2 growth stocks I’d buy and hold for 2018

Roland Head takes a look at two promising growth stocks from his watch list.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in FTSE 250 pharmaceutical group Indivior (LSE: INDV) have risen by 177% since the firm was spun out of consumer goods firm Reckitt Benckiser at the end of 2014.

However, it hasn’t been a smooth ride for investors in this opioid addiction treatment specialist. The shifting tides of the firm’s legal battles against generic competitors have caused whiplash movements in the share price. A strong nerve has been required to continue holding.

Growing pains could ease

As I’ve commented before, one way forward is for the company to use its strong cash reserves and borrowing facilities to make acquisitions that will broaden its portfolio. News released today suggests that management may be taking steps in this direction.

Should you invest £1,000 in Nvidia right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Nvidia made the list?

See the 6 stocks

Indivior has announced details of a collaboration with a small Swiss company called Addex Pharma, which is developing innovative treatments for alcohol and cocaine addiction. The UK firm will initially invest just $5m, but the potential scale of this deal seems quite large.

In today’s update, Indivior says that potential milestone payments to Addex “could total $330m over time if all development, regulatory and sales goals are achieved”. Given that Indivior’s annual revenue is currently around $1.1bn, it seems to me that the Addex collaboration could be significant if it’s successful.

Hold on for more

The group ended the third quarter with net cash of $322m. Management also recently refinanced lending facilities of $484m at significantly lower interest rates.

This combination should give Indivior plenty of financial firepower to defend its market share and fund joint ventures or acquisitions. With the shares trading on a 2018 forecast P/E of 16, I’d continue to hold.

An impressive performance

Pre-tax profit rose by 11% to £111m last year for the Lancashire-based polymer solutions group Victrex (LSE: VCT).

Strong cash generation lifted net cash to £120m, and prompted management to announce a special dividend of 68p per share. This more than doubled last year’s ordinary dividend of 53.8p per share.

Growth could remain strong

Victrex shares have risen by 36% over the last year. I believe further gains are likely in 2018.

Earnings forecasts for the current year were boosted in September, when the company said that changes to patent legislation would cut its effective tax rate from 21% to 12%.

Analysts have also upgraded their forecasts for 2018 since Victrex’s results were published last month. Such upgrades often take place in several stages, so I wouldn’t be surprised if further increases follow should February’s scheduled trading statement be positive.

One of the key attractions of this business is its high returns. The group’s operating margin was 38% last year, supporting a return on capital employed of 22%. Such high figures mean that Victrex can generate cash to invest in growth and pay dividends without needing to use debt. For shareholders this can be a potent formula for long-term gains.

Although the stock’s forecast P/E of 20 isn’t cheap, adjusted earnings are expected to rise by 11% this year. I believe the firm could beat this figure. It’s also worth noting that the group’s ordinary dividend is expected to grow 30% to 70p, giving a worthwhile yield of 2.7%. In my view, the shares remain worth buying and holding in 2018.

Should you invest £1,000 in Nvidia right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Nvidia made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Victrex. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

A hiker and their dog walking towards the mountain summit of High Spy from Maiden Moor at sunrise
Investing Articles

I asked ChatGPT for the best FTSE 100 stocks to consider and it recommended…

Motley Fool analyst Zaven Boyrazian reviews six FTSE 100 stocks picked by ChatGPT to determine whether any hidden opportunities exist.

Read more »

Young female analyst working at her desk in the office
Investing Articles

£10,000 invested in Imperial Brands shares 10 years ago is now worth…

Imperial Brands' share price has fallen over the past decade. But could large dividends still have provided a positive return?

Read more »

Black woman using smartphone at home, watching stock charts.
Investing Articles

Why did the IAG share price fall 7% in April?

One of Dr James Fox’s favourite stocks underperformed in April. Here, he explores why the IAG share price fell and…

Read more »

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

8%+ yields! Here’s the dividend forecast for Taylor Wimpey shares through to 2027

Taylor Wimpey has long been a solid pick for investors seeking top dividend shares. Can this FTSE 100 stock keep…

Read more »

Shot of an young mixed-race woman using her cellphone while out cycling through the city
Investing Articles

Here’s how a £25k ISA could be the start of a £25k second income

It’s simpler than it sounds. Dr James Fox explains how he’d try to achieve a life-changing second income from a…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

9%+ yields! Here’s the dividend forecast for Legal & General shares to 2027

With one of the FTSE 100's highest dividend yields, should investors consider buying Legal & General shares this May? Let's…

Read more »

Businessman hand flipping wooden block cube from 2024 to 2025 on coins
Investing Articles

I broke my 2025 Stocks and Shares ISA plan by buying this stock while it was down 60%

Our writer explains why he just added to a big loser to his Stocks and Shares ISA portfolio, despite it…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Don’t panic as Warren Buffett retires! Just stick to the Oracle of Omaha’s method

The world's greatest investor Warren Buffett is finally retiring, but this isn't the end of his influence. It’s only the…

Read more »