These are organisations with a substantial competitive advantage and a track record of developing their advantage further. Indeed, in the past, I have watched many companies lose their competitive advantages due to a lack of investment, poor customer service, and terrible acquisitions. If I can, I want to try and avoid such businesses. 

Of course, there is never going to be a strategy that will guarantee success. However, by focusing on these businesses, I can try to swing the odds of success in my favour. 

UK stocks to buy

A great example of a business I would buy today is Ferrexpo (LSE: FXPO). This company’s competitive advantage is its cost of production.

In the first half of the year, the miner produced a tonne of iron ore for $46.60. This compared to the average sale price of around $200 for the period.

In recent years, the group has been investing to increase output of its high-grade ore. This has helped it maintain an advantage in a market swamped by low-cost, low quality ore. 

The mining company also has a track record of returning significant amounts of cash to investors. The stock currently supports a dividend yield of 4.4%. 

Still, despite its competitive advantages, this company might not be suitable for all investors. Commodity prices are highly volatile, and Ferrexpo is controlled by a few key shareholders, which is not the best corporate governance practice. 

Despite these challenges, I would buy the stock today. 

Market leaders

Spirent Communications (LSE: SPT) and IG Group (LSE: IGG) are two other stocks I’d buy. 

Spirent is a leading producer of automated test and assurance solutions for the telecommunications industry.

As the world becomes more digital, the demand for telecommunications services is expanding. And so is the need for Spirent’s services. Revenues jumped 9% in the six months to the end of June. The firm’s order intake rose 14%. These figures have convinced me that I should add the stock to my portfolio. 

Management is reinvesting profits back into the business. It recently acquired octoScope Inc, making Spirent the firm leader for Wi-Fi tests in a growing market.

The company may have become a leader in the Wi-Fi testing market, but this is a viciously competitive industry. The group’s biggest challenge is always going to be competition. Spirent has maintained its competitive advantage so far. This may not last if the company does not keep investing. 

The same is true of IG. The financial services provider operates in a competitive market. The market is also highly regulated, which comes with additional costs and challenges. Regulators can and have banned the firm’s products. 

Despite these risks, I would buy IG for my portfolio. The company has grown to become one of the largest providers of contracts for difference (CFDs) and spread betting in the UK, and it is also expanding around the world. Recent acquisitions have expanded the group’s footprint, especially in the United States, the world’s largest listed derivatives market.

As the company continues to grow, more acquisitions seem likely. These will only reinforce IG’s competitive advantage and growth potential. This is why it sits on my list of the best stocks to buy. 

One is Hammerson (LSE: HMSO). And yes, it’s a shopping centre landlord, at a time when the retail sector is only just trying to pick up from its lockdown bruising. The company’s first-half results showed slowing recovery, and the market reacted negatively. The shares lost a couple of a percent in early trading, and are down 63% over two years.

Footfall is still down on pre-pandemic levels, which does not surprise me. And we’re not seeing profit yet, with an IFRS loss of £376m (down from 2020’s £1.1bn). But net debt was cut 16% to £1.9bn, and there’s still £1.5bn in undrawn committed facilities and cash. Hammerson says there is “No significant unsecured refinancing required until 2025.”

There is undoubtedly risk here, as the shape of the retail landscape in the emerging post-pandemic economy is far from certain. But there’s enough safety margin for me. Hammerson is one of my FTSE 250 investment candidates.

FTSE 250 growth stock

Synthomer (LSE: SYNT) is my second pick. The polymer chemicals specialist has seen its shares climb 80% over the past two years. But the wheels did come off an earlier bull phase, as so often happens with early stage growth stocks.

In the half year to 30 June, Synthomer saw underlying revenue climb by 73.7% (with a statutory 67.6% increase). And at the bottom line, EBITDA more than trebled from 2020’s figure to £322.7m. EPS came in at 49.3p, from 10.8p a year ago.

What’s the downside? Well, we could be looking at unusually good growth results as demand catches up from last year’s slump. And we could possibly see some some economic headwinds in the coming years. 

