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It feels like a long road back to economic recovery for the UK. But it has arrived at a crucial stop, finally. In November 2021, UK’s economy grew by 0.9% from the month before. The number in itself is not eye-popping. But it is significant, because the economy has now grown beyond its pre-pandemic levels of February 2020, and by a decent 0.7%, no less. This bodes well for my FTSE 100 investments. 

Good news on the economy

The sluggish economic recovery, I have to admit, was making me somewhat jittery about 2022. While there was little doubt that it would continue, recovery at snail’s pace meant that it was more vulnerable to risks like inflation or even a resurgence of the pandemic. However, now that it has managed to push past pre-pandemic levels, I am more confident about the returns from my investments. 

What it means for my FTSE 100 investments

Consider construction output, for instance. It is one of the components of gross domestic product (GDP), the headline measure for the economy’s performance. Some readers might recall that the previous print was pretty bad for construction. If the trend had continued, it could have had an impact on FTSE 100 construction stocks, including those in my own portfolio, like CRH. 

But construction can also be seen as a proxy for the real estate market. And plenty of house builders are also part of the index. Again, one example from my own investments is Persimmon. In another article today I have already written about whether or not it could sustain its 9% dividend yield in 2022. And if the latest economy numbers had been weak, it might no longer have been a question in my mind, but a foregone conclusion that it could not. Now, however, I am hopeful.

Also, the services sector has encouraging trends in sub-segments. Transport and storage, which includes postal and courier services has seen strong growth. This could bode well for a FTSE 100 stock like Royal Mail. It is one of the best performing stocks in my portfolio. And now I am even more optimistic about it. Of course there is a possibility of a seasonal bump up in demand for these services because of the festive season. So I would look out for future trends in the segment as well. 

What I’d buy next

The professional, scientific, and technical activities segment also showed strong growth. It includes business activities like architectural and engineering services among others. This is a good reminder to consider stocks that have been long on my investing wish-list, like Spirax-Sarco Engineering. It might be the priciest FTSE 100 stock in absolute terms, but it has also been a good growth buy for long-term investors.

A note of caution

However, I cannot just base my investment decision on one month’s GDP numbers, especially now when there is so much uncertainty in the air. The Covid-19 situation is still not completely under control, and we just do not know when it might throw up another nasty surprise. Also, inflation numbers are basically out of hand right now. And FTSE 100 companies are quite concerned about its impact on their financials. Still, I do believe that we have made a lot of progress and even with stops and starts, FTSE 100 stocks could continue to perform well. I would only add to my investments now. 

Manika Premsingh owns CRH, Persimmon and Royal Mail. 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.

One FTSE growth stock I like the look of is CVS Group (LSE:CVSG). Here’s why I would add the shares to my holdings for the long term.

Growth market

Pet ownership and pet care is a huge growth market. According to the Pet Food Manufacturers Association, it is estimated that 59% of households in the UK have pets as of 2021. In 2020, consumers spent nearly £8bn on pets and related products in the UK alone, according to data compiled by Statista.

CVS Group is one of the largest veterinary services providers in the UK. CVS has over 500 practices supported by more than 1,900 vets and 2,500 nurses. Owning a pet is a wonderful thing in my opinion. Much like us, our pets need food, water, exercise, accessories, and healthcare. 

As I write, CVS shares are trading for 2,000p. This is up from 1,446p at this time last year, which is a 38% return over 12 months.

Why I like CVS Group

CVS’ recent and historic performance has been excellent. I do understand past performance is not a guarantee of the future; however, I use it as a gauge. In November, CVS provided a trading update for the start of its new fiscal year. Total sales grew by nearly 14% in the four month period to 31 October 2021 compared to the same period last year. Positive cash generation and further investment in facilities has also been a priority. Looking at past performance, I can see total revenue and gross income have increased year on year for the past four years.

With the rising number of pets in the UK, I actually see CVS shares as defensive. The need for veterinary services and animal consumer goods are essential for pets. There’s no such thing as free healthcare for pets, unlike for humans who can rely on free healthcare in the UK provided by the NHS. 

Finally, I can see insiders own shares of CVS Group. I am usually buoyed when insiders own shares of a firm I am reviewing for investment viability. This is for two reasons. Firstly, insiders could sell shares for any number of reasons but they would only buy them for one reason – they believe the shares will rise. Second, who better to know if a company is heading for success than those who run it?

