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The last few months have been a rather uncomfortable ride for small-cap growth investors. Seen from a long-term perspective, however, this is just the sort of market behaviour that can prove profitable for those willing to buy and then sit on their hands.

I like to think I include myself in this group. And as luck would have it, the share price of one of my most coveted stocks is back down to levels not seen since the immediate aftermath of the March 2020 market crash.

Selling pressure

Set up in 2003, Farnham-based biotechnology firm Bioventix (LE: BVXP) specialises in the commercial supply of high-affinity monoclonal antibodies for applications in clinical diagnostics. In other words, these antibodies are used in blood testing machines in hospitals across the globe.

As a long-term hold, BVXP has been an absolute winner. As I type, the share price has climbed just under 1,000% in a little over eight years.

So far, however, this AIM-listed growth stock is having a poor 2021. The shares have retreated almost 24% year-to-date thanks to the brute that is Covid-19. With hospitals needing to prioritise treating the infected rather than diagnosing people for other things, it’s perhaps inevitable that profits have slipped. To compound the issue, fearful patients aren’t even reporting symptoms to doctors. 

So, the shares are cheap?

Not exactly. In fact, I imagine a fair few growth-focused investors would balk at the asking price (26 times earnings). However, I think this could prove to be a great contrarian opportunity for me for a few reasons.

First, BVXP scores extremely well on quality metrics such as returns on capital employed (ROCE) and operating margins. The former is something that star investors like Warren Buffett and Terry Smith pay a lot of attention to. Over time, it’s a company’s ability to reinvest the money it makes at a high level of return that separates the wheat from the chaff. 

Second, Bioventix is backed by some of what I consider to be the best fund managers in the business. No less than 20% of the company is held by star stock-picker Keith Ashworth-Lord in the CFP SDL UK Buffettology fund. Liontrust Investment Partners also owns a sizeable stake. Most importantly, Bioventix’s CEO Peter Harrison remains high up on the share register. Theoretically, the more willing management is to put its own cash at risk, the more likely it is to act in the interests of all shareholders.

Finally, there’s the balance sheet. With zero debt, Bioventix looks financially robust — the antithesis of many UK-listed companies right now. 

But what if Omicron sticks around?

It’s a fair question. The longer the pandemic goes on and resources are diverted elsewhere, the less near-term demand there is for Bioventix’s antibodies. Earnings could therefore continue to suffer in 2022.

Having said this, I do see Bioventix’s fall in 2021 as an opportunity to begin building a position at the very least. The shares could recover nicely if next year proves even slightly better than health and economic experts are currently predicting.

And if BVXP does stay down for longer than I expect it to, the dividend stream should make up for this. A potential 115p per share handout becomes a yield of 3.4% at the current share price.

As far as growth stocks go, I think there are a lot worse candidates out there.

Paul Summers owns shares in the CFP SDL UK Buffettology fund. The Motley Fool UK has recommended Bioventix. 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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The Avon Protection (LSE: AVON) share price has had a mixed performance during the Covid-19 pandemic. As a global leader in protective clothing and equipment, the shares understandably soared at the beginning of the pandemic as people worried about protecting themselves against the virus. From January 2020 to January 2021, Avon Protection’s share price increased 210% to an all-time high of 4,650p. Since then, however, the share price has been in a well-defined downtrend – it currently sits at 1,070p. While the recent price action is disappointing, I still consider this UK stock an exciting prospect, and the 10% gain today gives me even more hope.

Fundamentally, Avon Protection’s figures are promising. With a compounding annual growth rate of earnings per share of 50.48%, this stock has delivered outstanding results for the past five years. Furthermore, its price to earnings ratio of 11.8 suggests that its share price should be significantly higher than where it is currently. In terms of its products, Avon Protection is the only company in the UK and Europe, and one of two globally, that manufactures equipment for all specialised fields: emergency services, military, biochemical protection, and nuclear. While it produces body armour and hazardous material suits, it also manufactures respirators and helmets. The helmet production was enhanced with the acquisition of US company Team Wendy.