But as far as FTSE 250 growth stock prospects go, I think I’m looking at an attractively valued one here. Oh, and there’s a dividend too — upped at the interim from 3p to 8.7p per share.

5G profits

My final pick is Spirent Communications (LSE: SPT), whose interim figures pleased the market. Spirent develops telecommunications equipment, specialising in 5G stuff. So it’s in a growing market, and I see it as something of a ‘picks and shovels’ investment. When there’s a gold rush, those selling the tools can do well whoever strikes the motherlode.

In H1, order intake gained 14%, with revenue up 9%. Adjusted EPS improved by 9%, and Spirent lifted its interim dividend by 10% to 2.39p per share. I like the company, but do I like its growth valuation?

Spirent shares have wobbled a bit in 2021. But over five years, they’ve almost trebled in value. Annualising first-half earnings, we’d be looking at a P/E of close to 21 on an adjusted basis. On reported earnings, it would be closer to 27. So the risk is that the shares are fully valued now, or even over-valued. And it’s a competitive business too.

But on balance, I don’t find that valuation too stretching. Spirent is on my FTSE 250 watchlist.

Here are three companies I would buy for my portfolio today. 

FTSE 250 homebuilder 

The first company on my list is homebuilder Bellway (LSE: BWY).

The UK housebuilding sector is currently benefiting from significant tailwinds, and Bellway is capitalising on this growth. According to its interim results, the group produced a record 5,656 properties in its fiscal first half. Due to this record output and higher selling prices, revenue increased 11.6% year-on-year for the period. 

I think low interest rates, easy credit and high demand for new properties will lead to continued growth for Bellway. That’s why I would buy this FTSE 250 company. 

Some risks the business faces include higher costs. These are already having an impact. The group’s gross profit margin declined from 23.1% to 20.8% in its fiscal first quarter. If this trend continues, profits may come under further pressure. 

Growth stocks

Another company I would add to my FTSE 250 growth stocks portfolio is Clarkson (LSE: CKN).

I think this company, which is the world’s leading provider of integrated services and investment banking capabilities to the global shipping market, should register growing profits as economic growth returns.  

Indeed, thanks to rising shipping rates worldwide, a sign of high demand and reduced supply, the business has made an “encouraging start” to the year. Management believes activity will continue to increase throughout the year and is expecting a significant improvement in the second half. 

I would buy Clarkson as a growth play, but I also plan to keep in mind the company’s weaknesses. A sudden downturn in economic activity could send shipping rates plunging, which may lead to losses. Sectors such as shipping are usually the first to feel the pain in an economic slump. 

Booming 5G market

The pandemic has really accelerated the need for efficient communication technology worldwide, which could drive increased demand for 5G connectivity. One company that may benefit from this is Spirent Communications (LSE: SPT). 

Spirent produces and develops equipment for use in telecommunications networks. It is a specialist in 5G equipment and has reported growing interest in its capabilities recently. 

In the company’s latest trading update, management reported that the business “continues to win in 5G with the development of 5G technology and networks.” It booked 180 5G deals in the first quarter with more than 80 customers. 

Still, while Spirent might appear to be firing on all cylinders today, the technology sector is incredibly competitive. As a result, the company will need to remain at the forefront of 5G technology to maintain its market share. This is the most considerable risk the enterprise faces today. It could quickly lose customers if it doesn’t keep up with the competition.  

Even after taking this risk into account, I would buy Spirent for my FTSE 250 growth stocks portfolio right now.

However, I reckon there are still some good opportunities out there. Today, I’m going to look at two companies that have caught my eye recently.

From oil to renewables

I think it’s fair to say renewable energy is a sector that’s going grow for the foreseeable future. But the reality is that much of our energy today still comes from oil and gas.

I reckon that one good way to play the energy transition is to invest in companies whose services are needed by oil producers and renewable operators, especially offshore. My favourite stock in this sector is  Wood Group (LSE: WG), which has been in business for more than 100 years.

Wood Group has historically focused on the oil sector, but the company has diversified in recent years and now works in renewables and the wider infrastructure sector. I reckon that should support longer-term growth.

In the meantime, the company is still an important service provider to the oil sector — including the growing area of North Sea decommissioning.

