[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Airtel Africa 

What it does: Airtel Africa provides telecommunications and mobile money services in 14 African countries. 

By Royston Wild. Airtel Africa’s (LSE: AAF) share price has slumped in recent weeks. I’d use this as an opportunity to buy a top growth stock at a discount. 

Today the telecoms business trades on a forward price-to-earnings (P/E) ratio of 6.5 times. This is far below what, say, FTSE 100 rival Vodafone trades on (the earnings multiple here sits at 10.8 times).

City analysts think Airtel’s annual earnings will rise 12% in this financial year. They are tipped to increase 11% next year, too. 

I’d buy the business to capitalise on soaring demand for telecoms and financial services products in Africa. It is the second-largest telecoms provider on the continent, and has been growing revenues and earnings by double-digit percentages for the past 17 quarters. 

Product penetration across Airtel’s portfolio remains quite low. Meanwhile, personal wealth levels in its markets are increasing sharply. I think this perfect blend should deliver excellent long-term earnings growth at the company. 

Royston Wild does not own shares in Airtel Africa. 

Somero Enterprises

What it does: Somero Enterprises designs and sells concrete levelling equipment used by construction companies worldwide.

By Zaven Boyrazian. Somero Enterprises (LSE:SOM) is a designer and manufacturer of laser-guided concrete-laying screed machines. It’s hardly the most exciting business out there, but it plays a pivotal role in the US construction industry.

With the American congress recently passing a $1trn infrastructure investment bill, management has had little trouble finding customers for its products. So, it’s hardly surprising that the group recently hit record revenues.

Despite this, Somero shares have tumbled more than 20% over the last 12 months. It seems investors are getting increasingly agitated about supply chain disruptions, which are having a significant impact on its non-US operations.

However, while frustrating, this is ultimately a short-term problem. And seeing a solid high-growth company trading at a P/E ratio of 7.3 looks too cheap in my eyes. That’s why I’m tempted to bolster my existing position by buying more at today’s stock price.

Zaven Boyrazian owns shares in Somero Enterprises.

Chemring Group

What it does: Chemring Group designs, develops, and manufactures advanced technologies for the defence industry.

By Charlie Carman. China’s rise and the Russo-Ukrainian war have boosted demand for products developed by Chemring Group (LSE: CHG). Defence budgets are expected to increase across its four home markets: the UK, the US, Norway, and Australia.

The group’s order book reached £678m in September, covering expected full-year 2022 revenues. New contracts with NATO members for the company’s countermeasures and energetics business indicate a robust manufacturing pipeline for 2023 and beyond.

Chemring’s other main arm focused on sensors and information also looks healthy. In H1 2022, this division generated 21% revenue growth and a 27% hike in operating profit.

Granted, net debt is currently £18.5m, which could limit future growth prospects. However, a 52% reduction in this figure since H1 2021 shows a positive trajectory.

In my view, significant barriers to entry in the sector contribute to the defence stock’s long-term potential, provided it remains at the forefront of developing state-of-the-art technologies.

Charlie Carman does not own shares in Chemring Group. 

Darktrace

What it does: Darktrace is a cybersecurity company, and uses AI to develop autonomous detection of cyber threats.

By Alan Oscroft. A couple of brokers have price targets on Darktrace (LSE: DARK) of around twice the current share price. I’d never buy the stock based on that, but it’s inspired me to re-examine the company.

The shares got a little overheated last year, but then crashed after some negative reports. Over 12 months, Darktrace shares have now lost around 60% of their value.

Darktrace recently reported a 46% rise in full-year revenue, with a small net profit of $1.5m. It also confirmed 2023 guidance for a 31-34% increase in annual recurring revenue. Predicted adjusted EBITDA margin is in the 15-18% range.

The company has since reported a 29% year-on-year increase in net new customers in its first quarter, reiterating its full-year guidance.

We’re looking at a forecast P/E multiple of 130 as far out as 2024. So there’s definitely valuation risk there. But I think it could be the start of sustainable growth.

Alan Oscroft does not own Darktrace shares.

Marks and Spencer

What it does: M&S is one of the UK’s biggest retailers. It specialises in selling clothing, beauty, home products, and food products. 

By John Choong. Marks and Spencer (LSE: MKS) shares are currently trading at a P/E ratio of 7. Despite the grocery industry being known for its low margins, I think M&S could be an exception and be an excellent growth stock for the long term.

It’s no secret that Marks and Spencer’s products are priced on the higher side. Therefore, it may seem contradictive to buy its stock when consumers are ‘down trading’. However, I believe that the retailer’s target market (middle and upper class) isn’t necessarily trading down in groceries. Instead, they’re trading down in eating out, and choosing to seek value in purchasing M&S’ great-tasting packaged meals. After all, Tesco indicated this trend in consumer behaviour.