While it has a diverse business, the news is not all good for Avon Protection. Suspicions rose in June 2021 when Berenberg cut the Avon Protection price target from 3,335p to 2,955p. The following August, it was announced that the company’s 2022 revenue guidance was being cut from $357m to $320m-$340m. In the same announcement, however, Avon Protection stated its order book was up 21%, indicating the increasing need for its products. Nonetheless, with the pandemic easing, supply chain issues began to nibble away at the share price. Since then, a major flaw in body armour testing has dented investor confidence and the leadership eventually took the decision to wind down this part of the business over the course of the next two years.

These problems have created a rather interesting chart over the past four months. We can see the first price gap on 13^th August and a second, larger gap on 12^th November that took place on extremely heavy volume. These gaps both correspond with the negative supply chain and body armour news stories. While the stock is in an unmistakable downtrend, there is a remote possibility that the price is currently in the head position of an inverted head and shoulders formation. This could mean that a price reversal is in progress and the aforementioned gaps could be filled. There are clear problems with this stock, but these are mainly short-term issues that can be rectified in time. The management has addressed the body armour shortcomings by taking the courageous decision to wind down this part of the business. With solid fundamentals and potentially encouraging price action, I am glad I invested in this stock and will be adding in the near future. I am not surprised this stock is up 10% today.

Andrew Woods owns shares in Avon Protection. The Motley Fool UK has recommended Avon Protection. 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.

Rivian Automotive (NASDAQ: RIVN) has had a dreadful month since listing via an initial public offering (IPO) in November. At the time, I wrote about how Rivian stock reminded me of the dotcom bubble. I wouldn’t say it’s reached crisis point like the dotcom era, but the signs are a bit concerning given how much the share price has fallen of late.

However, the company released its maiden quarterly earnings report last night. Let’s take a look at the results to see if the recent share price weakness has been overdone.

Rivian’s quarterly earnings

Starting with a positive, and Rivian was able to deliver its first customer vehicle, the R1T, in its third quarter to 30 September. The company also said that by 15 December a further 386 vehicles had been delivered.

These production numbers may look small. And they are. But in Rivian’s IPO prospectus, the business described itself as being at the “development stage”. Therefore, delivering any vehicles to customers is a huge milestone for the company.

My main issue with the investment case back then was the large market value ($127bn at the time), and the fact that the company made zero revenue. Now that Rivian is delivering customer-ready electric vehicles (EVs), it should be in a position to start generating revenue.

However, although this was progress from the IPO, the company actually missed its production targets. This is what it said in its shareholder letter: “We expect to be a few hundred vehicles short of our 2021 production target of 1,200.”

My concern here is that 1,200 cars isn’t a great deal to start with. Missing by a few hundred says to me that there are many challenges to solve with Rivian’s production line before it can compete with the likes of Tesla. And that’s not to mention the other established car manufacturers that are producing their own EVs.

Rivian stock dropped 10% in after-hours trading when this news was released. The market value is $97bn now, which still seems very high to me considering the challenges that lie ahead.

Is Rivian a buy?

I think there could be an exciting business here once the production line issues are solved. The EV market is booming right now and shows no signs of slowing. This could really boost Rivian’s growth prospects.

However, the company has a long road ahead. Tesla also struggled to ramp up its production line. Rivian’s first earnings report highlights the challenge that lies ahead here.

I also view the industry as low-margin, and capital-intensive. It’s going to take a lot of investment to get Rivian’s production line running at volume. The fact that the company is loss-making, and generates little in the way of revenue, makes this an even greater risk to consider.

Taking everything into account, I view the market value of $97bn as too high for the risks ahead. I won’t be buying Rivian stock today as I think there are other growth stocks to consider.

Dan Appleby 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.

Tesla (NASDAQ: TSLA) stock has been falling. Since the shares hit an all-time high of $1,243 at the beginning of November, they have plunged 25%.

Several factors have contributed to the sell-off. The company’s flamboyant founder Elon Musk has been selling shares to fund a multi-billion-dollar tax bill. This has put significant pressure on the stock price. 

At the same time, market sentiment towards unprofitable high growth companies is changing. The US Federal Reserve and other central banks worldwide are planning to dial back on their pandemic policies over the next 12 months. This will involve higher interest rates and less money-printing. 

