After this big share price fall, Volex shares now look very cheap. So I plan to buy more of them for my portfolio. Here’s why I’m bullish.

Why I invested in this growth stock

What I like about Volex, from an investment point of view, is that it has exposure to a number of growth industries. Volex’s products are used to power and operate electric vehicles (EVs), medical equipment, data centres, and more. So there’s a long-term growth story here. It’s the EV segment I’m most excited about. Last financial year, revenue in this segment nearly doubled.

I also like the fact that management has ‘skin in the game’. The company is run by executive chairmen Nat Rothschild, and he owns around 39m VLX shares. Meanwhile, COO John Molloy owns around 2.3m shares. So it’s in their interests to get revenues, profits, and the share price up.

Positive trading update

A recent trading update from Volex, posted on 19 August, was quite encouraging, in my view. In this update, management said that the group had made a “strong start” to FY2023, and made continued progress across the business.

It said that revenues grew organically by 4.9% in the quarter ended 30 June, driven by positive customer demand and the company’s ability to deliver against the backdrop of a challenging supply chain environment.

Volex noted that its end markets (EVs, medical, data centre, etc) provide the group with a high degree of resilience. It added that next-generation high speed cable volumes are expected to increase in future periods as customers accelerate their technology replacement programmes.

Low valuation

Turning to the valuation, analysts expect Volex to generate earnings per share of $0.27 this year. This means that, at the current share price and exchange rate, the stock has a forward-looking P/E ratio of around 11. I think there’s a lot of value on offer at that multiple, given the rate at which the company is growing.

Risks

Of course, there are risks to consider here. The main one, to my mind, is inventory issues. Recently, a lot of companies have experienced issues with excess inventory. Semiconductor companies are a good example.

There have been no signs of this issue here yet. But we can’t rule it out. It’s worth noting that the company recently said it had “higher inventory levels than the previous year” in order to support the timely delivery of complex products to customers.

The other main risk is debt. Recently, Volex has made a few acquisitions and this has increased its leverage. With interest rates rising, this debt is going to be more expensive to pay off.

I’ll be buying more

With the stock now trading on a P/E of around 11 though, I think the risk/reward for a long-term investor like myself is appealing. That’s why I plan to buy more shares for my portfolio.

Although I refrain from investing based on fads, current market trends seem to be rooted in important recent developments. Renewable energy has become supremely important after Europe’s latest power crisis. 

I’ve identified three shares that could supplement the growth of this booming industry right now. These UK shares look primed for growth and could boost my portfolio over the coming years.

All charged up

Greencoat UK Wind (LSE:UKW) and Volex (LSE:VLX) are two shares I’m watching closely right now.

Electricity bills across the country are surging. Just yesterday, the Confederation of British Industry warned policymakers about the impact of this on local businesses. And I think this points to the larger crisis as we’re caught between an expensive transition to green energy while fending off sky-high crude oil prices. 

Greencoat UK Wind’s business model involves investing in wind farms and then selling the generated power back to the grid. This relatively low-risk strategy with 90%+ margins means the company is largely cash positive. In the first half of 2022, it has already generated 2,175GWh of energy with a net cash generation of £328.8m.

This share has risen 22% in the last 12 months. And despite this jump, it’s trading at a price-to-earnings ratio of just 4.6 times. I think this is a very attractive valuation for a firm with strong financials and excellent future prospects. 

The next company on my list is Volex, a manufacturer of fibre-optic, copper and battery wires. The company also operates a range of brands in the electronics space that collectively have a global presence. Its main markets are North America (44% of revenue), Asia (23%) and Europe (33%). 

Volex recently developed an EV division that manufactures components for the booming industry. These include charging cables, charging stations and storage systems. 

In FY22, the company saw revenue growth of 38.6% to US$614.6m. The company expects to generate revenue of $1.2bn by the end of FY27. Thanks to strong recent reports, this share has risen 12.8% in the last six months and is finally showing signs of a bounce-back after falling steadily for months.

