Key points

• Some FTSE 250 growth stocks have more potential than others
• These companies have unique competitive advantages
• They could report substantial growth over the next decade

Recently, I have been looking for FTSE 250 growth stocks to add to my portfolio. I am looking for companies with fantastic growth potential over the next decade and a robust competitive advantage to help them achieve their aims. 

Here are two companies I would buy, considering their growth targets for the next couple of years. 

FTSE 250 growth stocks 

The first on my list is Trustpilot (LSE: TRST). As the world becomes more digital, service providers need to show their customers they are trustworthy. Customers also want to know the enterprise they are buying from is not a scam. 

Trustpilot fulfils this niche in the market. The company has built a brand that is well trusted by consumers and businesses alike. This is a tremendous competitive advantage. The group has developed this trusting relationship over the years.

The longer it is able to maintain the relation with users, the more significant the advantage will become. Indeed, I think it would take years and a vast amount of capital for a competitor to achieve the same stakeholder trust and awareness level. 

Of course, this does not guarantee that the business will never face any competition. I think there will always be challenges to its dominance. The company also needs to ensure that it maintains the quality of reviews. If it lets its guard down, the trust between stakeholders will quickly vanish. 

Despite these risks and challenges, I would be happy to buy the stock for my portfolio of FTSE 250 growth shares today, considering its substantial competitive advantages. 

Defensive market

In my opinion, the food industry is one of the most defensive. Humans will always need to eat and drink, so it seems likely there will always be a market for these products. 

That is why I think Premier Foods (LSE: PFD) also deserves a position in my long-term growth portfolio. The owner of the Mr Kipling brand, among others, is coming out of a decade-long slump, which began during the financial crisis. 

However, over the past couple of years, the company has made substantial progress reducing debt, cutting pension liabilities, and freeing up cash to invest in marketing. 

Now it has removed these chains from around its neck, I think the group is primed for growth over the next decade. It is planning to hike marketing and investment spending further and increase shareholder returns. 

While the food industry is defensive, it is also incredibly competitive. And competition is probably the biggest challenge the group will have to deal with over the next few years. 

Despite this headwind, considering its long-term potential, I am excited about the outlook for the FTSE 250 company. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

I think these low-cost stocks could help me make spectacular returns. Here’s why I’d buy these ‘nearly’ penny stocks right now. Each costs less than 150p.

Packaging powerhouse

The relentless growth of e-commerce means that Macfarlane Group’s labels and packaging products should remain in high demand. The business designs, makes and distributes generic and bespoke packing materials which it sells in the UK and Europe. It also sells its labels in the US. It therefore has considerable strength through geographic diversification.

Its operations might not be the most exciting but they serve an important part of everyday life. Researchers at Statista think the global e-commerce market will be worth $6.39trn by 2026, up from $4.89trn last year. Despite the threat posed by rising raw material prices I think Macfarlane’s could be a great buy for the online shopping boom.

A high-energy stock

I also believe VH Global Sustainable Energy Opportunities could be a great investment for me for the next 10 years. This near-penny stock allows UK share investors to make money from rising global demand for green energy. According to the International Energy Agency, 95% of the increase in global power capacity to 2026 will come from renewables.

VH Global invests in different low-carbon technologies across the globe. In recent months, it’s acquired new solar assets in Australia and Brazil, for example. I’d buy VH Global even though the highly-regulated nature of its operations could throw up profit-sapping obstacles at any time.

Bakk in business

Bakkavor Group’s in the box seat to enjoy recovering demand for ‘on the move’ food. It makes salads, sandwiches and bakery products and it has expanded into the US and China to exploit these fast-growing markets.

According to IGD, the food-to-go market will command a 23% share of the total food sector by 2026. That compares with the 21% take it was said to have commanded last year.

Demand for ready-made food is soaring as people’s lifestyles become busier. This is a theme that looks set to continue for the foreseeable future. My only concern with buying Bakkavor shares is the possible return of Covid-19 lockdowns if infection rates spike. This would naturally hit demand for its edible products hard.

A highly-stable ‘nearly’ penny stock

I actually think Residential Secure Income should thrive even if the pandemic rolls on. As the name suggests, this business generates income by letting homes, a property segment which history suggests should remain robust whatever economic, political or social crisis comes along.