With the grocer’s latest cost-savings plan and exciting lines of clothing to be launched, I think the company’s top and bottom lines should benefit over the long term as it continues to fulfil its growth plans. As such, I think M&S shares have the potential to head higher from their current levels.

John Choong has positions in Marks and Spencer.

Safestore

What it does: Safestore is a leading supplier of self-storage services in the UK and continental Europe

By Christopher Ruane. The Safestore (LSE: SAFE) share price over the past year might not suggest a compelling growth story. The shares are down 25% in 12 months.

But I think that offers an attractive buying opportunity for me to increase my stake and would consider doing so if I had spare money to invest.

In the most recent quarter, revenue grew 15% compared to the same period last year. That is part of a pattern of long-term growth I expect to continue. Self-storage continues to see growing demand in the UK. Safestore’s well-established brand can help it benefit from that. The company is developing a pipeline of new properties equivalent to around 14% of its current floor space.

A worsening economy could lead some tenants to try and cut their costs by reducing storage space. That might hurt profits. But I am upbeat about the company’s prospects and see strong growth opportunities ahead.

Christopher Ruane owns shares in Safestore.

Rightmove

What it does: Rightmove is the UK’s most popular property portal, providing advertising services to new home developers and estate agents.

By Paul Summers: Shares in property site Rightmove (LSE: RMV) have tumbled nearly 40% in 2022 as investors have become increasingly skittish over the impact of higher interest rates on the UK housing market. I regard this as an opportunity.

At face value, a P/E ratio of 21 doesn’t seem like a bargain. However, it’s far less than the five-year average of 32. This presents as an even better deal when Rightmove’s massive market share, healthy financial position, and staggeringly high margins are taken into account. 

A recovery won’t happen overnight and things could easily get worse for the stock depending on what the Bank of England decides to do about rates in early November. But it does feel like a lot of fear is already priced in.

And let’s not forget that Rightmove makes money even if the properties it lists fail to attract buyers or renters.

Paul Summers has no position in Rightmove.

Rightmove

What it does: Rightmove makes money by listing estate agents on its website and selling additional advertising products.

By Stephen Wright. My Best British growth stock to buy in November is Rightmove (LSE:RMV). I think that now could be a terrific time to add to my investment in this stock.

Right now, the UK property market is under pressure. Rising interest rates have been making mortgages more expensive and slowing down the demand for housing. 

As a result, shares in Rightmove have fallen by around 37% since the start of the year. But I’m seeing this as an opportunity. 

The company has a dominant position in an industry that typically has high margins and it generates significant amounts of cash. There might be some turbulence in the near future, but I think that the business will do well as the economy recovers.

Furthermore, the company has been buying back its own stock over the last few months. To me, this indicates that management also sees the stock as undervalued.

Stephen Wright owns shares in Rightmove.

Diageo

What it does: Diageo is a global leader in alcoholic beverages with products sold in more than 180 countries.

By Ben McPoland. Diageo (LSE: DGE) has been firing on all cylinders for many years. The British drinks giant has a portfolio of over 200 brands, including Guinness, Johnnie Walker and Baileys.

The share price is down this year, though, with the looming possibility of a global recession. Consumers, however, don’t tend to give up their favourite tipple, even during economic downturns. They are unlikely to switch from something like Johnnie Walker (the world’s most popular Scotch whisky) to a cheaper alternative. People basically put these drinks into the “affordable luxury” category.

This consumer loyalty to Diageo’s brands gives it a powerful competitive edge. And, due to its wide global presence, the company stands to benefit as disposable incomes rise in regions like Asia and Latin America.

The shares trade at a P/E ratio of 24, which isn’t particularly cheap. But I think the premium price is warranted for Diageo.

Ben McPoland owns shares of Diageo. 

Down 27% this year, I think the London Stock Exchange’s second-tier index is now packed with brilliant value stocks. Here are two dirt-cheap shares on my shopping list today.

Begbies Traynor Group

I’m surprised to see the Begbies Traynor Group (LSE: BEG) share price trekking lower again. This is a UK share which stands to gain from the spluttering UK economy.

Begbies Traynor is an expert advisor when it comes personal and corporate insolvency. It also provides services in other fields including restructuring, capital management, and corporate finance.

In other words, when businesses start to struggle, this one comes alive. Last month it advised that it had made “a good start” to the financial year ending April 2022 “with encouraging activity levels” across the company.

