Here's how I'd spend £1,500 in July on UK growth stocks

Here’s how I’d spend £1,500 in July on UK growth stocks

Jonathan Smith explains the key elements of what make UK growth stocks attractive, and gives some examples of companies he would buy now.

Jon Smith ❯

Jon is an experienced private investor from London. He specializes in macroeconomics with his articles often incorporating the state of the economy into specific stock recommendations.

Published 5 July, 2021 10:07 am BST

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.

Given the volatility we saw in the FTSE 100 last month, I think there are some opportunities in the market to take advantage of. If I had £1,500 that I was looking to deploy in July for the long run, I would be thinking about good UK growth stocks. There are several points that I think make them attractive right now.

Key points about UK growth stocks

A growth stock is a share that has certain attributes. The company is usually in a fast growth sector. This could be technology, energy, healthcare or several others. The fast pace of growth usually means that all profits are reinvested in the business. As a result, it’s unusual to get a growth stock that’s attractive for dividend investors.

It also might be the case that the profits aren’t that high right now. Yet due to the pace of growth, the future looks bright. This usually means UK growth stocks have a high price-to-earnings ratio. This feature means that value investors tend to stay away from growth stocks.

Should you invest £1,000 in Sig Plc 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 Sig Plc made the list?

See the 6 stocks

If income and value investors are unlikely to buy growth stocks, why should I? Well there’s an important element of growth stocks that I find attractive: the future outlook. These stocks have the potential to increase revenue and profit by 10x or more in a few years time. If this is realised, then the share price should reflect this increase as well. This could give me large profits when I come to sell the shares.

Investing my £1,500

There are many UK growth stocks listed on the FTSE 100 and FTSE 250 right now. With £1,500, I could in theory invest in all of them, but I wouldn’t actually do this. After all, my £1,500 would become so diluted and would be eaten away by transaction fees that it wouldn’t be very efficient at all.

Instead, I’d look to buy half a dozen stocks that fit the bill. As I mentioned at the beginning, several sectors are growing at a good pace. In the technology area, the likes of Experian and AVEVA Group are companies that I think would sit well in my portfolio.

Outside of technology, I’d buy SSE as a potential growth stock in the renewable energy space. Although the share price is only up 10% over the past year, I think the renewable energy space hasn’t fully gained traction yet and so has the potential to outperform going forward. Thinking outside the box in this way can help me to outperform the broader market.

Over time, I’ll hopefully get more disposable funds that I can allocate to growth stocks beyond July. One option here would be to increase my holdings in the same stocks I already hold. Alternatively, I can buy different stocks, allowing me to further diversify my risk.