What could go wrong? Market conditions are pretty tough for oil services firms these days. Wood’s profit margins have never returned to the peak levels seen from 2013-2015, when oil traded at over $100 per barrel.

The company is also still battling to repay the debt it built up when it acquired AMEC Foster Wheeler in 2017. Borrowings are coming down, but they’re still a little high for my liking.

Despite these concerns, I think Wood Group looks decent value at the moment, on around 13 times 2022 forecast earnings. I’d be happy to buy the shares at this level, as I expect to see steady growth over the next few years.

This UK share could keep growing

One company that’s impressed me over many years is FTSE 250 firm Spirent Communications (LSE: SPT). This company is one of the leading players in the network-testing and analytics sector. Its main business is providing the services and equipment needed by network operators to test services such as 5G and Wi-Fi.

The pandemic caused some extra challenges last year. Despite these, Spirent’s adjusted pre-tax profit rose by 10% to $104m last year, while its operating margin rose to 18%.

City analysts are forecasting a 17% increase in pre-tax profit for 2021. Is this the perfect business? Not quite.

Spirent must continually invest in research and development to ensure that it has the best testing solutions for new technology. The company is spending about 20% of its revenue on R&D each year at the moment and must continue to stay ahead of new trends. Falling behind could result in a multi-year slump in new sales.

This UK share isn’t cheap either. Spirent trades on around 23 times forecast earnings for 2021, with a dividend yield of just 1.6%. If steady growth continues, then I think this valuation is probably fair. But if results disappoint, then I think the stock could fall sharply.

Despite these risks, I’d buy Spirent Communications today. I reckon it’s a good quality business in a growing market. In my experience, that combination often makes for a good investment.

Why invest in this FTSE 250 stock?

Spirent Communications was founded way back in 1936. As well as 5G, it’s also involved in cybersecurity. This is an increasingly vital cog in all businesses with an online presence. It provides cloud based automation and testing solutions for a variety of needs. It also creates simulators that allow reliable testing in the performance of autonomous vehicles.

These are disruptive areas of technology that are building momentum in our changing world. 5G is particularly exciting because its instantaneously high speeds could be game-changing for so many aspects of industry. For instance, 5G connections are super-fast and reliable. This should allow for seamless multi-person video calls, autonomous driving, augmented and virtual reality solutions. Plus, it should greatly enhance those artificial intelligence programs that need to operate in real-time.

Risk vs reward

There’s considerable competition in the 5G infrastructure sector. You see, BT, Virgin Media and Vodafone are all vying for similar contracts. It also comes with high costs and immense responsibility. Managing the data transfer of vital and often sensitive communications is a serious business.

Until October last year, Spirent Communications’ share price had been on an upward trajectory for the best part of half a decade. And up to today, its price has risen 216% over five years. It now has a £1.4bn market cap. And it has a forward price-to-earnings ratio (P/E) of 22, with earnings per share of 9p and a 1% dividend yield. Its full-year revenue grew 4% for 2020.

It seems the recent pullback in its share price may be due to a slowdown in revenues caused by the ongoing pandemic.

A long-term investment

When I’m looking to invest in the FTSE 250 or any other area of the market, I always think long term. That’s because it’s easy to become distracted by short-term fluctuations in the market, but I want to invest in companies that are going to be around far into the future.

Therefore, if I think about businesses that are offering a service and have a reason to be here for the long term, then I think it makes for a more appealing investment. I feel Spirent Communications ticks this box. My primary concern is that it may not have enough of the competitive edge that I’d like. I’ll have to keep an eye on that. But I do expect it to go the distance. And I’d be happy to invest £1,000 to buy shares in this FTSE 250 business today.

Of course, buying stocks and shares may not be for everyone. Investors should only invest what they can afford to lose. Returns are never guaranteed. However, I’m comfortable with the level of risk investing involves. As such, I’m always looking for opportunities.

And with that in mind, here are my top three shares to buy today. 

FTSE 250 stocks 

Spirent Communications (LSE: SPT) provides engineering services for the information technology sector. The company has recently been rolling out infrastructure to help with the 5G data revolution. Demand for its services is currently running high. City analysts forecast earnings growth of 10% for the business in 2020. 