Latest data from the Office for National Statistics suggest the FTSE 250 firm will get a heck of a lot busier in the months to come too.

Due to surging energy costs, total company insolvencies hit 5,629 in the second quarter. This was the highest level since 2009 when Britain’s economy was suffering from the shockwaves of the global economic crisis.

Begbies Traynor operates in a highly competitive industry. But the company’s long history of unbroken double-digit earnings growth — helped in part by frequent acquisitions — shows how effective it’s been in neutralising this threat.

City analysts expect annual earnings to grow another 9% this year too. That leaves it trading on an undemanding forward price-to-earnings (P/E) ratio of 13.2 times.

Safestore Holdings

Property stocks like Safestore Holdings (LSE: SAFE) have been smacked by the flight from UK assets during the last week. I consider this to be a great opportunity to grab a bargain.

Okay, falling consumer spending power presents a threat to self-storage businesses. So do rocketing interest rates as they weigh on the housing market. Home movers account for a significant chunk of revenues for the likes of Safestore.

But it’s my opinion that these dangers are baked into the FTSE 250 firm’s low valuation. City brokers think earnings will jump 40% in this financial year (to October). This results in a forward price-to-earnings growth (PEG) ratio of just 0.4. A reminder that any reading below 1 suggests a stock is undervalued.

As a potential investor, I’m highly reassured by Safestore’s latest trading update. In September, it said that like-for-like revenues were up 9.5% in the three months to July, with like-for-like enquiries in August “at record levels”.

Analysts think the UK self-storage market will grow at an annualised rate of 7.5% between now and 2027. This will give Safestore a terrific opportunity to supercharge its profits.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Safestore Holdings

What it does: Safestore is a leading self-storage provider operating throughout the UK and Europe via a network of 179 locations.

By Zaven Boyrazian. Safestore Holdings (LSE:SAFE) is the UK’s largest provider of self-storage solutions, with 179 facilities around the UK and Europe. In total, the group has just over 7.6 million square feet of leasing space at an 84.3% occupancy rate as of July 2022.

While self-storage is hardly the most exciting sector, it provides a critical service that’s growing in demand and generally resilient to economic shifts.

So far this year, Safestore’s revenue has grown by a solid 15.6% overall and 12.8% on a like-for-like basis. Management has also been exercising a bit of pricing power to bolster its average storage rate by 9.1% to £28.59 per square foot. And with only a handful of fixed operating costs, net profit margins stand at an impressive 42.7%

Despite delivering consistently impressive results, shares currently trade at a dirt-cheap P/E ratio of just 3.9. Pairing this with a 3.1% dividend yield makes me believe a bargain income opportunity has emerged for my stocks and shares portfolio.

Zaven Boyrazian does not own shares in Safestore Holdings.

NatWest

What it does: NatWest is a banking firm based in the UK. It specialises in a number of products, including personal and commercial banking.

By Andrew Woods. For 2021, NatWest (LSE:NWG) paid a dividend of 10.5p per share. At the time of writing, this payment equates to a dividend yield of around 4.66%. Although that’s not the largest yield on the market, I still consider it to be solid.

The company has been benefiting from a trend of rising interest rates. Rates have risen to 2.25% in the UK and may well climb higher as central banks seek to bring inflation under control.

Higher rates basically mean that banks can charge more for borrowing services. However, since they make loans and mortgages more expensive, some customers may be put off taking on more debt amid the cost-of-living crisis.

Regardless, the firm posted an operating pre-tax profit of £2.6bn for the six months to 30 June. This was up from £2.3bn for the same period in 2021. For now, at least, the bank appears to be in a strong position and my income favourite at the moment.

Andrew Woods has no position in NatWest.

Endeavour Mining

What it does: The company owns and operates gold mines across Africa. It makes money by selling the gold it extracts.

By Stephen Wright. Shares in Endeavour Mining (LSE:EDV) just hit a price that I find it impossible to ignore them at. That’s why they’re my top British income stock for October.

As a gold mining company, Endeavour’s profitability is tied closely to the price of gold. The higher the gold price, the more money the business makes.

Recently, the price of gold has been coming down, falling from $1,756 per ounce to $1,643 per ounce. And the stock I’m looking at has fallen from £18.09 per share to £15.83.

To me, this looks like a good opportunity to buy shares. Over time, I expect the price of gold to increase and I expect all gold mining companies to benefit.

The reason for focusing on Endeavour specifically, though, is that it has lower costs than its competitors. This gives it an advantage that I think is extremely difficult to replicate.

Stephen Wright does not own shares in Endeavour Mining.