Tesla stock under pressure 

As a result of this central bank shift, equity valuations are beginning to fall back to earth. Unfortunately, this is also hitting Tesla shares. 

However, unlike many other speculative technology stocks, this company is profitable and has a significant market share of the global electric vehicle (EV) market.

The company essentially dominates the EV market in the UK, holding a share of more than 30%. 

In my opinion, this kind of brand strength and brand recognition is worth a premium, although I will admit I think the stock has gotten ahead of itself in recent weeks.

But for Tesla, the company’s exploding valuation has been nothing but good news. It has been able to use buoyant market sentiment to issue new shares and raise additional capital to fund its growth plans.

Therefore, the company’s success has become a bit of a self-fulfilling prophecy. A higher stock price has helped the organisation raise more capital, funding capital spending and driving output growth.

This is helping the corporation increase sales, which should ultimately lead to a higher share price as the business expands. A higher share price will allow the company to raise more money for growth… and so on. 

This year, the group is targeting output of nearly one million vehicles. And further growth is planned over the next decade. Musk wants Tesla to be one of the largest car manufacturers in the world by 2030. 

If it can hit this target, I think the company does look attractive as an investment at current levels. 

Company risks 

That said, there is a lot that can go wrong for Tesla stock between now and 2030. Supply chain disruption could have an impact on the vehicle manufacturer’s output.

Meanwhile, competitors are rapidly catching up. More established vehicle producers such as Volkswagen have been launching their own EVs. These are nipping away at Tesla’s market share. If these challenges continue to mount, the shares could keep falling. 

 Still, despite these risks, I would be happy to buy Tesla stock for my portfolio as a speciality growth play, considering the strength of its brand and expansion plans. 

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.

With the New Year just around the corner, now is a great time for me to look at additions for my portfolio for 2022 and beyond. One standout for me in this respect is F&C Investment Trust (LSE: FCIT). Since I last looked at FCIT back in July, the share price is up 7%. And the stock has seen healthy growth of 15% year-to-date.

I have always been an advocate of investment trusts, as they offer exposure to a variety of sectors in a single investment. As such, here’s why I would buy shares today.

The portfolio

The main reason I like F&C is because of its diverse portfolio. With nearly £6bn in assets under management, investing in over 400 companies globally, the trust adds real range to my portfolio. As of October 2021, its top holdings included Alphabet, Goldman Sachs, and Apple. All three of these stocks have seen at least 20% growth in price this year, showing the potential of the trust’s portfolio.

What I also like about it is its investment style. Simply put, it buys for the long term. And for me, this is perfect. It means issues surrounding volatility that may be experienced in the short term are less relevant. The trust has prospered under the guidance of manager Paul Niven, who has been at the helm since 2014. The last five years have seen a return of 70%, showing the positive impact he has had.

On top of this, the trust, founded in 1868, is the oldest in the world and therefore has stood the test of time. Its bounce-back from the crash we saw in March last year is proof of this. This is a major factor when I think about adding it to my portfolio.

My concerns

With this said, I do have concerns about F&C. It third-largest asset allocation is emerging markets (9.2%). And as much as I see value here, the spread of the Omicron variant globally could have a negative impact on these markets. Cases have been confirmed in countries such as India and Brazil, both states that have struggled to contain Covid, even prior to the emergence of Omicron. However, as I mentioned above – these short-term periods of volatility should not pose a long-term threat. The trust has a proven track record over long periods, and I think its weighting in emerging markets will eventually bear fruit.

Why I’d buy

Although investor confidence may have taken a hit as we see Omicron impact our lives, F&C has proved it can weather storms such as these. The main attraction for me is the diversity it offers to my portfolio – and while past performance does not guarantee success in the future, for me it provides a good indication. Its record shows it has the potential to continue to flourish. As such, I would look to buy shares today and hold them for the long run.

Charlie Keough has no position in any of the shares mentioned. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Apple and Microsoft. 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 we head into 2022, I am starting to plan my investment strategy for the year ahead. I am looking for UK shares to buy that will help me capitalise on several key themes that I want to build exposure to as the global economic recovery gets underway.

The themes are rebuilding (construction and infrastructure), hiring and luxury goods. Plenty of companies could ride these trends in 2022 and beyond.