Concerns and verdict

While both companies look in relatively strong financial positions, they also come with considerable debt. Given the nature of both businesses, a high percentage of profits are invested back into acquiring assets.

Slowing economies remain a concern for Volex, given its international presence. Its buying power could fall if a recession happens, affecting sales and currency values. Greencoat is currently seeing a premium paid for the energy it sends to the grid. If this stabilises, year-on-year profits could fall, spooking investors.

However, I’m bullish on the European energy sector. I think current changes will prove fruitful in years to come. While traditional oil shares have dominated the energy market, I think a shake-up is under way, which is why I’m considering an investment in these two stocks right now. 

This AIM stock is cheap

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

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

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

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

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

High-growth market

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

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

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

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

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

Major opportunities ahead

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

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

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

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

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

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

For long-term investors like me, I think this weakness has created an opportunity, as I expect plenty of these stocks to rebound in the not-too-distant future. With that in mind, here’s a look at three cheap growth shares I’d buy for my portfolio today.

Growth at a reasonable price

First up is Gamma Communications (LSE: GAMA). It’s a technology company that provides communications solutions (a rapidly expanding market) to businesses across the UK and Europe.

Gamma has grown at a very healthy rate in recent years and a trading update posted last month showed that the company continues to advance. Management said it expects the group to generate revenue growth of around 10% this year. It added that it had seen no impact from the chip shortage or inflation.

But this growth doesn’t seem to be reflected in the stock’s valuation. At present, Gamma’s price-to-earnings (P/E) ratio is just 17. I think that’s quite low given the company’s track record.

A risk to consider here is that Gamma is looking to expand in Europe. This expansion may not go to plan. I think this risk is baked into the share price right now however.

A play on the EV market

Another cheap growth stock I like the look of at present is Volex (LSE: VLX). It manufactures power products for the electric vehicle (EV), healthcare, and data centre markets.

Volex’s last trading update, posted in April, was very encouraging. It said the business had continued to trade strongly, with revenue from the EV sector nearly doubling over the period. It noted that revenue for the year ended 3 April was set to exceed $605m, which would represent year-on-year growth of around 37%.

This growth is being completely ignored by the market right now though. At present, the forward-looking P/E ratio here is just 10. At that valuation Volex shares are an absolute steal, to my mind.

It’s worth noting that the business could be impacted by supply chain and cost issues going forward. This is a risk to keep an eye on. But all things considered I see this stock as a ‘buy’.

Operating in a booming market

Finally, I also like Gresham House (LSE: GHE). It’s a UK-based investment management company that specialises in alternative assets.

The alternative assets market is booming right now. With bonds producing low returns, investors are looking for new ways to invest their money. And Gresham House is riding the boom. Indeed, over the last three years, revenue has climbed from £14.5m to £70.4m (helped by acquisitions). And in a recent trading update, the group said it is enjoying a lot of momentum right now.

The stock can still be picked up at a very reasonable valuation, however. With analysts expecting the group to post earnings of 54.6p this year, the forward-looking P/E ratio is just 16.

That said, Gresham House is a small company with a market-cap of just £342m. So its share price could be volatile in the short term. I’m comfortable with this risk though. I’m looking at this growth stock as a long-term play.

Here are some reasons why I think the Rolls-Royce share price is falling. They also explain why I’m looking at other exciting UK shares for my long-term portfolio.

Freefall

After a tumultuous 2020, the airline market is opening up slowly. Although air travel is yet to hit pre-pandemic levels, there was a jump in 2021 and early 2022. Many investors, including myself, expected the Rolls-Royce share price to benefit from this.

However, the recovery was marred by multiple small outbreaks across the world. Air traffic in 2021 was still 49% below 2019 figures. Most international flights flew at less than 50% capacity and the average flight volume in 2021 was 68%. Analysts estimate total losses incurred by the industry during 2020 and 2021 at nearly $700bn. And Rolls-Royce recognised the sluggish recovery and shifted focus to its ‘new markets’ division.

These new segments, including power systems and eco-friendly engines, are very promising but young. And how long will Rolls-Royce take to reach profitability in these spaces? 