United Utilities Group 

What it does: United Utilities supplies water and wastewater services to 7m households in the North West of England.

By Royston Wild. I think buying classic defensive shares could be a good idea as stock market volatility picks up. One I’m thinking of snapping up in October is United Utilities Group (LSE: UU). 

The outlook for the UK economy is plagued with danger as inflation soars and interest rates rocket. But our essential need for water means that revenues at suppliers like this remain rock-solid.

As a consequence, businesses like United Utilities have the financial clout and the confidence to raise dividends at all times. Indeed, for the years to March 2023 and 2024 City analysts are expecting total payouts of 45.57p and 49.42p per share respectively. 

These are up from last year’s full dividend of 43.5p per share. And they provide healthy yields of 4% and 4.4%.  

I also like United Utilities because a lack of industry competition provides revenues with additional security. Though bear in mind that changes to water UK regulations could have an impact on future earnings.

Royston Wild does not own shares in United Utilities. 

Glencore

What it does: Glencore is the world’s largest commodity trader, known for trading metals that include the likes of zinc, copper, lead, and nickel.

By John Choong. Bucking the trend of the FTSE 100, Glencore (LSE: GLEN) has outperformed the wider index by more than 20%, at the time of writing. Pair that with a decent dividend yield of just under 5%, and the commodity giant certainly looks like a lucrative income stock to buy for my portfolio.

In its latest half-year results, Glencore smashed it out of the park by posting top line and bottom line growth of 43% and 820% respectively. While the outlook for metals is a rather uncertain one given the economic conditions surrounding a global recession, management believes that the reopening of China in the second half of the year could boost its income stream, and dividend as a result, while helping to hedge against declining metal prices.

Nevertheless, it’s worth noting that the miner’s dividend isn’t well covered by current earnings and cash on its balance sheet. So any substantial decline in metal prices and overall demand could significantly hamper the dividend payout. 

John Choong has no position in Glencore.

Smith & Nephew

What it does: Smith & Nephew is a medical technology company that specialises in hip and knee implants and advanced wound management.

By Edward Sheldon, CFA. Smith & Nephew (LSE: SN) shares have fallen in recent months due to challenges associated with supply chains, inflation, and China, and I think the share price fall has created an attractive buying opportunity for long-term investors like myself.

In the near term, the challenges I’ve mentioned above could persist. However, eventually, I expect them to moderate as the world returns to normal after the pandemic. And when they do, sentiment towards the healthcare stock should improve. It’s worth noting that, in many countries, there are large backlogs for joint replacement surgery.

Meanwhile, the long-term growth story here remains attractive. By 2030, one in six people globally will be 60 or over. This is likely to create strong demand for joint replacements.

With the stock currently sporting a P/E ratio that is not much higher than the average FTSE 100 P/E, and offering a dividend yield of about 3%, I think it’s a good time to be buying here.

Edward Sheldon owns shares in Smith & Nephew.

BAE Systems

What it does: BAE Systems is a defense, aerospace and security company.

By Paul Summers. Finding a high-yielding income stock isn’t hard right now. Then again, I think it still pays to be cautious. With a recession already here/on the way, many companies may reduce their cash returns or cut them completely. That’s why my pick is BAE Systems (LSE: BA).

Prompted by the invasion of Ukraine, its shares have been in fine form in 2022. This has reduced the yield to a pretty pedestrian 3.2%. Even so, payouts are likely to be covered twice by expected profit. This arguably makes the £25bn cap a relatively safe play for income hunters.  

At almost 16 times earnings, the shares trade at a premium to their five-year average. Hence, there might be some profit-taking on the horizon. However, I think this is a risk worth taking. BAE boasts a superb record when it comes to consistently increasing its annual payouts. 

Paul Summers has no position in BAE Systems

Self-storage and warehousing

Safestore is a self-storage business that provides units to consumers and companies for warehousing purposes. In fact, it is the largest operator of its kind in the UK, and has an international presence with sites in France, the Netherlands, and Spain.

At current levels, Safestore shares are trading for 919p. They are down 14% over a 12-month period as they were trading for 1,078p at this time last year.

Due to the explosion of e-commerce, which requires lots of warehousing space, as well as a burgeoning housing market, storage and warehousing businesses have done well in recent times. This trend is expected to continue, according to Statista.com, which is why I am considering Safestore as a major player and a potential growth stock.

Challenges ahead

One challenge that could have a detrimental impact on Safestore shares is the saturated market it operates in. Lots of firms are vying to leverage heightened demand for storage solutions into profit and growth. Furthermore, there are low barriers of entry into the storage market which could invite other players that may be able to eventually undercut and overtake Safestore and others.