As the world becomes more and more reliant of technology, I think the business will see a prolonged period of growth. That’s why I believe this is one of the best shares to buy today and would add it to my portfolio.

While the company does face risks, such as increased competition and rising costs, it has managed these challenges well in the past, although that doesn’t guarantee future performance. What’s more, if the corporation makes a grave mistake, which ends up causing a client to lose data, it could suffer severe reputational damage, so that’s something I’m going to watch out for. 

Shares to buy today

Thermal processing is a niche technical industry. However, it’s one Bodycote (LSE: BOY) specialises in, providing heat treatment services for clients worldwide. Bodycote is one of the largest players in this sector globally, giving it a competitive advantage. It can offer customers lower prices due to economies of scale. Moreover, customers can trust the business to produce a quality product. 

These qualities have helped the FTSE 250 business go from strength to strength over the past few years.

However, the company is exposed to similar risks as Spirent. It may have a good reputation, but that means the pressure is on to maintain quality. Customers could leave the business if it decides to cut corners to improve profit margins. An economic downturn may also lead to reduced demand. Despite these risks, I think this is one of the best shares to buy today, based on its competitive advantages. 

FTSE 250 engineering group Weir (LSE: WEIR) has similar qualities to the two companies outlined above. It produces critical components for the resource industry, such as pipes and valves. These aren’t the sort of products customers want to go wrong, as the costs of a broken pipe can be high. That’s Weir’s advantage. It’s a trusted provider that has been engineering products for clients for decades.

Unfortunately, this industry is highly cyclical. The company’s earnings can and do gyrate significantly based on economic cycles. Therefore, a prolonged economic downturn may cause significant pain at the group. This suggests the business may not be suitable for all investors. 

Nevertheless, companies with competitive advantages like Weir are few and far between. That’s why I’d buy this engineer despite its exposure to the highly cyclical resource industry. 

Royston Wild: B&M European Value Retail

As the UK economy spits and splutters, I think B&M European Value Retail (LSE: BME) will continue rising in price. Its shares have already soared in 2020 as investors expect a prolonged period of weak consumer confidence. In this environment, sales of B&M’s vast range of discount foods and household staples will keep on shooting through the roof.

Despite its rocketing stock price — an ascent that is set to see it promoted to the FTSE 100 later this month — B&M’s shares still look attractively priced at current levels. City analysts reckon that earnings will soar around 60% this year. And this leaves it trading on a forward price-to-earnings growth (PEG) multiple of 0.3. I reckon it’s a top buy right now, with a 2.2% dividend yield providing an extra sweetener.

Royston Wild does not own shares in B&M European Value Retail.

Rupert Hargreaves: Team17

Video game developer Team17 (LSE: TM17) looks set to report a record-breaking 2020. In its latest trading update, the company said it experienced “strong sales traction” during the six months to the end of June. It also noted demand for its back catalogue was exceptionally high in April and May.

At this stage, it is impossible to tell how this will impact full-year trading performance. However, analysts were already projecting earnings growth of 20% this year.

As such, I reckon Team17 is a high growth stock worth buying in September.

Rupert Hargreaves does not own shares in Team17.

Matthew Dumigan: ASOS 

Online fashion retailer ASOS (LSE: ASC) has enjoyed an outstanding run recently, something that can’t be said for many listed companies over the past few months. To illustrate, since the start of 2020, the shares are up almost 40%. 

A trading statement released in July detailed that for the four months ending 30 June, group sales climbed by 10%. Additionally, active customers increasing by 16% year-on-year, ‘with particularly strong growth in new international customers’. 

Overall, thanks to this solid performance, I’m confident the company’s upward trajectory can continue, especially given the strength and growth potential of the underlying business. 

Matthew Dumigan does not own shares in ASOS.

G A Chester: Avon Rubber 

Avon Rubber (LSE: AVON) announced the divestment of its dairy milking technology business earlier this year for £160m. This leaves it focused as a fast-growing global leader in respiratory and ballistic protection for the world’s militaries and first responders. 