FTSE stocks have risks

Despite my bullish attitude towards CVS Group, I must note two risks associated with buying the shares. Firstly, like most growth markets, there are many firms vying for market share and looking to get ahead of the competition. One competitor that springs to mind is Pets at Home Group. Competition can affect performance and shareholder returns. Secondly, there is a concern about the lack of availability of vets in the UK, which could affect operations and in turn performance and returns too.

Overall, I like CVS Group and would buy the shares for my holdings and keep them for the long term. Performance has been positive for some time and seems to be continuing on an upward trajectory. In addition to this, the market as a whole is growing in line with increased pet ownership, which bodes well for CVS as a FTSE growth stock for my portfolio.

Jabran Khan 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.

FTSE AIM incumbent Kape Technologies (LSE:KAPE) has seen its share price increase by over 100% in the past 12 months. What’s prompted this rise and should I buy the shares for my portfolio?

Cyber security specialist

Cyber security is a major concern for businesses and consumers alike as the digital revolution continues to speed up, driven by the pandemic. Kape Technologies is a software business specialising in cyber security software solutions. It designs and sells its own proprietary tech through a number of its own brands. Kape possesses an international reach with operations in 11 countries through its 750 employees.

As I write, the shares are trading for 400p. At this time last year, the shares were trading for 195p, which equates to a 105% return over a 12-month period. Looking back even further, five years ago the shares were trading as a penny stock for 48p. There aren’t many FTSE stocks that have returned over 700% across a five-year period.

For and against buying shares

FOR: Kape has performed well consistently for a number of years through organic growth and key acquisitions. Reviewing past performance, I can see revenue and gross profit has increased year on year for the past four years. Of course, past performance is not a guarantee of the future. Kape’s most recent update, an interim report released in October for the six months ended 30 June was positive too. I can see that overall revenue, recurring revenue, operating profit, and cash generation all increased compared to the same period last year. It also completed a key acquisition of Webselense for close to $150m to enhance its offering.

AGAINST: The tech and cyber security market is saturated and extremely competitive. Many of the firms in this space that do well have a rich history of performance and brand recognition. There are bigger names with better reach in this space than Kape, which could affect customer numbers and in turn, performance and shareholder returns.

FOR: I like when a firm makes acquisitions to enhance its offering and beat off competition. Kape has a consistent history of doing this. I particularly liked its most recent addition to the Kape umbrella, ExpressVPN, one of the best known VPN services around. This deal was completed at the end of last year and gained Kape millions more customers and lots of revenue.

AGAINST: Despite my personal, bullish attitude towards acquisitions, there is always the risk that they don’t work out. Kape, like any firm completing acquisitions, could end up overpaying for a business or the business may not perform as expected. This can affect the balance sheet and potential shareholder returns too.

A FTSE stock I would buy

Overall, I really like Kape Technologies and I would add the shares to my holdings at current levels. It has grown at a rapid rate in a burgeoning tech market despite some heavy hitters out there like Avast and McAfee. Recent and past performance has been excellent and it continues to acquire excellent businesses to enhance its offering.

I expect the cyber security market to continue growing. I think Kape should command a slice of this market and perform well for my portfolio in the long term.

Jabran Khan 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.

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I like to hold some growth stocks in my portfolio. If I had £20,000 to spend on UK growth shares right now, I would spread it equally across the eight companies below, giving me some diversification.

Digital future

I would pick three shares that would give me significant exposure to the growth of the digital economy, although each has a different role in it. First is software provider Idox. It had a challenging few years and saw revenues shrink not grow. Last year, though, both revenues and operating profit returned to growth. With its government customer base, I see substantial opportunities for the company in coming years. One risk is price competition from larger rivals hurting profit margins.

I would also buy digital media group S4 Capital. The company plans to double its revenues and profits in a three-year period and has signed up blue chip clients such as BMW. By growing business with large clients, attracting new ones, and acquiring smaller agencies I think S4 could hit its growth targets. But rapid growth can add overhead costs. That may hurt profits.

I also think Computacenter could continue to benefit as customers upgrade their IT systems as part of a push to more digitalisation. It has deep experience and long-established customer relationships that could translate into ongoing revenue growth. One risk is that any economic downturn could lead to non-essential digital upgrades being suspended, hurting revenues and profits.

UK growth shares

I also like the growth strategies of a couple of companies with big ambitions.

One is instrument maker Judges Scientific. The shares have performed strongly lately but I think the company’s growth ambitions could propel it higher still. Its focus on applications where accuracy matters allows Judges to sustain premium pricing. As it gets bigger, it can benefit from economies of scale and a growing reputation. One risk is that competitors try to mimic its strong performance by bidding for the types of assets Judges has been buying at attractive valuations. That could slow revenue growth.