I also noticed that Safestore experienced a lot of success in recent years due to the pandemic, as well as the growing housing market. This led to increased demand. The current economic outlook and the cost-of-living crisis could result in weaker demand in the shorter term. This could hurt investor sentiment, not to mention performance and returns.

The bull case and my verdict

So let’s take a look at some positive aspects of Safestore shares. I’ll start with its performance track record. I am aware that past performance is not a guarantee of the future. However, looking back, I can see that it has grown revenue and gross profit for the past four years in a row. With demand for storage space set to continue growing, it could continue this trend too.

Next, Safestore shares would boost my passive income stream through dividend payments. The current dividend yield on offer is 2.7%. This is higher than the FTSE 250 average of 1.9%. I am aware that dividends can be cancelled at any time, however.

Finally, the shares look dirt-cheap right now on a price-to-earnings of just over four. This tells me that if performance and returns were to increase, the share price could follow suit.

In conclusion, favourable market conditions, the belief that demand for self-storage is only set to increase, as well as the passive income opportunity help me make my decision. I would be willing to buy Safestore shares for my holdings.

I like property stocks because they can raise rents to offset the impact of soaring inflation. This can give them added strength to pay dividends in tough times like these.

And I like REITs in particular for rich income streams. This is because they have to pay 90% of annual profits out by way of dividends.

Here are two top REITs I think will deliver a healthy second income for many years.

Safe as houses

The PRS REIT (LSE: PRSR) invests in residential rental accommodation. More specifically, it’s dedicated to providing family homes across the UK. This is a part of the market where rent growth is particularly strong.

There simply aren’t enough rental homes to go around. It’s why landlord services provider HomeLet reports that the average rent for all properties soared to new record highs of £1,143 per month in August.

This was up 1.4% from the previous month and a staggering 8.5% from August last year.

The PRS REIT latest financials illustrated this acceleration in rental income. Like-for-like rents on stabilised sites were up 5.1% in the 12 months to June, it said. Rents rose by a more modest 4.8% in the year to March.

It’s my belief that the market’s supply-and-demand imbalance will get worse before it gets better. And so rents should keep shooting higher. Housebuilding activity in the UK remains weak. Meanwhile, the exodus of buy-to-let investors is increasing as landlord costs stomp higher.

An ultra-competitive mortgage industry is a threat to this REIT. This, along with government support for first-time buyers, is helping people to leave the rental sector. But all things considered, I think the trading landscape remains highly favourable.

The PRS REIT carries a 4.1% dividend yield for the current financial year (to June 2023).

Another top-class REIT

A strong housing market bodes well for self-storage companies like Safestore Holdings (LSE: SAFE). Movers can need extra storage for several reasons, from needing to de-clutter before switching houses to keeping things in boxes whilst they decorate.

According to Cushman and Wakefield, average rental rates have risen 9% over the past year. They now sit at record highs of £29.13 per square foot.

Like the PRS REIT, Safestore is operating in a market where supply is failing to keep up with demand. That real estate report showed that 2,050 self-storage facilities are in existence today, up just 2.65% year on year.

This is why Safestore’s latest financials showed revenues and underlying earnings up 14.6% and 19.9% respectively between November and April.

Now Safestore doesn’t have the biggest dividend yield out there. This sits at 2.7% for the financial year to October 2022.

However, I think this REIT is a great bet for those seeking spectacular income growth. The annual payout here has leapt 115% during the past six years. I’d buy the business even though falling consumer confidence poses a near-term risk.

However, rarely do we think about shareholder perks offered by firms. Some companies reward you for buying into their stock by offering tasty discounts.

A recession-proof stock offering 25% off your storage needs

For example, Safestore (LSE:SAFE) is the UK’s largest and Europe’s second largest provider of self-storage space. Safestore has been a pandemic winner, seeing net income soar from £178m in 2020 to £382m in 2021.

The stock looks cheap to me with a price-to-earnings (P/E) ratio of just 5.

In the self-storage industry, it is said there are “four Ds” that benefit the sector: death, divorce, disaster and downsizing. For that reason, I think Safestore is a good risk-off addition to my portfolio.

As well as offering a dividend yield of 2.4%, Safestore provides those holding at least 100 shares (worth £1,113 at current market prices) a 25% discount off their services.

Supposing you wanted to rent out 10 square feet of space (about the size of a car boot) for a year, that would cost around £240. The 25% discount would, therefore, be worth £60. That is the equivalent of a 5% yield on the shares.

Having said that, as consumer budgets tighten, self-storage might start to look like an easy luxury to scrap. Why pay to house your surplus items when you could bin or sell them?

