Low-priced stocks tend to be popular with investors. One reason for this is we got a lot of shares for our money.
Here, I’m going to highlight two UK stocks trading under £3 that I’d be comfortable buying today. Both of these companies look set to benefit from powerful long-term trends, and I think they have a lot of growth potential.
A top stock under £3
The first stock I want to highlight is Tritax Big Box (LSE: BBOX). It’s a real estate investment trust (REIT) that invests in large logistics warehouses and rents them out to blue-chip retailers, such as Amazon, Tesco, and M&S. Its shares can currently be picked up for around £2.25 a piece.
BBOX strikes me as a great way to play the UK e-commerce boom. Consumers today are increasingly shopping online and they want their goods delivered quickly. To operate efficiently, online retailers need modern, automated warehouse facilities that are strategically located and allow for goods to be distributed seamlessly. Tritax is a leader in this space with a best-in-class portfolio of warehouse assets. As the e-commerce industry continues to grow, BBOX should also continue to benefit.
One risk here is that, as a REIT, BBOX sometimes needs to raise additional money from investors through share placings to expand its portfolio. These can push its share price down in the short term.
However, I’m comfortable with this risk. That’s because these share placings help accelerate the company’s development programme and, ultimately, fuel long-term growth.
It’s worth noting that analysts at Berenberg recently initiated coverage of the stock with a ‘buy’ rating and a £2.50 price target.
Strong growth potential
Another stock under £3 I like the look of right now is Big Technologies (LSE: BIG). It’s a UK company that has developed technology that helps with the remote monitoring of individuals. This tech, which is sold under the Buddi brand, can help those facing cognitive and/or physical decline live independently. The share price here is currently around £2.97.
Big Technologies is growing at a fast pace which isn’t surprising given that the number of over-65s globally is growing quickly. Last year, for example, revenue was up 53% to £29.6m. Meanwhile, in the first half of 2021, the company generated revenue growth of 41%. Looking ahead, analysts expect the group to generate top-line growth of 24% for 2021.
One thing that stands out to me about Big Technologies is that CFO Daren Morris recently purchased stock. Regulatory filings show that on 15 October, the insider picked up 108,755 shares at a price of £2.96 per share.
I see this ‘director dealing’ as bullish. Morris has an investment background (he was previously a managing director at both UBS Investment Bank and Morgan Stanley) so is likely to have a good understanding of the company’s true value.
A risk here is the valuation. Currently, BIG shares trade at 52 times next year’s earnings. That’s quite high and doesn’t leave a huge margin of safety. If future growth is disappointing, the stock could fall.
Overall however, I think the long-term risk/reward profile here is attractive. I’d be comfortable taking a small position in this sub-£3 stock today.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares of Amazon and Tritax Big Box REIT. The Motley Fool UK has recommended Amazon, Tesco, and Tritax Big Box REIT. 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.
This post was originally published on Motley Fool