The board is already reinvesting a sizable chunk of its revenue into new markets. In 2021, the company recorded an underlying revenue of £10.95bn with an operating profit of £414m. R&D expenditure was £1.18bn, which looks steep considering the low profit margins. I wrote about the uphill battle Rolls-Royce will face in meeting its ESG goals in April, and the situation hasn’t changed.

Also, another major concern for me is the sizeable net debt of £5.15bn in 2021, up 44% from 2020. While the company could turn a steady cash flow from its £50bn order book, I think this debt will leave glaring holes in upcoming results.

Looking elsewhere

Despite the company’s stellar reputation and effective cost-cutting methods during the pandemic, I think its recovery will be very sluggish.

Global stock indexes are very volatile right now. Even if upcoming results are favourable, the Rolls-Royce share price could fall significantly every time there is a small market crash. 

And I think there are much better UK shares for my portfolio that offer growth potential and passive income. Although Rolls-Royce’s new power systems wing is promising, I like Volex shares better. The cable manufacturer works closely with the electronic vehicle industry, which is booming. Although its share price has taken a tumble this year, recent financials look good. The company finished well ahead of analyst estimates and is growing revenue by nearly 30% year on year. 

I also like the Aviva share price right now for its forward dividend forecast of 7.3% yield and steady growth since the pandemic crash. Although dividend payouts have been rocky since the pandemic, the company has pledged £4.75bn through share buybacks and dividends over the coming months. And I think it is a good, stable passive income play for me at the moment. 

The good news for UK investors like myself is that there are plenty of top tech stocks on the London Stock Exchange that are benefiting from this digital revolution. With that in mind, here are three tech shares I’d snap up for my portfolio today.

Calnex Solutions

Let’s start with Calnex Solutions (LSE: CLX), which specialises in telecommunications network testing solutions.

Calnex has generated strong revenue growth in recent years and I expect its top line to keep climbing in the years ahead. That’s because the rollout of 5G network technology, along with the introduction of new technologies such as self-driving cars, will mean that networks need to be tested rigorously. According to Grand View Research, the market for 5G testing is set to grow by around 9% per year between 2020 and 2027.

Last month, Calnex posted an excellent trading update. Here, it advised that its order book was sitting at “record levels” and that the board was confident that the group can deliver “significant, sustainable growth” over the coming years. This is encouraging, to my mind.

One issue with CLX is that the stock has had a good run recently. So, it could experience a pullback in the short term. Over the long term, however, I think there’s a good chance it will deliver attractive returns.

Kainos

The next stock I’d buy is Kainos (LSE: KNOS), which helps organisations with digital transformation.

Kainos, like many other tech stocks, has underperformed in 2022 as investors have focused more on value. At the start of 2022, its share price was near 1,900p. Today, however, it’s close to 1,200p.

I see this decline as a great buying opportunity. Because nothing has really changed within the company. Indeed, last month, Kainos advised that trading for the year ended 31 March 2022 had been “very strong”. It added that it’s well-positioned for further growth due to its “significant contracted backlog”.

I’ll point out that even after the big share price pullback, KNOS isn’t cheap. Currently, the P/E ratio is about 30. This doesn’t leave much room for error. If growth was to stall, the stock could fall further. I’m comfortable with that valuation, however, as I think the growth potential here is significant.

Volex

Finally, I’d also buy Volex (LSE: VLX). It manufactures high-performance power cords and cables for a range of industries, including the electric vehicle (EV) market.

Volex has a lot of momentum right now. In a recent trading update, the group advised that revenue for the year ended 4 April is expected to be up 37% year on year while revenue in its EV segment had nearly doubled. It added that it was handling inflation and supply chain problems effectively.

Yet this momentum is not reflected in the share price or the valuation. Since September, the share price has fallen from 500p to 260p. Meanwhile, the P/E ratio now is just 11.5.

At that valuation, I see an attractive opportunity here. The stock could continue to be volatile in the short term, but I think in the long run, it could go much higher.