However, I am looking to build a focused portfolio of high-quality companies which should have the financial resources to capitalise on the opportunities available. 

Luxury shares to buy in 2022

The first two are higher-end businesses. I already own shares in Diageo and would be happy to buy more to invest in this theme. The corporation owns some of the most premium, sought-after alcohol brands globally and has been investing more in these products to capitalise on the shift by consumers towards quality brands. Consumers are drinking less, but they are happy to pay more when they do. 

The other is luxury company Burberry. This high-profile fashion house has a cash-rich balance sheet with no debt. As such, it is one of the UK’s top brands. 

In my opinion, these companies are well-positioned to capitalise on the recovery and consumer spending. But if spending falls, they could start to encounter problems. This is the biggest risk they face right now. 

Economic recovery stocks

There are many companies I would be happy to own to invest in the construction and infrastructure recovery. However, one related business many investors may not be aware of is the hedge fund Pershing Square Holdings.

This company owns a portfolio of many US investments, including retailer Lowe’s. This is America’s B&Q, and it is seeing tremendous demand from homeowners developing their properties. As the economic recovery continues to grow, I think this trend will continue. 

Along the same lines, I would also own Kingfisher, which owns B&Q here in the UK. These two companies are some of the best ways to invest in the consumer economic recovery, not to mention the infrastructure and construction recovery, in my opinion.

Infrastructure growth

Some direct infrastructure investments, which I would also like to include in my portfolio, include Balfour Beatty and 3I Infrastructure. The former is one of the largest construction companies in the UK, while the latter owns a portfolio of infrastructure assets around the world. 

Infrastructure is a defensive industry. It also has a lot of protection against inflation as contracts connected to infrastructure investments are usually inflation-linked. 

This protection is one of the main reasons I would own 3I Infrastructure. I also think the company will have a significant amount of opportunities for growth over the next few years as governments around the world fork out vast sums of cash for spending on new projects.

The UK government is looking to spend £100bn over the next few years on new projects. Balfour could benefit directly from this. The company has already recovered from the stresses of the pandemic, and it has a robust order book for the next few years as new projects are proposed. 

Construction risks

The one risk all of the four groups outlined above will have to deal with is another economic slowdown. Construction and infrastructure companies are usually the first to suffer here. Therefore, if the market suddenly takes a turn for the worst, these businesses are going to be more exposed than most. 

But even after taking this potential headwind into account, I would still own all of these businesses as a way to invest in economic recovery and infrastructure spending from global governments. 

This brings me to the final investment theme I would like to have exposure to in 2022. The global employment market has rebounded rapidly from the pandemic. And it is not only hiring plans that have improved. Wages are surging as well, producing a double tailwind of more volume and higher prices for recruitment companies. 

The best UK shares to buy for recruitment

There are plenty of recruitment companies available for investors to buy on the London market. The four stocks I would acquire for my portfolio are Hays, Pagegroup, Robert Walters and Sthree. 

I think all of these organisations bring something different to the table. Hays is the largest with the most extensive international footprint. Robert Walters is the smallest, but it has more room to grow and take market share from its competitors. 

Meanwhile, Sthree specialises in hiring the science, technology, engineering and mathematics (STEM) industries. Due to its specialist nature, the company may be more defensive as an investment than some of its peers. 

All four companies are expected to report a substantial increase in profits and sales for the current financial year. Sthree is projecting earnings growth of around 77%. Robert Walters could see earnings rise by 340% in its current financial year, with earnings projected to increase a further 26% in 2022. 

According to analysts, thanks to its international footprint and recent growth initiatives, Pagegroup’s net income could hit £34m this year. This is the highest level in more than six years. Further growth is expected in 2022, as the firm rides the global economic bounceback. Analysts have pencilled in earnings growth of 20% to £41m.

These companies are firing on all cylinders at the moment. However, like the construction stocks outlined above, they are usually among the first to feel the pain in an economic downturn. Therefore, the most considerable risk they face is an economic slowdown. In this situation, all of the projections outlined above would become irrelevant.

Rupert Hargreaves owns Diageo. The Motley Fool UK has recommended Burberry and Diageo. 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.