We asked our freelance writers to share the best British small-cap stocks they’d buy this November. Here’s what they chose:
Rupert Hargreaves: Trifast
Trifast (LSE: TRI) specialises in the design and manufacture of high-quality industrial fastenings. After a slowdown in demand last year, sales have rebounded this year. Revenues in the first half increased 30% compared to 2020 and are now ahead of 2019 levels.
As the global economy continues to rebuild after the pandemic, I think this trend could continue. Management is also looking to complement organic growth with acquisitions.
At the beginning of September, Trifast acquired Falcon in the USA, and management has said that the search for additional acquisitions continues “apace.”
Considering the growth potential, I would buy the stock for my portfolio. Some challenges it could face that may hold back growth include cost and wage inflation pressures.
Rupert Hargreaves does not own shares in Trifast.
Christopher Ruane: Card Factory
As people buy Christmas cards, small-cap stock Card Factory (LSE: CARD) is on my radar. It’s 56% higher than a year ago, but well below its Spring highs.
The company sharply cut its loss in the first half. The Christmas season should be busy. Increasing moves online could help grow sales. The company is cash generative and cut net debt by a third in the first half. But Card Factory remains risky. Its shops can see sales plummet if there are lockdowns, and supply chain inflation could hurt profits.
Christopher Ruane does not own shares in Card Factory.
Roland Head: Spectra Systems
I think that security technology specialist Spectra Systems (LSE: SPSY) could be a quality company at a reasonable price.
Spectra specialises in providing authentication technology for documents, consumer goods and currency. For example, Spectra provides the security features for many countries’ banknotes and the equipment needed to test them.
Banknotes are Spectra’s biggest market, and this is probably the main risk for investors. Use of paper money is falling and the business could struggle to grow.
However, Spectra is diversifying and continues to win new contracts. The group also upgraded its profit guidance for 2021 in October. I think the shares look reasonably priced at current levels. There’s also a tempting 4.7% dividend yield. This is a stock I’d buy today.
Roland Head does not own shares in Spectra Systems.
Andy Ross: finnCap
Financial company finnCap (LSE: FCAP) is a great small-cap stock in my opinion. Apart from its small market capitalisation, which gives it plenty of headroom to grow into a much larger company, I really like finnCap’s financials. They indicate to me a stock that has serious growth potential.
The group has a three-year compound annual growth rate (CAGR) for sales of 29%. This is important because, as an investor, I want to know that demand for a company’s products/services is continuously increasing. The operating margin is improving, so all in all it seems like potentially a great time to buy the shares.
Andy Ross does not own shares in finnCap.
Royston Wild: Science in Sport
I’d use recent price weakness at Science in Sport (LSE: SIS) as a dip-buying opportunity. The sports nutrition giant has fallen 10% in value over the past month. Demand for the products it makes is rocketing as peoples’ desire to live healthier lifestyles grows and fitness activities become more popular. Science in Sport’s revenues jumped 24% during the six months to June.
This small cap’s more than doubled in value during the last year. If industry analysts are to be believed there should be plenty of opportunity for Science in Sport’s share price to continue soaring too. Experts at Statista for example think the global sports nutrition market will be worth $35.4bn by 2026. That’s up significantly from the $16.5bn it was valued at last year. Through its popular products I think the business should make big profits in this favourable landscape.
Royston Wild does not own shares in Science in Sport.
Zaven Boyrazian: iomart
iomart (LSE:lOM) is a cloud-computing business trying to take on industry giants like Amazon, Alphabet, and Microsoft. That’s quite a tough bunch of competitors, so it’s not surprising to see revenue growth struggle. However, management has since begun pursuing a niche in the hybrid-cloud market through bolt-on acquisitions.
It will take some time before this new strategy starts yielding results. However, iomart continues to be supported by fairly impressive cashflows courtesy of its high customer retention and 93% recurring revenue.
There is obviously no guarantee of success. And using an acquisitive approach has led to an increased debt position that adds more risk. But given the potentially explosive returns of becoming a new leader in cloud computing, I think the risk is worth the reward.
Zaven Boyrazian does not own shares in iomart, Amazon, Alphabet or Microsoft.
Paul Summers: Bioventix
Although still far from being cheap, I think shares in biotech firm Bioventix (LSE: BVXP) are starting to look attractive. Stock in the small-cap antibodies supplier has fallen 20% in value in 2021 so far.
At least some of this selling pressure has been due to hospitals continuing to prioritise dealing with the pandemic over diagnosing people for other things. To make matters worse, understandably cautious patients aren’t even reporting symptoms to healthcare professionals. As a result, Bioventix’s main business has been suffering.
I reckon this might be a great contrarian opportunity. BVXP’s returns on capital and margins are some of the best on the market. The balance sheet also looks sound. Any indication that Covid-19 is being beaten back and the shares could rally.
Paul Summers has no position in Bioventix
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), Amazon, Bioventix, and Card Factory. 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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