UK shares have been in a bit of turmoil recently. While the FTSE 100 seems to be fairing well, there are plenty of stocks getting hammered into the ground as fears of a recession continue to rise.
These fears may be justified. But as a long-term investor, an economic slowdown is ultimately a short-term problem.
With that in mind, I took a look at some sectors that have been hit hard by panic-sellers. And, in turn, discovered some exciting investment opportunities. In fact, assuming these businesses can maintain their current market share, I might even be able to double my money in the long run!
Such an assumption is by no means guaranteed, of course. But it’s still possible. So, with that said, let’s dive in.
UK renewable shares – an untapped gold mine?
With supply chain disruptions sending oil prices through the roof, UK renewable energy shares haven’t received as much headline attention. And while the global transition to clean energy could be decades away, the story is a bit different here at home.
Today, around half of the electricity generated in Britain comes from burning gas. However, 26.4% originates from renewable energy, primarily wind power. Looking back 10 years, renewables only accounted for 5%. And with the government’s Green Industrial Revolution planning to invest a further £20bn into wind power alone, this upward adoption trend doesn’t appear to be slowing.
A recent report by the research group Mordor Intelligence predicts the UK renewable energy market will continue growing at an annualised compounded growth rate of 10%. That means the market opportunity for companies operating in this space could double by 2029 – only seven years away.
That’s why shares of Greencoat UK Wind and Foresight Solar are on my buy list today. There are countless other businesses seeking to capitalise on the shifting demand. And this increased degree of competition, along with regulatory limits on pricing, does create some hurdles. But, so far, these two stocks appear to be thriving, generating an impressive dividend yield in the process.
Buying technology during a sell-off
One of the hardest-hit industries in the 2022 stock market correction is technology. These once-high-flying shares quickly came crashing down to Earth after investors realised that some of the valuations were generous, to say the least. But have these prices been overcorrected?
I certainly believe so. After all, demand for technology, especially software-as-a-service, continues to rise. And with plenty of UK shares now trading at significant discounts, growth opportunities for my portfolio seem to be everywhere. The question is, how long will I have to wait for some impressive returns?
It’s impossible to say for sure, but a report by Grand View Research revealed that the global software and services market is expected to grow 11.7% a year. Assuming this is accurate, and the companies I’ve chosen matched that growth I could potentially double my investment in around six years.
So which stocks are the best to buy now to profit from the predicted growth? Personally, I’m focusing on the businesses offering services which I believe will continue to be in demand over the next decade. As such, digitalisation specialist Kainos Group, digital marketing automation firm dotDigital and cloud computing expert iomart are on my list of shares to add to my portfolio today.
Having said that, I’m not blind to the risks. The barriers to entry in the technology space aren’t exactly high. It’s why there are so many stories of young disruptors entering the industry. And it’s possible that all three of these businesses could face disruption in the future. That might mean that not only do my investments not grow, I could actually lose money.
Investing in UK pharmaceutical shares
After the pandemic ravaged the world, interest in pharmaceutical and biotech stocks peaked for both investors and governments alike. So it’s not surprising this is one of the few sectors that seem to be performing relatively well, despite the current wobbly economic conditions.
Like technology shares, the demand isn’t slowing, with countless new medicines, vaccines, and treatments currently in development and with UK firms leading the charge. The gigantic size of this industry doesn’t make it the most obvious place to look for healthy returns. But digging deeper into the numbers reveals a different story.
Another report by Grand View Research predicts a similar 11% growth pattern for this sector. That means a £1,000 investment could be worth £2,000 by 2029. That might seem slow, especially since this industry houses some explosive early-stage stocks. But it’s worth remembering that the difficulty of developing a drug and bringing it to market is exceptionally high. That’s why these young biotech groups often surge from investor excitement only to collapse a few months later.
Since I’m focused on the long-term, gambling on potentially promising pre-revenue stocks isn’t what I’d describe as prudent investing. Instead, I’m far more interested in companies with established patent and product portfolios, with even more game-changing drugs in the pipeline. That’s why biotech giant AstraZeneca, vaccine specialist GlaxoSmithKline, and generics oracle Hikma Pharmaceuticals are on my best-UK-shares-to-buy list for 2022.
Making money with money
The final industry that’s caught my attention with its growth capability is fintech. As digital payments adoption gains popularity over traditional cash, leading payment companies are enjoying some significant tailwinds. So much so that this is predicted to be one of the fastest-growing sectors around, with an annualised compounded forecast of 19.8%! Assuming this rate is accurate, it means I have the potential to yield good return in just a few years.
In fact, it could grow nearly twice as fast as the other opportunities I’ve just explored. But it does come with a caveat. Such high growth potential attracts a lot of competition. And today, there are countless companies worldwide trying to capture and expand their market share. That makes it rather challenging to determine which UK shares will be future winners. But by focusing on a few specific niches, the volume of competition declines rapidly.
Alpha FX is a prime example of this. The firm offers specialised currency risk management and enterprise-facing international payment solutions. Another that caught my attention is PayPoint. This group provides payment acceptance solutions on steroids for convenience store owners! Beyond accepting cash, card, and mobile payments, its terminals also automate inventory management with direct access to local suppliers. Both seem extremely promising, in my opinion. And that’s why they’re already in my portfolio.