset managers.

How I value these financial stocks

A good while ago, I picked up a tip on valuing asset management companies from Nick Train (a.k.a. Britain’s Warren Buffett). Invest only when the stock is valued at less than 3% of AUM. Over the years, I’ve found this a useful rule of thumb.

I wrote about Jupiter, Liontrust and Polar (in separate articles) back in the summer of 2018. The table below draws together their valuations at the time.

As you can see, based on the 3% rule, Liontrust at 2.7% was the only one of the three stocks I considered buyable. Jupiter and Polar, at 4.4% and 4.9% respectively, were far too highly valued for me. Let’s fast-forward to today.

All change

Much has changed in the financials of the three stocks, as you can see in the table below.

The shares of Liontrust, my ‘buy’ stock of 2018, have risen 208% from 605p to 1,864p. This has been helped by the market rerating the stock from the ‘cheap’ 2.7% of AUM in 2018 to 3.4% today.

Polar’s shares have advanced a more modest 23% from 700p to 862p. Its gains were constrained by the market derating the stock from the ‘pricey’ 4.9% of AUM in 2018 to 3.8% today.

Finally, the Jupiter share price is down 37% over the three years from 453p to 286p. Again, its performance was negatively impacted by a market de-rating. In this instance, from a ‘pricey’ 4.4% of AUM in 2018 to just 2.7% now.

How I see these financial stocks today

Jupiter is the only stock currently valued at less than 3% of AUM. It’s on the same 2.7% rating as Liontrust was in 2018. As such, Jupiter looks very buyable to me today. Certainly there’s the aforementioned risk that AUM and the share price could drop significantly in a falling stock market. But hopefully, the low valuation mitigates that.

The valuations of the two highest-rated stocks today — Liontrust at 3.4% and Polar at 3.8% — are much less extreme than the two highest of 2018 (4.4% and 4.9%). If I owned Liontrust and Polar, I’d be inclined to hold at sub-4% of AUM.

A growth share with plenty of potential to outperform Marks & Spencer shares

In my view, one such share is Polar Capital Holdings (LSE: POLR). The boutique asset manager has a dividend yield of 4.8%, which is very solid for an AIM-listed company. It’s established and has a value approaching £700m, so this isn’t one of the AIM’s Wild West-style penny shares.

Many of its funds have been performing very well for investors, including the Polar Capital Technology Trust.

Growth is both organic and through acquisition. As part of its acquisitive growth strategy, Polar Capital bought Dalton Capital, the parent company of London-based boutique asset manager Dalton, for £15.6m in December. The latter has £1.24bn of assets under management and a strong European presence.

In its last annual report, the company stated it was keen to expand in the US and has bought financial companies over the Atlantic to help achieve this. Along with expansion in other regions like Asia and the Nordics I think there’s a lot more growth to come from Polar Capital Holdings.

An AIM share in a growth industry – gaming

Gaming group Frontier Developments (LSE: FDEV) is part of a red hot sector. Under lockdowns in 2020 shares in companies in the sector flew. Many are now expensive on traditional valuation measures like the price-to-earnings (P/E) ratio, but if they can post exceptional growth there may still be opportunities for the share prices to rise.

I might consider Frontier Developments as a future buy for my portfolio since I have confidence in the sector and am not averse to buying a highly rated stock. There’s little doubt it’s a very solid operator.

It has plenty of cash and a strong balance sheet. The games are very popular and of high quality, and include titles such as Zoo Tycoon and Disneyland Adventures.

With the global gaming market forecast to grow from $151.55bn in 2019 to $256.97bn by 2025.

I think investor optimism and interest in the sector will keep pushing share prices higher. The quality of Frontier Development’s games means I believe it’ll stay near the front of the pack. It’s such a good company that it may even get taken over. Codemasters, a rival game producer has recently been bought, so there’s precedent. 

I like both Polar Capital and Frontier Developments because they look to be high quality AIM growth shares. The former is particularly attractive because it’s valuation is lower and it pays a dividend. The latter is in a sector that is in fashion and could well remain so for some time. I expect both to massively outperform floundering Marks & Spencer shares.