Picking up growth stocks to help bolster my holdings today and build wealth tomorrow is just smart investing, in my view.
One pick I’d love to buy when I have some cash to invest is Kainos Group (LSE: KNOS).
Here’s why!
Passive income stocks: our picks
Do you like the idea of dividend income?
The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?
If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…
Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.
What’s more, today we’re giving away one of these stock picks, absolutely free!
Helping others work smarter
Kainos Group is a British-based tech firm in the business of providing information technology services. To be specific, it provides consulting and software solutions to help other businesses work smarter, not harder.
The shares haven’t had the best 12 months, losing 31%. However, I’m not too worried about this — in fact, it could provide me with a better entry point to buy some shares.
At this time last year, Kainos shares were trading for 1,235p, compared to current levels of 840p.
The good, the bad, and not much ugly
I reckon Kainos shares have been a victim of economic volatility. Customers have delayed projects due to higher interest rates and inflation impacting budgets. This can have a material impact on earnings and investor sentiment.
For example, the firm’s most recent trading update reflected this, as it showed earnings will come in at less than expected full-year levels. Any business confirming it will not meet forecasts is usually met with negative investor reaction. I’ll keep an eye on the impact of higher interest rates on Kainos’ performance.
Another bearish aspect I’ll keep an eye on is the competitive nature of the tech sector Kainos operates in. It’s still a smaller firm compared to some competitors such as Softcat, for example. These larger firms often possess the experience and presence to win contracts for new business due to their existing market position.
Moving to the other side of the coin, I must admit I’m particularly excited about Kainos’ Workday capabilities. This software has risen in popularity in recent times, and Kainos’ partnership and expertise could be a money spinner for the business.
Next, Kainos has also decided to adopt and incorporate artificial intelligence (AI) solutions into its offering. You may have heard, read, or seen the fanfare around AI capabilities. Again, Kainos adopting this could be another boost for earnings, returns, and sentiment.
Another bullish aspect I noticed is that Shore Capital, one of the top brokers around, gave Kainos a ‘buy’ rating recently. Although broker ratings don’t guarantee anything, I tend to pay attention to trusted and expert financial brokers who understand markets, and carry out lots of research.
Finally, the shares offer a dividend yield of 3.2%, which helps my investment case. However, I do understand that dividends are never guaranteed.
Final thoughts
Although economic turbulence has hurt Kainos shares, I’m not too concerned as a long-term investor. I can see lots of growth ahead for the business, and buying shares now could prove fruitful as part of my investment strategy.
There could be some bumps in the road, which is par for the course when it comes to investing. However, Kainos’ capabilities, future prospects, and current fundamentals are hard to ignore for me.