I also like kidney diagnostic specialist Renalytix. Its revenues remain small but I expect strong growth in coming years as a growing sales force increases the company’s installed user base across New York state in the US. One risk is the additional costs of the sales push hurting profit margins.

From pork to parkour

Selling pig meat is a growth business because demand is booming. Meat producer Cranswick recorded earnings per share growth of 11% last year. A dividend raise of 16% was the latest in a series of annual increases over more than three decades. But any sudden changes on export rules are a risk to revenues and profits.

Discount retailer B&M has found a winning formula selling well-known brands at keen prices. It has plenty of space to grow in the UK, which I expect to fuel higher profits in coming years. One risk is increased competition from online discounters. That could hurt revenue at B&M’s bricks-and-mortar operation.

Finally, I would buy JD Sports, which sells active sportswear for everything from football to parkour. Its first half results were the strongest ever. I see continued growth opportunities from the company’s aggressive international expansion. But competition in markets like the US could hurt the company’s profit margins.

Christopher Ruane owns shares in JD Sports, Renalytix and S4 Capital. The Motley Fool UK has recommended B&M European Value and Judges Scientific. 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.

Transforming £1,000 into £5,000 using UK growth shares is quite a task. After all, that’s a 400% rise on my initial investment.

Expecting these sorts of returns over a couple of months is, in my opinion, too optimistic and often leads investors pursuing such short-term gains down exceptionally risky avenues.

Instead, I aim to generate this wealth over the next five years. The question is, how to find such opportunities today? Let’s explore.

Identifying competitive advantages

What can often be forgotten is that when an investor buys a stock, they’ve just purchased a piece of a business. That’s why when a company does well, in most cases, so does its stock price.

So predicting which UK growth shares will become monsters in the future is the wrong question, in my opinion. Instead, I ask which businesses are set to thrive and prosper in the coming years.

There are a vast number of industries with equally vast opportunities. For example, the automotive sector is currently undergoing a massive shift toward electric vehicles. Meanwhile, technology companies are preparing for the incoming metaverse. The list goes on, and plenty more opportunities like these will appear in the future as well.

There are countless businesses operating in each of these spaces. Most of them either won’t make it or will not deliver desirable triple-digit returns for my portfolio. So how do I know which to buy and which to avoid?

Throughout my ongoing investing journey, I’ve learned that the best investments are those in businesses with key advantages over their competitors. That’s why when looking at any stock, I ask: “What makes this business special?”

Does it have a strong brand that delivers pricing power? Is its technology superior to that of its rivals? Are there high barriers to entry for newcomers to its industry? If the answer is yes, then I could be looking at a long-term winner for my portfolio.

An example of a thriving UK growth share

Keywords Studios (LSE:KWS) is a prime example of a company leveraging its scale and growing reputation to dominate its industry.

The firm provides support services to the video game development sector. And its list of competitors is far from short. But by offering services that cover the entire scope of the development process, rather than specific parts, it’s become a one-stop solution for studios worldwide, including Ubisoft, Electronic Arts, and Take-Two Interactive, among numerous others.

This advantage has enabled its revenue to climb from €96.6m to a forecast €500m over the last five years. Unsurprisingly, the share price has followed suit, delivering a 396% return for investors over the period. That means a £1,000 investment in January 2017 would now be worth £4,960 today – just £40 shy of my £5,000 target.

Of course, this isn’t a risk-free enterprise. A core part of Keyword’s success stems from its acquisitive growth strategy to expand its talent pool. Acquisitions can go south quickly, and if a series of poor decisions are made by management, it can lead to a compromised balance sheet.

Despite this risk, I believe shares of this UK growth stock look primed to continue surging for many years to come. That’s why it’s already in my portfolio.

Zaven Boyrazian owns shares in Keywords Studios. The Motley Fool UK has recommended Keywords Studios. 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.

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Roku‘s (NASDAQ:ROKU) stock has had quite a rough couple of months. Despite reaching a new all-time high in July last year, shares have since been trashed. Over the past 12 months, this previously explosive growth stock has taken a nearly 60% hit.

So, what happened? And is this actually a buying opportunity for my portfolio?

A unique streaming platform

As a reminder, Roku is a streaming service similar to Netflix or Amazon Prime. But rather than primarily focusing on offering original content, the firm has ventured into the hardware space.