But this UK share is far from boring. I think this ‘nearly’ penny stock could deliver strong profits growth this decade. Britain’s shortage of affordable rental properties looks set to run and run.

I also like Residential Secure Income’s exposure to the fast-growing shared ownership market. I’d buy the business even though Bank of England plans to loosen mortgage affordability could hit broader demand for rented accommodation.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Macfarlane Group. 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.

As a self-employed worker, I know my retirement plans are entirely in my hands. I don’t have a workplace pension. That’s why my long-term strategy is to build a passive income fund to help support me as I get older.

I’ve been investing for quite a long time already. But today, I want to explain how I’d start again with just £5.15 per day — less than the average price of a pint of beer in London.

How I’d start investing

I’ll start with a quick wealth warning. Share prices can fall at a moment’s notice and dividends can be cut. Future results are never guaranteed and it’s generally a bad idea to be a forced seller.

For all of these reasons, I wouldn’t start buying shares until I’d built up a cash savings fund of three to six months’ income.

Once that’s done, I’d start using my investment cash to buy shares in good quality companies with a track record of long-term growth. I’d be looking for businesses with defensive qualities I expect to continue growing steadily for many years.

I wouldn’t try to invest £5.15 every day. Even if it was possible, investing so little would make my trading costs far too high. What I’d probably do is have the total monthly amount (£157) paid into my ISA direct from my bank each month. I’d then aim to buy a new stock every three months or so.

The dividend income I’d receive would be left in my share-dealing account and reinvested with my regular deposits to help drive long-term gains. Naturally, I’d keep my stocks in a tax-efficient Stocks and Shares ISA.

What stocks would I buy?

To start with, I’d want some exposure to consumer businesses with well-known brands. Unilever and drinks giant Diageo would probably both me on my list, thanks to their strong brand portfolios and global footprints.

Other businesses I’d consider might include defence giant BAE Systems, distribution group DCC and FTSE 100 testing and certification specialist Intertek.

All of these stocks have a long history of profitability and regular dividend growth. Although shareholder payouts are never guaranteed, I’d hope to see continued growth over the coming years.

Passive income: what I’d expect

The long-term average return from the UK stock market is around 8%. Using this as a guide, my sums suggest it would take me about 25 years to reach my £500 monthly passive income target.

In reality, it might be quicker or slower than this. There’s no way to know. But one sure way to speed up the process would be to pay in more cash each month.

If I upped my monthly payments to £10.66 (two pints of London beer per day), then I estimate I’d hit my £500 passive income target in just 17.5 years — a big improvement.

Whatever I was able to contribute, I’d want to start straight away. One thing I’ve learned in my years of investing is that good results take time. That’s why I’m making it a top priority to put regular contributions into my Stocks and Shares ISA in 2022.

Roland Head owns DCC, Intertek, and Unilever. The Motley Fool UK has recommended Diageo, Intertek, and Unilever. 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.

When I have covered the Rolls-Royce (LSE: RR) share price in the past, I have consistently concluded that this stock looks attractive as a recovery play. 

The company is still one of the largest producers of engines for the civil aviation market in the world. It also owns a cache of valuable engineering know-how. This includes the resources to manage the Royal Navy’s nuclear submarines. 

These are tremendous competitive advantages. It could take another corporation decades to design, develop and have a new engine approved for the civil aviation market. And when it comes to nuclear power, it seems unlikely the government will ever replace Rolls-Royce, considering the strategic importance of its position in the defence industry supply chain. 

However, the company is currently facing severe headwinds. The coronavirus pandemic bought the business to its knees and, at the beginning of the pandemic, there were genuine concerns the enterprise would not survive. 

Pulling through the crisis

Rolls has pulled through by slashing thousands of jobs, raising money from investors, and selling off a selection of non-core business. Unfortunately, it is not in the clear just yet. It could take several years before the global aviation industry returns to 2019 levels of activity.

As the bulk of the company’s revenues are tied to engine service contracts which are, in turn, linked to the number of hours flown. So until the aviation industry fully recovers, its sales are likely to remain under pressure. 

Still, over the next decade, I think the business has potential. Should the aviation industry return to 2019 levels of activity by 2025, Rolls sales and income could jump. Its profit margins could even exceed 2019 levels, thanks to recent cost-saving initiatives. 