A high-street favourite helping investors look their best

Next (LSE:NXT)’s share price has been on a steep downward trend this year, losing 28% of its value since 1 January. It is now trading at a P/E ratio of 11, far below that of some of its closest FTSE 100 competitors. JD Sports has a P/E of 15.8, and Burberry trades at a P/E of 17.8.

In addition, the retailer offers investors a 25% discount off purchases of any size once a year, as long as they hold at least 100 shares.

However, those 100 shares have a hefty market price of £5,818 at the time of writing.

Even if I did all my autumn and winter shopping at once, I would only spend around £500, which would leave me with savings of just £125. That would only equate to a 2% return on the shares, and I would have to wear almost exclusively Next produce just to achieve that.

And with a moderate dividend yield of 2.2%, below the FTSE 100 average of 3.7%, I will have to say “next” to the prospect of investing in Next shares, especially as consumer sentiment looks set to continue souring.

Investing in what you know…

Legendary investor Peter Lynch coined the maxim “invest in what you know”. That means using your own experience as a consumer to sniff out companies that are doing a good job.

And given that some companies offer shareholder discounts, I think it makes even more sense to invest in companies that I shop with.

However, I also have to take into account the companies’ fundamentals and the generosity of the perks they offer before taking the plunge with my hard-earned capital.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

FRP Advisory 

What it does: FRP helps businesses in economic trouble by providing advice on restructuring, debt and pensions.

By Royston Wild. Finding solid growth stocks to buy is becoming increasing challenging for UK investors. Inflation is soaring and economic growth is stalling, putting corporate profit forecasts under increasing strain. 

But FRP Advisory Group (LSE: FRP) is a stock that’s set to benefit from these deteriorating conditions. The business provides a range of advisory services to companies in financial distress, the number of which is soaring in Britain. Higher interest rates mean that businesses are struggling to pay their debts.

According to tax, audit and advisory firm Mazars Accountants, the number of corporate insolvencies has rocketed 70% over the past year, to 19,191. Unfortunately it has warned, too, that “the dismal outlook means more pain for businesses is likely.” 

FRP’s share price has slumped more recently. This is because of rising costs that caused profits to fall in its latest financial year (to April 2022). 

I consider this to be a great dip buying opportunity and expect FRP’s shares to bounce back as trading activity gathers momentum. Revenues at FRP leapt 21% year-on-year in fiscal 2022, and rose 11% on an organic basis. 

Royston Wild does not own shares in FRP Advisory. 

Kainos

What it does: Kainos is a technology company that helps public and private organisations with digital transformation.

By Edward Sheldon, CFA. Kainos (LSE: KNOS) shares have experienced a significant pullback this year as growth shares have fallen out of favour and I think this has created a compelling investment opportunity.

Kainos is benefitting as companies and government organisations embrace technology and this is reflected in the group’s financial performance. Last financial year (ended 31 March 2022), revenue was up 29%. Meanwhile, at the end of the period, the group’s contracted backlog was £260m – up 26% year on year.

Looking ahead, I’m confident that Kainos will continue to grow at a healthy rate. That’s because digital transformation can help organisations lower costs and beat inflation. It’s worth noting that CEO Brendan Mooney recently said that demand for the company’s services has “never been higher”.

Now, this growth stock isn’t cheap. Currently, its P/E ratio is in the high 20s. This adds risk to the investment case. However, I believe that long-term investors in the company, like myself, will be rewarded over time.

Edward Sheldon owns shares in Kainos

dotDigital

What it does: dotDigital is a SaaS company providing an omnichannel marketing automation and customer engagement platform.

By Zaven Boyrazian. The technology sector hasn’t had much love in 2022. Yet, despite the volatility, there remain plenty of attractive opportunities for my portfolio. One that’s caught my attention at the moment is dotDigital (LSE:DOTD).

With the tailwinds from the pandemic slowing down, top-line growth followed suit, upsetting quite a few momentum investors. Yet even without these catalysts, revenue continues to expand at a respectable rate. Meanwhile, its latest trading update showed a 16.8% jump in average revenue per customer.

In other words, clients are spending more money on the firm’s marketing platform. And even with an uncertain economic outlook, marketing email volumes are up 22% to 29.4 billion versus a year ago. This all bodes well for the company, especially given its fierce competition from alternative platforms.

Pairing this with a seemingly cheap valuation makes dotDigital look like an excellent growth addition to my portfolio this month.

Zaven Boyrazian owns shares in dotDigital.

Domino’s Pizza

What it does: Domino’s is a UK-based pizza delivery company and FTSE 250 constituent.