Here, I’m going to look at why VLX shares have surged. I’ll also explain why I’d be happy to buy the small-cap stock for my portfolio, even after the big move higher.

Why Volex’s share price just popped

The reason Volex’s share price has jumped is that the company published a very encouraging trading update for the 52 weeks to 3 April this morning.

There were a number of positives in the update. For starters, Volex said revenue for the year is expected to be in excess of $605m. That’s well above the consensus forecast of $561m, and represents growth of 37% year on year.

Meanwhile, underlying operating profit is expected to be in excess of $55m, representing growth of about 28% year-on-year. It added that it had seen a significant contribution from the electric vehicle (EV) sector, where revenue had almost doubled.

Inflation and supply chain issues

The group also said it’s handling inflation and supply chain problems effectively. In terms of inflation, it said its relationships with customers have enabled it to pass through increased costs to them, protecting profitability. As for supply chain issues, Volex appears to actually be benefitting here as its customers have been bringing forward orders in an effort to secure manufacturing capabilities.

Additionally, management is confident in its future, saying the group is well positioned to navigate the challenges of the dynamic macro environment.

“We have delivered an excellent performance in a challenging environment and are now well ahead of the five year plan we set out in October 2019. This is a validation of an effective strategy which has created a resilient and diversified business. We continue to pursue a number of exciting organic growth opportunities, while successfully acquiring and integrating compelling acquisitions, leaving us well placed for the future,” said executive chairman Nat Rothschild.

Overall, it was a very good update and I’m not surprised the share price jumped. It had fallen significantly since late last year and even after today’s rise, it’s still down about 16% over the last 12 months.

Why I’d buy Volex shares today

The thing is though, I see plenty of potential for further share price upside here. Volex is a high-quality company. It has exposure to a number of high-growth industries including the EV, data centre, and healthcare markets.

I’m expecting the company to generate substantial growth in the years ahead as these markets expand. It’s worth noting that management has ‘skin in the game’ as both Rothschild and COO John Molloy own a ton of the stock.

Yet the valuation here is very low. Currently, the consensus earnings forecast for this financial year is 28.8 cents (roughly 22p). That puts the stock on a forward-looking P/E ratio of under 13. That looks like a steal to me.

Of course, there are risks to be aware of. A manufacturing slowdown due to a recession is one. Weak sentiment towards small-cap stocks is another.

All things considered though, I think the stock looks very attractive right now. At the current valuation, I’m a buyer.

Here are two stocks I’d buy before the deadline, and some top-rated stocks and shares ISAs.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

A Stocks and Shares ISA investment

I’d first top up my investment in Games Workshop (LSE: GAW), the tabletop gaming company. The share price has come under pressure recently and is down by 24% over one year. I think this represents a buying opportunity. Indeed, the consensus analyst share price target is £132.10, or 80% above today’s share price of £73.30.

Games Workshop benefits from strong barriers to entry, in my view. The company has developed its games, characters, and storylines over decades, which would be hard for a competitor to copy straight away. It’s also leveraging this intellectual property by selling the rights to use these characters to video games developers. Just last week, Sega published the widely-played third instalment of Total War: Warhammer 3, which received positive reviews from critics.

I see further licensing deals as a key growth driver for Games Workshop. It’s also a very high margin business, too.

However, growth rates have stalled recently. This is due to the cyclicality of Games Workshop’s major tabletop releases. Therefore, sales can spike one year, and then growth appears to slow in the following year. It’s a risk to consider before I buy more shares. In addition, competition cannot be ruled out completely, particularly in the highly competitive video game industry.

But on balance, I’d add Games Workshop shares to my portfolio today.

One more stock I’d buy

I would also add to my position in Volex (LSE: VLX). It’s another share price that has been falling lately, and is down by 20% over one year at time of writing.

The company released its half-year results back in November. Revenue grew by over 44% in the 26 weeks ending 3 October 2021 (HY22), which reflected “high levels of customer demand in all sectors”. However, profit margins came under pressure due to the global supply chain disruptions businesses are facing right now. This is a key risk for the company going forward.

