Welcome back to the FTSE350 Tips column where we have been selecting UK shares based on their ability to outperform the market. This month, we are adding an innovative British medium sized company to the portfolio that has recently shown signs of a strong recovery in trading and also has strong growth potential for the coming years.
Firstly I would like to comment on a successful trade as readers may have noticed one of the portfolio companies Alpha Group International [LON:ALPH] has received a takeover offer and is now up 85% since we tipped the shares last September. This has been an excellent return in under a year, and I think it now reflects fair value for the business and could be a good time to make an exit.
At the time of writing this article in July, the outlook for the global economy seems to be turning brighter. A slew of trade deals have been announced for major economies, even the EU has tentatively agreed to a deal with the U.S, although this is subject to individual country approval. The UK seems to be well positioned from tariff malaise as it looks as though our tariff rates into the largest consumer market will be lower than our closest trading partners are able to receive, hopefully this will boost commerce and trade for our listed UK companies.
The company I am buying this month relies on international trade, especially to the two largest consumer markets – the U.S and China, whereby it sells into agricultural markets. These agricultural markets are quite volatile in nature, and undergo cyclical periods as agricultural input prices vary, farming yields fluctuate and disease can destroy the supply of goods and wipe out end customers from the market. The forces mentioned above have presented a challenging few years for today’s company, but there are signs that things are improving, and the next few years look primed for growth on the back of innovative product releases.
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