The company is also pursuing plans to develop small nuclear reactors. If successful, this could become a multi-billion dollar business line for the group over the next few decades. However, it is unlikely the first facility will be up and running before the end of this decade.

Nevertheless, over the next five years, the company should provide more information on how this initiative will flow through to sales and profits. If the demand for the small reactors exceeds expectations, the Rolls-Royce share price could have a bright future. 

Rolls-Royce share price potential

These are the reasons why I think the stock has potential over the next decade. The twin tailwinds of the aviation market recovery and launching new products could help the business grow its bottom-line and increase cash flow. If this scenario plays out, I think the Rolls-Royce share price will rise significantly from current levels over the next 10 years. 

However, it is impossible for me to place a price target on the stock. There is a lot that could go wrong for the business between now and 2032. What’s more, nuclear technology is notoriously difficult to develop and commercialise. There is no guarantee these company initiatives will ever generate substantial profits. 

Despite these risks, I would be happy to buy the stock for my portfolio as a speculative long-term growth play today. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The Lloyds (LSE: LLOY) share price has been an underwhelming investment to own over the past 10 years. 

However, I believe that all of the pieces are now in place for the business to charge ahead. And I think it is likely this improving operating performance will enhance investor sentiment, pushing the stock higher in the years ahead. 

Pieces in place

The lender has only really just started to recover from the financial crisis. For most of the past decade, the group has been focused on cutting costs, improving efficiency and diversifying its operations. 

These initiatives have generated results, but interest rates have remained the elephant in the room. Interest rates have been held near-zero consistently since the financial crisis, preventing financial institutions like Lloyds from making a full recovery. 

This is changing. The Bank of England is expected to increase interest rates several times over the next year. This will allow lenders such as Lloyds to increase rates charged to customers. For the first time in a decade, it should be able to generate a significant increase in lending margins. 

As lending accounts for the vast majority of the company’s business, higher rates could lead to a dramatic increase in returns on equity, a crucial measure of banking profitability, calculating the rate of return for every £1 invested. 

Over the past decade, Lloyds has been trying to improve its return on equity by diversifying into wealth management, buy-to-let investing, and expanding its credit card business. These initiatives have produced results, but its hands were tied without an interest rate hike. 

Lloyds share price re-rating 

As the environment changes, I think the market will rethink its opinion of the business. Investors have been wary of buying the shares in the past, due to the uncertain interest rate environment. Now the environment is improving I believe market sentiment will change. 

That is why I think the outlook for the Lloyds share price has never been so exciting. Over the next couple of years, I believe the stock will benefit from the twin tailwinds of growth and improving market sentiment. Investors may be willing to pay more for the stock as growth returns.

The combination of higher earnings and a higher earnings multiple is likely to produce a favourable environment for the enterprise. 

Having said all of the above, there are some challenges to consider. Interest rates may not rise as high as some analysts expect. A sudden economic downturn could cause the Bank of England to reverse course. This would pull the rug out from underneath the bank.

What’s more, the banking industry is highly competitive. Due to competitive forces, Lloyds may not be able to increase the interest rate it charges to customers significantly. This could hold back growth. 

Still, despite these challenges, I would be happy to buy the stock from my portfolio today, considering the positive factors outlined above. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.

In 2021, the FTSE 100 index rose by a respectable 14.3%. One of the biggest winners was Meggitt (LSE:MGGT), soaring 58%. Meggitt is a British engineering company with a global footprint specialising in components for the aerospace, defence, and energy industries. It has production plants, research facilities, service centres, and sales offices across four continents and 14 countries. It might not be a household name but the company’s technology and products are present on almost every major aircraft.

The pandemic hit Meggitt’s top and bottom line hard as aerospace spending halted. In fact, Meggitt continues to face a challenging environment that includes supply chain disruptions. So how did the company navigate these headwinds and generate eyewatering returns for its investors?

Closer inspection

A closer look at Meggitt’s share price chart would be perplexing for uninformed investors. Incredibly the share price was up just 0.5% between January and July. Then it exploded nearly 60% on the first trading day of August. Subsequently the share price nudged up less than 0.5% in the remainder of the year. The Meggitt share price found itself in relative limbo for most of the year despite breathtaking share price performance. Indeed, it is still trading sideways at the start of 2022. 