A key growth market for Volex is the expanding electric vehicle industry. The company supplies grid-cords for charging purposes, and sales grew 210% in this division in HY22 compared to the same period last year. I see this being an important vertical for the company in the years ahead.

Volex has also completed two acquisitions recently: Prodamex, and Terminal & Cable. Both companies will expand Volex’s geographic coverage of the North American market. One thing to keep in mind though, is that there’s never a guarantee that an acquisition will work out. Indeed, Volex just recently increased its debt facilities to support further acquisitions. Therefore, acquiring businesses is a key part of its strategy, so it’s important to monitor how they integrate into the Group.

Nevertheless, I’ve been pleased with Volex’s acquisitions up to now. I also see strong growth potential for the company. So, I’d add to my position before the Stocks and Shares ISA deadline.

Here, I’m going to highlight two beaten-down stocks that now have substantial upside, according to City analysts. I own both of these stocks, and I’d be very comfortable buying more shares at their current levels.

City analysts see massive share price upside here

Let’s start with Volex (LSE: VLX). This is an under-the-radar manufacturing company that specialises in power cords and cables. Last year, this stock was trading near 500p. However today, it can be snapped up for under 280p.

There are a number of things I like about Volex from an investment point of view. For starters, it operates in a number of high-growth markets including the electric vehicle (EV) and data centre industries. As a result, the company is growing at a prolific rate right now. For the 26 weeks to 3 October 2021, for example, revenue was up 45% year-on-year to $292.7m.

Secondly, management has ‘skin in the game’. At present, executive chairman Nat Rothschild owns around 39m Volex shares (worth over £100m). This means it’s very much in his interests to boost the share price.

Additionally, the valuation is very low. After the recent share price fall, the forward-looking price-to-earnings (P/E) ratio is less than 15. 

Of course, there’s a few risks to consider here. One is supply chain disruptions. Another is higher costs. 

All things considered, however, I’m very bullish here. It’s interesting to see that analysts at Canaccord Genuity Group have a price target of 510p for VLX. That’s more than 80% above the current share price.

Strong long-term growth potential

Another UK stock that has taken a big hit recently is Keywords Studios (LSE: KWS). It’s a leading provider of technical services to the video gaming industry. Last year, KWS shares were trading near 3,300p. Today however, they’re near 2,430p.

While this stock has lost its upward momentum recently, I remain very bullish on the outlook here. That’s because the video game industry is absolutely booming right now, and looks set to get much bigger in the years ahead.

Indeed, according to Mordor Intelligence, the global gaming industry – which is now bigger than the film and music industries combined – is expected to grow by around 10% per year over the next five years. This industry growth should provide huge tailwinds for Keywords Studios, which is essentially a ‘picks and shovels’ play on the industry.

After the recent share pullback, KWS now has an attractive valuation, in my view. At present, the forward-looking P/E ratio is about 32, which I think is very reasonable given the growth the company is generating at present (19% organic revenue growth in 2021).

One risk to consider is that the company has just appointed a new CEO who doesn’t appear to have much gaming experience. Acquisition setbacks are another risk to consider as Keywords is a frequent acquirer.

I’m comfortable with these risks however. It’s worth pointing out that analysts at Berenberg have a price target of 3,450p for KWS. That’s about 40% higher than the current share price.

Stuart Blair: National Express 

Although the National Express Group (LSE: NEX) share price has managed to make a decent recovery from 2020’s stock market crash, it is still far below its pre-pandemic price.

But the coach operator is starting to see a pick-up in demand, and its businesses in both Spain and North America have managed to re-reach profitability. This has meant that in Q3 of 2021, revenues were up to 83% on the same period as 2019. I believe that the recovery will continue into 2022, especially as things hopefully return to full normality.

As a more eco-friendly way of travelling than cars, I also believe that National Express is well positioned to combat climate change for the future. This will hopefully be met with increased demand, helping to boost revenues and profitability.

Accordingly, despite the continual risks posed by Covid, I will be adding more National Express shares to my portfolio in 2022, hoping that its post-pandemic recovery can continue. The prospect of a returning dividend is another factor that gives me optimism.