The company’s scheduled to release a trading update soon, ahead of its financial year-end of 30 September. City analysts expect 6% earnings growth for the year, reaccelerating to 26% in fiscal 2021. The stock trades at around 30 times the forecast 2021 earnings. 

The company has moved quickly to put its divestment proceeds to work. It announced the £100m acquisition of a military helmet-maker just this week. 

G A Chester has no position in Avon Rubber.

Anna Sokolidou: Dotdigital

Dotdigital (LSE:DOTD) is a typical high-tech company. It provides quite cheap and highly targeted digital marketing services. It derives a lion’s share of its revenues from the UK market. Most of its customers are financial, e-commerce, travel and leisure companies.

Dotdigital has a market capitalisation of just under £400m but its share price is near all-time highs. Due to the growing popularity of internet marketing, its sales keep rising.

It is trading at a price-to-earnings (P/E) ratio of around 36. Compared to “trending” shares, it’s not too much. What’s more, unlike many other growth companies it pays dividends.

Anna Sokolidou has no position in Dotdigital.

Edward Sheldon: Gamma Communications

My top growth stock for September is Gamma Communications (LSE: GAMA). It’s a technology company that provides ‘unified communication services.’ Its solutions help businesses raise productivity, boost agility, and increase collaboration.  

Gamma is an extremely profitable company that has a great growth track record. Recently, it advised that it expects EBITDA and earning per share for the full year to be ahead of consensus expectations.

GAMA is not a particularly cheap stock. Its forward-looking P/E ratio at the time of writing is about 30. I think this growth stock deserves a premium, however. In my view, it has significant growth potential.  

Edward Sheldon owns shares in Gamma Communications.

Kirsteen Mackay: Computacenter 

Computacenter (LSE:CCC) reported better than expected annual results thanks to better than expected trading throughout the year. With more people committed to working from home and new orders from the government and financial sectors, its business thrived and offset losses from industrial customers. I think this is likely to continue as the pandemic shows no signs of slowing down.

The FTSE 250 group has a price-to-earnings ratio of 23 and earnings per share are 90p. It increased its interim dividend pay-out by 22%. It also agreed to buy Canadian company Pivot Technology Solutions, which should increase its opportunity for growth.  

Kirsteen does not own shares in Computacenter.

Paul Summers: Spirent Communications

Anyone looking for top growth stocks should take a closer look at IT infrastructure business Spirent Communications (LSE: SPT), in my opinion. Its expertise means this company is in a great position to capitalise on the rollout of 5G technology over the next few years. 

Trading at 25 times forecast earnings, Spirent isn’t cheap. However, improving operating margins and returns on capital employed, stacks of cash on the balance sheet, and geographical diversification suggests the stock is worth digging deep for. There’s even a small (and growing) dividend.

I think those prepared to buy and hold could see a very tidy return. 

Paul Summers has no position in Spirent Communications.

Kevin Godbold: Computacenter

FTSE 250 company Computacenter (LSE: CCC) has consistently grown for the past decade. And in the half-year report of 9 September, the IT infrastructure and services firm revealed good figures for the period to 30 June 2020. Adjusted diluted earnings per share jumped more than 35% higher year on year, and the directors pushed up the interim dividend by almost 22%.

The business was “resilient” through the Covid-19 crisis, with customers investing in their IT infrastructure. A recent acquisition announcement aimed at expanding operations further in the US and Canada demonstrates growth remains on track. I’d buy for September and beyond.

Kevin Godbold owns shares in Computacenter.

Jonathan Smith: Barratt Developments

The UK housebuilder Barratt Developments (LSE:BDEV) saw a share price rally of almost 60% in 2019. However, the lockdown restrictions hit the property sector hard in the first half of this year. Barratt reported annual completions down 29% in a mid-year trading update.

I think this top growth stock could rebound strongly in the short term. Forward sales are up 22% on the year. The average selling price is also higher, at £280,000. Add into this the stamp duty holiday along with reports of house prices continuing to rise, and demand for new homes should be very strong. 

Jonathan Smith does not hold any position in Barratt Developments.