That sudden jump in August sent the FTSE 100 constituent’s share price to an all-time high but what caused this boom?

Recently there have been encouraging signs of a recovery in civil aerospace. The company reported a £48m profit for H1 2021, a big improvement on the £348.7m loss reported for H1 2020. Additionally, in the latest trading report Meggitt reported a 5% year-on-year increase for the third quarter. Nevertheless, this is not the blowout performance that could create such explosive growth in the share price of a company. 

FTSE 100 takeover target

It was an acquisition announcement that sent the FTSE 100 company’s share price skyrocketing. Aerospace and defence competitor Parker-Hannifin reached an agreement to acquire Meggitt in a cash deal worth £6.3bn. That translates to a share price of roughly 800p. This valuation represented a 70% premium on where the company traded a week before. Certainly this provides the context to the volatile chart above.

The acquisition is subject to regulatory clearance but Parker-Hannafin had promised a series of commitments regarding UK jobs and investment. However, the deal has triggered concerns from the UK government. “On 18 October 2021, acting on official advice, the Secretary of State issued a public interest intervention notice to intervene in the proposed transaction on national security grounds”, the government said. The Competition and Markets Authority (CMA) now has until midnight on 18 March 2022 to complete and submit this report to the Secretary of State.

What next?

The FTSE 100 index has a ‘dinosaur’ reputation among some investors. Skewed towards banks and oil stocks, some companies look dated and arguably lacking in real innovation. This cannot be said about Meggitt. The acquisition has already been approved by Meggitt shareholders. Should the deal go through, one of the best FTSE 100 performers of 2021 and a global innovator will soon leave the index. 

Nathan Marks has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

ESG investing has increasingly come into vogue in recent years. According to Bloomberg Intelligence’s (BI) latest ESG 2021 Midyear Outlook report, environmental, social and corporate governance (ESG) assets are on track to exceed $50trn by 2025, representing more than a third of the projected $140.5trn in total global assets under management.

Furthermore, the Global Sustainable Investment Association has said that ESG assets surpassed $35trn in 2020 up from $30.6trn in 2018 and $22.8trn in 2016.

It’s clearly then an area of large growth. It’s attracting a lot of institutional money as well as attracting investment from private investors.

However, is ESG investing worthwhile when it comes to deciding what to invest in?

Can ESG investing find the next big winners?

One of the reasons I’ll be generally avoiding picking shares based on ESG considerations is that a) it’s hard to define what constitutes a good ESG share and b) as a private investor I want to invest in the very best companies I can. I’m not at all convinced that ESG investing with its exclusions of certain companies based on environmental, social or corporate governance grounds can possibly help me do that.

It potentially excludes future big winners in place of companies deemed to be ESG friendly today.

How I’m looking to find the next big winners

One way, as I’ve explained recently, is to invest thematically. I’m keen to invest in the continued growth of clean energy, artificial intelligence, and e-commerce. These are all areas I expect can attract a lot of money from institutional and private investors. As such, share prices in these sectors could well keep going up. By backing high quality companies in these sectors, with good future prospects and robust balance sheets, I expect I could outperform the market.

Beyond that, as thematic investing is only a small part of my investing strategy, I also want to replicate the investing strategies of some of the most successful investors.

As a long-term investor, what I want to do is try and copy as far as my abilities and time allow is to try and replicate the behaviours of successful investors like Nick Train, Terry Smith, and Warren Buffett. They all invest in different companies and have slightly different styles and methods. What links them though is their conviction and their ability to stick through the tough times. As a result, all have outstanding past success.

That stems from being long-term investors in my opinion. So when thinking about investing in shares this year, I’m going to be mindful that any new investment I buy must have a very high chance of being a bigger and better company in three to five years time.

A word on small-cap shares 

I’m keen also to invest some of my money into smaller cap shares, which struggled in the second half of 2021. That potentially makes some of these shares much better value. Shares such as National World, 4D Pharma, Totally, and Saietta Group could all be high risk, high return speculative stocks, which could boost my portfolio’s returns. Mainly though, rather than investing with ESG in mind, I’ll mostly invest long term in high quality companies that I think can provide income and growth.

Andy Ross owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.