Stuart Blair owns shares in National Express Group.

Rupert Hargreaves: XP Power

My top stock for 2022 is XP Power (LSE: XPP). I think this company offers one of the best ways to invest in the global economic recovery and green energy transition.

The group designs and produces power transformers, including AC-DC power supplies and DC-DC converters. As renewable energy generation capacity expands, it seems likely the demand for these transformers will rise substantially.

Renewable energy sources such as solar and wind produce DC power, but most homes and businesses are wired for AC currents. Therefore, power transformers — such as those produced by XP — are becoming an integral part of the energy system.

Unfortunately, the company is not the only firm in the space. It faces competition from other corporations around the world. This is the biggest challenge facing the enterprise.

Still, despite this risk, I would acquire the stock for my portfolio today. I am excited by its growth potential and its intellectual property portfolio, which could have significant value to a potential acquirer. I would not rule out a possible acquisition as the race for green energy heats up.

Rupert Hargreaves does not own shares in XP Power.

James Reynolds: Darktrace

Darktrace (LSE: DARK) has been in the headlines a lot since it first went public earlier in 2021. It saw some of the most volatile price action of any UK company, pushing it quickly up into the FTSE 100. But what goes up must come down, so the saying goes, and sentiment seems to have soured on Darktrace since the share price corrected in late 2021.

Irrespective of this, sales and revenue have remained strong, and the company is projected to grow by a further 38% over the next year. It seems that customers are eager for the service.

Cybersecurity is proving vital for the modern world. More than 88% of US businesses suffered a data breach in 2020 and one was successfully hacked every 16 seconds. Darktrace is providing adaptive security on a subscription model, which I believe will come to serve it well over the long term. The longer a customer uses Darktrace, the more entrenched it will become in that customer’s IT ecosystem.

The Omicron flash crash pushed the share price to its lowest point since July. For as long as it remains low, it looks to me like the perfect time to buy.

James Reynolds does not own shares in Darktrace.

Edward Sheldon: Volex

My top stock for 2022 is Volex (LSE: VLX). It’s an AIM-listed manufacturing company that specialises in power cords and cables. Its products are used across a number of markets including the electric vehicle (EV), data centre, and healthcare industries.

There are several reasons I’m bullish on Volex. One is that the company is seeing very strong growth in its EV component segment. For the 26 weeks to 3 October 2021, EV market sales were up 210% to $45m, boosted by the global rollout of EV charging stations. I expect growth here to remain strong in 2022 as charging stations continue to be installed around the world.  

Another reason I’m bullish here is that the company looks well placed to benefit from the recovery of the healthcare industry. Covid-19 placed a tremendous amount of pressure on healthcare systems in 2020 and 2021, resulting in lower spending on medical technology. In 2022, I’m expecting spending to bounce back as hospitals move to address the backlogs that have built up during the pandemic.

There are risks to consider here, of course. One is supply chain issues. Another is competition from rivals.

Overall, however, I think this stock looks very attractive at its current valuation.

Edward Sheldon owns shares in Volex.

Niki Jerath: Rolls-Royce

The share price of Rolls-Royce Holdings (LSE:RR) has been volatile in 2021, but it’s worth remembering that prior to the Omicron mini-crash in November, the stock was trading near a 12-month high. This reflects the newfound positivity around the business following the pandemic.  

I could be wrong, but it wouldn’t surprise me if the share price got to 180p next year. 

First, it used the pandemic as an opportunity to cut costs and shore up its balance sheet. Second, it has now secured UK Government backing for its small nuclear reactor business. Third, its P/E ratio is very low. It’s one of the lowest in the FTSE 100. I feel it could be substantially undervalued.  

The biggest risk to the business may be if airlines do not recover. Despite the Omicron scare, I hope that in 2022 air travel will increase substantially. The core business is still building and maintaining aircraft engines and is likely to benefit if it does.  

Rolls Royce is still a bastion of British industry and a byword for quality. I am largely optimistic for the stock going into 2022.