Using a Roku Player device, non-smart TV’s can gain access to almost all other streaming services through it. And the company even works directly with TV manufacturers to install the Roku platform as the operating system on these devices.

This strategy has enabled the group to remain competitive in an area where new streaming services are constantly popping up. And it’s resulted in revenues growing from $399m in 2016 to $1.78bn in 2020. That’s an average annualised growth rate of 45%!

Needless to say, that’s quite impressive. So seeing Roku’s stock have a stellar run over the years is hardly surprising. But if the company is thriving, why is the share price now on a downward trajectory?

Roku’s stock falls on fears of a slowdown

Like any high-growth stock, Roku’s valuation is pretty lofty. Even after the recent tumble, its price-to-earnings ratio sits around 80. In my experience, with such a high price tag, the level of volatility also tends to be elevated, especially when fears of a growth slowdown is on the rise.

In its latest earnings report, guidance for its final 2021 quarter fell below expectations. Management set its net revenue outlook at $893m, versus analyst forecasts of $944m. But even beyond missed targets, there could be looming issues in its international expansion.

To date, most of Roku’s success has originated from within the US. But with the market now close to saturation, management is having to look elsewhere to find new growth opportunities. And a recent report by Atlantic Equities suggests the group could struggle against rising competition from the likes of Samsung and LG Electronics.

With that in mind, I’m not surprised to see Roku’s stock take a hit.

Is this actually a buying opportunity?

Facing new challenges abroad is hardly unexpected, in my opinion. But even with this increasingly competitive environment, I believe Roku is in a strong position. Alphabet (Google) recently signed a new deal with the company to keep YouTube and YouTube TV on Roku’s platform.

Meanwhile, despite having its own streaming device business, Apple has also signed a partnership with the firm to add Apple TV to Roku’s technology.

To me, this looks like the work of a wide economic moat. As such, I think the falling Roku stock price is actually a buying opportunity for my portfolio.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Roku. 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.

Scottish Mortgage Investment Trust (LSE: SMT) is a ‘technology stock’ that has performed extremely well during the Covid-19 pandemic. And I think it could bring breadth to my portfolio this year. Formed in 1909, it is highly diversified on a geographical basis and has holdings in a number of the world’s leading companies. In more recent times it has specialised in technology stocks, but it also holds stocks in other sectors, like pharmaceuticals. Let’s take a closer look.

A diverse portfolio

The main reason I like Scottish Mortgage Investment Trust is that aforementioned geographical diversity. Its holdings are from a number of countries, but mainly the US and China. This brings together some of the highest-profile (and, I think, best) stocks from the two biggest economic powerhouses of our time. These include Tesla, Tencent and Alibaba.

But while there are a number of well-known public companies on its list of holdings, it also offers exposure to private companies that would be extremely difficult for the average investor to access. While investing in the stock gives me access to all these different companies, I have to be careful to analyse its holdings where I can as their performances could affect the share price.

Scottish Mortgage Investment Trust is currently trading at around its net asset value (NAV), indicating that it is neither expensive nor cheap relative to the underlying value of the assets it owns.

Yet that doesn’t mean it isn’t appealing. In terms of the stock’s fundamentals, it has usually massively outperformed the FTSE 100 index in the past five years, although it underperformed the index in the 2018/19 fiscal year. 

The growth in its share price over recent periods is staggering. It registered 188% share price growth in the past two years, although it rose only 10.35% in the past year.

I also like how the trust’s managers allocate cash and I was interested in the pandemic-era move to make Moderna the top holding. This made sense, given that Moderna has been at the forefront of the global vaccination rollout. It is clear that Scottish Mortgage Investment Trust can adapt to new and challenging situations.

The post-pandemic era

There are risks, of course. Given its current holdings I am not totally confident that this stock will continue to outperform in the post-pandemic environment at the level it has done. With a heavy emphasis on technology and pharmaceuticals, I would be looking elsewhere to benefit from the reopening. Airlines and hospitality could perform much better than they have done of late, for instance.

Nonetheless, as the Moderna move showed, the trust’s leadership has shown itself to be adaptable. And it may tweak its holdings to cater for the end of the pandemic. Besides, it’s unlikely that the technology stocks it holds today will see their businesses devastated by the return to normality. Quite the reverse, in fact. In the long term, I think this stock brings diversity to almost any portfolio. While I am not adding immediately, I will be looking for opportunities to buy in the future whenever there are any dips in the share price.

Andrew Woods holds no share mentioned. The Motley Fool UK has recommended Tesla. 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.