By Paul Summers: At the time of writing, shares in Domino’s Pizza (LSE: DOM) are down by over a third in 2022. That’s not entirely surprising. The squeeze on discretionary income was never likely to be good news for the firm. 

For a long-term growth investor like me, however, this is looking like an opportunity to acquire the stock at a cheaper-than-usual valuation. A forecast price-to-earnings (P/E) ratio of 14 for the current year is below the 5-year average of 16. There’s also a 3.5% dividend yield to reinvest while I wait.

I’m not expecting a rip-roaring recovery in earnings over the next year or so. Nonetheless, decent interim numbers at the beginning of August coupled with encouraging news on the search for a new CEO could herald a change in market sentiment.

Paul Summers does not own shares in Domino’s Pizza.

Safestore

What it does: Safestore is a leading provider of self-storage facilities in the UK and Continental Europe

By Christopher Ruane. I continue to see value in Safestore (LSE: SAFE). Its shares are down 20% since April, although they are still 7% ahead of where they were this time last year.

In the first half, revenue grew 15% compared to the same period last year, diluted earnings were up 67%, operating cash inflows grew 25% and the dividend also grew 25%.

That is excellent growth – and I expect more of the same in future. Self-storage remains a fairly undeveloped industry in the UK compared to the US, for example. I see lots of space for growth. Safestore’s strong brand and proven operating model could help it capitalise on that. One risk I see is competitors trying to woo customers with low prices, pushing down profit margins across the industry.

But I think Safestore has a great, simple formula in a market with strong long-term growth prospects.

Christopher Ruane owns shares in Safestore.

CMC Markets

What it does: CMC Markets specialises in online trading, providing exposure to a range of different asset classes. It has a global presence.

By Andrew Woods. A glance at the historical earnings data for CMC Markets (LSE:CMCX) immediately indicates rapid growth over the past five years. For the year ended March, between 2018 and 2022, earnings per share (EPS) rose from 17.3p to 24.8p.

By my calculations, this results in a compound annual EPS growth rate of 7.5%. For me, I find this attractive in a growth stock. Over that time period, revenue also grew from £209m to £325m.

It’s quite clear that the firm benefited from increased trading activity during the pandemic. As customers enjoyed greater disposable income and had more time to devote to investing, the business saw its profit surge. What’s more, greater volatility in the stock market enabled the firm to derive more income from price spreads.

However, revenue fell by around £100m between 2021 and 2022, suggesting that customer interest and activity may have declined following the pandemic. Nevertheless, revenue and pre-tax profit are still higher than pre-pandemic figures.  

Andrew Woods has no position in CMC Markets.

Here are three top picks I’d be happy to invest in right now.

Primary Health Properties

There are few more defensive parts of the market than healthcare. That’s why my first pick comes from this sector.

Primary Health Properties (LSE: PHP) is a real estate investment trust that owns 523 sites in the UK. The majority of these are GP surgeries which it lets out on long leases.

A price-to-earnings (P/E) ratio of 22 as I type looks expensive but I think reflects just how predictable earnings should be here. No less than 90% of the rent roll is paid by government bodies. If they don’t pay up then we really are in a sticky spot.

As mentioned, REITs can be a solid option for income seekers. By law, 90% of the tax-exempt profit from a REIT must be distributed to shareholders. Here, the forecast dividend yield is an attractive 4.6%.

This is not to say there aren’t risks. The rise in virtual healthcare options, whereby patients can receive advice and support from a distance, could begin to impact demand for bricks and mortar facilities in time. It will never be a catch-all solution but it’s certainly something I need to bear in mind.

Supermarket Income REIT

Just as there will always be a need for medicines and treatment, there will always be a need for food. This is why having some exposure to the supermarket sector makes sense to me.

Now, I could just buy shares in a FTSE 100 juggernaut like Tesco or Sainsbury’s. However, we know that this is an incredibly competitive space. So, a potentially safer option is to snap up shares in Supermarket Income REIT (LSE: SUPR).

This investment trust owns and lets out sites to both of the above. However, it also leases to Asda, Morrisons, Waitrose, Aldi, and Marks & Spencer. This earnings diversification should mean it can reliably go on paying long-term, inflation-linked income (4.8% yield currently) for the foreseeable future.

Notwithstanding this, the growing popularity of getting groceries delivered is a potential issue here. A P/E of 23 is hardly a bargain either.

So, again, it makes sense to spread my money around.

Safestore

Most of us have too much stuff. Fortunately, a wonderful way for me to capitalise on our tendency to over-consume is by storing some money in, well, a self-storage company.