Niki Jerath does not own shares in Rolls-Royce.

Dan Appleby: Games Workshop

The Games Workshop (LSE: GAW) share price has been volatile this year. At one point it was sitting at an all-time high, which meant the company was almost knocking on the door of the FTSE 100 index. But as I write today, the stock has fallen by 17% on a year-to-date basis.

The share price weakness came after a trading update in which management said the company had seen pressure on freight costs. This is a key risk to consider for next year as Games Workshop continues to grow internationally.

I view the current supply chain issues as temporary, though. Management also said that sales continue to grow, which I think is key. This is because the previous year marked a major release of its flagship game. The fact that sales have grown again makes me think the company has excellent momentum heading into 2022.

With an expanding customer base and greater use of its intellectual property through licensing deals, I view the recent weakness as a buying opportunity. I expect Games Workshop stock to outperform in 2022.

Dan Appleby owns shares in Games Workshop.

Zaven Boyrazian: XP Power

2021 has been quite a tumultuous year for investors. Disruptions have been commonplace throughout most industries, with the pandemic wreaking havoc across supply chains. But despite this, the world is still shifting into a new technological era.

Renewable energy, robotics, and 5G telecommunications are just some sectors that have received enormous levels of new investment. And that’s something that has dramatically benefited XP Power (LSE:XPP).

The firm manufactures power converters for electrical appliances. That may not sound particularly exciting. But the technology is a core component for machines in the industrial, healthcare and even semi-conductor industries. In fact, revenue generated from the latter sector alone surged by 86% in 2020!

As encouraging as this level of growth may be, it doesn’t come risk-free. The electronics industry is highly competitive, with relatively low barriers to entry for low-voltage solutions. As such, the group may struggle to retain its pricing power for some of its products in the future.

Having said that, XP Power seems to be faring well against its competitors so far. And with the demand likely to keep rising for the foreseeable future, XP Power is my top stock for 2022.

Zaven Boyrazian does not own shares in XP Power.

Christopher Ruane:  Safestore

Although it had a stellar run in 2021, I reckon there continues to be substantial upside in Safestore (LSE: SAFE). I recently opened a position in the self-storage operator after watching its performance from afar for a while. Self-storage demand has grown in the UK but, based on the US market as a comparison, there continues to be significant space for growth. As a proven operator with an established brand, I reckon Safestore can be one of the beneficiaries of that.

One of the reasons I think the shares could continue to climb in 2022 is their relatively low valuation. Even after hitting an all-time high in December 2021, the shares still traded at a price-to-earnings ratio of around 12. I regard that as cheap for a company with Safestore’s growth prospects. Its most recent quarterly revenue grew 19% compared to the prior year.

Risks include any drop off in demand for self-storage, and the relatively low barriers to entry in the industry. That could lead to more price competition and hurt profits. For now, though, I am optimistic about the outlook for Safestore stock in 2022.

Christopher Ruane owns shares in Safestore.

Nathan Marks: JD Wetherspoon

Following a bleak period for pubs, the market cap of JD Wetherspoon (LSE:JDW) has almost halved since December 2019. After two years of disruptions and suffering, Wetherspoon is my stock pick for 2022 based on optimism of an economic recovery.

Covid-19, supply chain disruptions and inflation could unfortunately persist. However, Wetherspoon has a strong brand name, loyal following and a pre-pandemic history of steady sales growth. It has long been a solidly run business and can thrive again as we hopefully leave the pandemic behind us. If we can avoid any lockdowns or tightening of restrictions, there are more headwinds for the pub chain. Specifically, a 5% cut to the tax on pulled pints. That is the largest beer duty cut in 50 years and could help offset rising input costs, keeping prices low. And with a focus on affordable food and drink, it could continue to attract customers even if inflation rises further.

I think the stock looks cheap at the time of writing, trading at under 900p per share following fears of the spread of the Omicron variant. With the right market conditions, though, the share price could test the 1,600p level not seen since January 2020. Cheers to that!

Nathan Marks does not own shares in JD Wetherspoon.