Roland Head: Auto Trader 

Early reports suggest the car market is bouncing back strongly from lockdown. According to Auto Trader (LSE: AUTO), traffic to its website was 28% higher during the first three weeks of June than at the same point last year.

The pandemic has also increased the level of car-buying activity that takes place online. As Auto Trader continues to expand into the new car market and offer other new services, I think it will continue to grow.

Auto Trader shares always look pricey, but with profit margins running at close to 70%, I’d be happy to buy at current levels.

Roland Head does not own shares in Auto Trader Group.

Manika Premsingh: London Stock Exchange Group

At a challenging time for the stock markets, the FTSE 100 share London Stock Exchange Group (LSE: LSE) stands out. Its share price has not just risen sharply, it has consistently created multiple new all-time highs in the months since the stock market crash. As a result, it’s now one of the priciest FTSE 100 stocks, with an earnings ratio of around 80 times.

But I reckon its share price will continue to rise because of its robust financial performance. A 16% increase in interim dividend is another positive for the stock, since this is in sharp contrast with dividend suspension or reduction by other FTSE 100 companies.

Manika Premsingh has no position in the London Stock Exchange Group.

Today, I’m going to take a look at three such companies I think could be worth buying now. 

The best UK shares to buy

Computacenter (LSE: CCC) is one of the fastest-growing domestic technology businesses. Over the past six years, the company has reported annualised earnings growth of 15%. 

The group, which provides the information technology infrastructure services, has seen the demand boom in 2020. City analysts had been expecting the company to report a decline in earnings for this year.

However, according to its latest trading update, management expects trading to be “materially above” initial expectations. 

As such, I think the company qualifies as one of the best UK shares to buy now. With earnings set to jump substantially this year, investors could see high total returns from the stock in the years ahead as it builds on its position in the market.

The stock also supports a dividend yield of 2%, and the payout is covered twice by earnings per share.

Moneysupermarket.com

Moneysupermarket.com (LSE: MONY) is another UK technology leader. The company operates one of the most well-known comparison websites in the country.

This is an asset-light operation. The firm takes a cut of every insurance policy or energy deal it sells.

As a result, the business is highly profitable. Its average operating profit margin for the past six years is 30%. The average margin of all UK shares is 6.4%. During the same time frame, the company has reported average annualised earnings growth of 12%. 

At the time of writing, shares in Moneysupermarket.com are changing hands at a forward price-to-earnings (P/E) multiple of 22. This looks expensive at first, but I think it’s a price worth paying for such a profitable and recognisable business that has cornered the comparison market.

Further, the stock also supports a dividend yield of 3.6%, which only adds to the appeal of the business, in my opinion. The average yield of all UK shares is 3.4%. 

Spirent Communications

One of the best ways to invest in the technology revolution may be to own the nuts and bolts. Or, in this case, telecommunications infrastructure. Spirent Communications (LSE: SPT) is one way to play this theme.  

The company is perfectly positioned to benefit from the world’s transition to 5G technology. It’s widely believed it’s only a matter of time before 5G becomes the mobile standard around the world. Building the infrastructure to hit this milestone will be a challenge. Luckily, Spirent already has the know-how and resources. 

As demand for the company’s services has grown over the past few years, its net income has jumped.

From just $13m in 2015, City analysts believe the company will report net income of $85m for 2020. As the rollout of 5G technology continues, I think it’s highly likely the group can maintain this rate of growth.

Therefore, Spirent could be one of the best UK shares to buy now. 

Today, I’m highlighting two examples I believe are likely to make their owners considerably richer, so long as they’re prepared to buy and hold. 

5G ready

FTSE 250 constituent Spirent (LSE: SPT) provides communications testing and connectivity kit to more than 1,500 customers around the globe in sectors as diverse as defence, healthcare, and financial services. It’s a leader in what it does and, right now, business is good.

Earlier this month, the company reported a “strong” performance over the first half of the year, despite some impact from the coronavirus. Order intake and revenue were up 6% and 7% respectively. A “material increase” in adjusted operating profit from $20.7m last year to $39.5m in 2020 was also booked. Cue a sharp rise in Spirent’s share price.