Safestore (LSE: SFE) is a major player in the UK market. Only last week, it announced half-year profit of £285.2m. That’s up almost 71% on the same period in 2021!

A potential downside here is that the shares aren’t cheap. A P/E of 23 could come back to bite me if markets continue drifting downwards. The dividend yield is also ‘only’ 2.7%.

That said, a recent dip in the share price could a great opportunity. While higher prices are making us mindful of what we buy (and actually use) right now, I can’t help but think this will prove temporary. A nation of minimalists, we are not.

Berkeley (FY22 earnings)

Berkeley (LSE: BKG) is a British property developer and housebuilder. It mainly builds homes and neighbourhoods across London, Birmingham, and the South of England. The company is expected to release its FY22 earnings results for the year ending April 2022 on Wednesday 22 June.

The FTSE earnings preview indicates slight growth, as the housebuilder is expected to have capitalised on higher house prices. Nonetheless, analysts are predicting that if the outlook for FY23 comes in below consensus expectations, Berkeley shares may be in for a tough time.

DS Smith (FY22 earnings)

DS Smith (LSE: SMDS) is a British multinational packaging business. It offers sustainable, plastic-free packaging, integrated recycling services, and sustainable paper products. The firm is expecting to report earnings for the year ending April 2022 on Wednesday 21 June.

Analysts at Jefferies Financial Group recently reduced their EPS estimates for DS Smith. Morgan Stanley, Credit Suisse, and JP Morgan all reduced their price targets as well. So, if DS Smith can beat its earnings estimates and provide a positive outlook, its share price could recover. Otherwise, a further drop in its stock is to be expected.

Safestore (H1 22 update)

Safestore (LSE: SAFE) is the UK’s largest and Europe’s second-largest provider of self-storage. It has over 120 locations in the UK. The FTSE 250 firm is forecasted to report its earnings results for the six-month period ending April 2022, on Tuesday 21 June.

However, Safestore’s first-half earnings results are yet to be officially announced on its earnings calendar. Nonetheless, these are the figures to look out for. Analysts in the UK don’t normally publish earnings previews for six-month periods, so it’s best to compare the firm’s upcoming 2022 first-half numbers to the ones from a year before. The H1 22 figures can also be useful to determine whether it’ll outperform its FY21 numbers, or even beat analysts’ FY22 forecasts.

I’m currently looking for the best FTSE 250 shares to buy. And I reckon I’ve found some great ones. This mid-cap index holds some excellent companies. They’re often small enough to provide ample growth potential but large enough to be relatively stable. I’d describe it as a sweet spot.

I’d buy IT

One FTSE 250 share that I reckon provides decent long-term prospects is IT provider Softcat (LSE:SCT). Its share price has fallen by 13% over the past year, despite solid business performance by the group. Allow me to explain further.

In its half-year results, the company delivered strong profit growth and cash generation. Profit per customer rose by 12.4% as more of Softcat’s customers emerged from the impacts of the pandemic. The results beat management expectations and the board believes that results for the full year will be ahead of their previous estimates.

I’m impressed it performed so well despite component shortages and the supply chain constraints that plagued many companies.

Can it beat the competition?

Bear in mind that competition is intense in this industry. It’s highly fragmented with many small players. That said, Softcat has a history of gaining market share and differentiates itself with excellent customer service.

Overall, I’d say that the future looks rosy. More growth could come from ever-more businesses migrating to the cloud and the growing need for enhanced cybersecurity. That’s why I’d buy these shares for my new ISA allowance.

A FTSE 250 top pick

My next FTSE 250 top pick is Safestore Holdings. This self-storage company has been a remarkable performer over the past decade. Its shares have risen by 29% per year on average. That’s enough to turn a £1,000 investment into almost £12,500.

But can these mid-cap shares continue to perform? I believe they can. Safestore makes money by buying large buildings, splitting them up into sections and renting them out to those that need to store things.

It grows its earnings by expanding its property portfolio and letting out empty space in existing buildings. It’s a business model that serves it well and sales have steadily risen by 10% per year since 2015.

Points to consider

A few points to consider, however. Borrowing costs to finance new properties could increase if interest rates rise over the coming months and years.

If the UK economy tips into a recession, it could reduce the number of home-movers. That said, this group accounts for just 10%-15% of new business.

Overall though, I particularly like that it’s a profitable business with tremendous cash flow. I’m also currently looking for investments that could beat the effects of rising inflation and I reckon Safestore makes a good candidate.

In addition to renting out space, it should also benefit from rising property values over time. It ticks many boxes for me and I’d consider adding it to my ISA this month.