G A Chester: Whitbread 

I think Premier Inn owner Whitbread (LSE: WTB) has outstanding growth prospects for 2022 and beyond. It still has plenty of scope for growth on home soil, but also has a huge opportunity to replicate its UK success in Germany. 

The pandemic has taken capacity out of the market, and with surviving competitors more financially constrained, Whitbread can take advantage. The company also believes it’s “better placed than most to deal with the challenging operating and inflationary environment (wages, utilities).” 

Reporting on the six months to 26 August, management said Premier Inn’s recovery was ahead of expectations. It trumpeted a “significant market outperformance” in the UK and “expansion continuing at pace” in Germany. 

There’s a risk pandemic developments over the coming months could yet set back the recovery and hold back Whitbread’s share price. But with management “confident on the return to pre-pandemic UK profit margins” at some point, and “confident in our ability to execute acquisitions at good returns in Germany,” the stock is currently at the top of my shopping list for 2022. 

G A Chester has no position in Whitbread.

Harshil Patel: Diageo

My top stock for 2022 is global drinks giant Diageo (LSE:DGE). It has a long history of building successful drinks brands around the world. It owns a collection of over 200 brands, including highly successful names such as Johnnie Walker, Smirnoff and Guinness.

I think 2022 could be full of many uncertainties. As such, I’d like to own strong, stable and relatively defensive businesses. I’d say that Diageo fulfils these criteria.

It also benefits from several trends that could make it a long-term winner. Rising populations and incomes in several developing countries are sources of growth. In addition, Diageo expects an extra 550m consumers to come of age this decade.

Diageo is also relatively counter-cyclical, so it should perform reasonably well whether the economy is strong or weak. With so many uncertainties regarding the pandemic, I certainly value this characteristic. That said, it will need to look after its brands to maintain popularity. Competition is strong so it will need to stay alert to maintain its pricing.

Overall, Diageo is a quality, defensive consumer company. And I’d be more than happy owning it in 2022.

Harshil Patel does not own shares in Diageo.

Royston Wild: SSE 

There’s never a perfect time to buy shares. There are always some economic, political or social problem that’s threatens to sink global stock markets. It’s my opinion, though, that the litany of risks as we head into 2022 — from the enduring public health emergency and rocketing inflation to the rapidly slowing Chinese economy — mean investors like me probably need to be extra careful right now. 

This is why I think SSE (LSE: SSE) could be a top stock to buy for next year. Electricity’s one of those essential commodities that remains in high demand irrespective of broader economic conditions. Therefore power generators like SSE can expect revenues to remain stable in 2022 even if the world economy goes for a bath. 

I also like SSE from a long-term perspective. The FTSE 100 firm has made green energy a cornerstone of its growth strategy and it plans to treble output from renewable sources between 2019 and the end of this decade. This should pay off handsomely as low-carbon electricity gains in popularity. I’d think SSE’s a top stock to buy for 2022 despite the unreliable nature of wind power and the subsequent danger this poses to the energy producer’s top line.

Royston Wild does not own shares in SSE.

Roland Head: Centrica

Gas prices and energy supplier failures have made headlines in 2021. I reckon that British Gas owner Centrica (LSE: CNA) could be one of the biggest winners from this crisis

Unlike smaller rivals, Centrica has a solid balance sheet and has hedged its supply contracts to make sure it doesn’t lose money on price-capped deals with consumers.

By taking on the customers of failed firms such as People’s Energy, British Gas has also been able to add more than 400,000 new domestic customers. This has helped to reverse the customer outflows seen in recent years.

As one of the largest players in the utility sector, Centrica is helping to shape new rules aimed at preventing a repeat of supplier failures we’ve seen in 2021.

I expect larger firms such as British Gas to emerge stronger from this crisis. Indeed, I expect economies of scale and value-added services such as boiler maintenance drive a return to growth.

Centrica shares are currently trading on less than 10 times 2022 forecast earnings and offer a forecast yield of 4.6%. I can see plenty of room for further share price gains, supported by higher profits.

Roland Head does not own shares in Centrica.