At 27 times earnings, this company’s now far from cheap. Then again, great stocks are rarely without friends for long. Indicatively, the company ticks the boxes for rising margins and returns on capital. It’s in solid financial shape with oodles of cash on the balance sheet. Although unlikely to attract income hunters, the 12% hike to the interim dividend also suggests confidence on the part of management.

By far, the most interesting part of the investment case for me is the company’s exposure to the 5G market. The fact that many organisations will turn to Spirent for support when it comes to deploying infrastructure and related equipment makes me think those buying this tech share now could be richly rewarded later down the line.

Booming tech share

Fellow FTSE 250 member Kainos (LSE: KNOS) is another stock worth backing, in my view. The IT consulting and software solutions provider is ideally placed to take advantage of a growing demand for ‘digital transformations’ as a result of the coronavirus pandemic.

Reflecting the recent boom in business, Kainos now expects full-year revenue will come in “well ahead” of previous expectations. Adjusted profit will also be “substantially ahead” of forecasts, thanks to demand from its near-400 customers around the world.

Another bit of good news was the 6.7p per share special dividend. This goes some way to making up for the lack of final payout from the previous year (which coincided with the coronavirus outbreak). The cherry on the cake was the announcement that cash returns would now carry on as usual. 

Naturally, all this hasn’t gone unnoticed by investors. Having soared 130% since March’s market crash, Kainos’s shares now sit on a valuation of 51 times forecast earnings. It may be that they now pause for breath. After all, the company still can’t estimate the impact Covid-19 will have on its customers. 

Like Spirent, however, Kainos has all the things I look for in a ‘buy and hold’ investment. Earnings are nicely diversified by customer and geography. Returns on capital employed are consistently high too. At the time of its update, the firm also held cash of more than £62m and zero debt. 

All told, I think Kainos is one to tuck away for a few years. Should markets crash again, I’ll be backing up the truck.

The backer of Tesla and other tech companies

One such company is Scottish Mortgage Investment Trust (LSE: SMT). The share price is up 44% over the last six months. This has been driven by its focus on tech, a principal beneficiary of the covid-19 situation.

Its top holding is Tesla. This is followed by holdings in Amazon, Tencent, Illumina and Alibaba. Spotify and Netflix are also in the top 10 holdings.

The trust, run by Baillie Gifford, is a top performer. The manager though has other strong-performing trusts. This gives me hope the current outperformance isn’t a flash in the pan.

Technology isn’t going away so the trust should keep doing well and the share price might well keep flying upwards. But a word of warning — it’s closely tied to the success of its biggest holding, Tesla.

A UK tech stock riding the 5G wave

Spirent Communications (LSE: SPT) is another tech stock that’s making moves upwards. It’s piggybacking on expectations of a 5G revolution. The company provides testing and assurance services to the telecoms industry.

Spirent says that 5G isn’t yet at the end of its journey. There will be a lot more ongoing demand for its services is the key message. Spirent Communications, like Scottish Mortgage, is in the right place at the right time.

The latest results showed the company is making good progress, which should work through to the share price (it’s already nearly double its low during the stock market crash). Spirent saw revenue rise 7% in its first half to $233.7m (£177.53m). On a reported basis, operating profit was up 97% at $35.6m and its profit before tax improved 93% to $36m, while basic earnings per share grew 94% to 5.28 cents.

Devoted fans bring in the profits

Games Workshop (LSE: GAW) has been getting a lot of press attention. It’s not hard to see why. The share price has been motoring upwards. The company displays a lot of signs of a quality business. It has repeat, dedicated customers, high margins and the ability to grow sales and profits.

The shares have been hitting new highs recently. The boost has been provided by results last month that showed a 10% jump in profits before tax to £89.4m for the year ending on 31 May. At the same time, cash on hand before paying dividends stood at £70.5m, against £50.7m in the year before.

On a more operational level, it’s encouraging to see its roughly 40% jump in user numbers on the Warhammer website to over 8m. This indicates there are a lot of fans out there.

The opportunity to licence itself creates the next big opportunity for Warhammer and as such, I think the shares, though expensive already, could keep moving higher.