We recently published a list of 8 High Growth UK Stocks to Invest In. In this article, we are going to take a look at where Burford Capital (NYSE:BUR) stands against other high growth UK stocks to invest in.
According to a KPMG report, the United Kingdom’s GDP growth is projected to slow in the second half of 2024 but is expected to rise slightly to 1.2% in 2025. This growth will likely be driven by a less restrictive monetary policy and ongoing improvements in real wages, which could boost consumption and business investment. However, in the longer term, GDP growth may be limited to around 1.1% per year due to historically slow productivity growth.
UK inflation is forecasted to rise to 3% by early 2025, after dropping below 2%, this increase is attributed to the ongoing economic recovery and the impact of interest rate cuts on the economy. The Bank of England is expected to take a cautious approach to easing monetary policy, with the base rate expected to reach 3.5% by the end of 2025. This indicates that the central bank will be careful not to overstimulate the economy, in order to avoid overheating and inflationary pressures.
UK consumers have been saving a larger portion of their income, which may continue to limit spending growth. While some of this increase in savings could reverse as interest rates fall, a significant portion is likely to remain, driven by long-term demographic trends and heightened caution in response to a more volatile economic environment. In terms of investment, the forecast predicts that overall investment growth will accelerate as further interest rate cuts reduce the burden on business investment.
UK Equities: Attractive Investment Opportunity
Nannette Hechler-Fayd’herbe, Chief Information Officer in Europe, the Middle East, and Africa at Lombard Odier, a Swiss private bank specializing in wealth and asset management, in an interview on Bloomberg, shared her perspectives on the current investment landscape, emphasizing the importance of spreading investment risk more broadly across multi-asset portfolios. Hechler-Fayd’herbe expresses her affinity for UK equities, citing their attractive valuations and sector composition.
She notes that UK equities are trading at forward price-to-earnings ratios similar to those of emerging markets, making them an appealing investment opportunity. The UK equity index, in particular, offers a favorable exposure to the energy sector, which is poised to benefit from a better-than-expected global economy. Additionally, in the event of geopolitical escalation, the energy sector is likely to benefit from higher prices, making it an attractive hedge.
Hechler-Fayd’herbe highlights the sector composition of the UK equity market as a key factor in its appeal. The market’s exposure to the energy sector, combined with its relatively lower volatility and higher dividend yields compared to European equities, makes it an attractive investment opportunity. She also notes that the UK equity market’s dividend yield is more attractive compared to European equities, providing a more stable source of income for investors.
Hechler-Fayd’herbe believes that the Bank of England’s interest rate cuts would potentially lead to a rally in UK equities. Overall, Hechler-Fayd’herbe’s comments suggest that UK equities offer an attractive combination of value, income, and sector composition, making them a compelling investment opportunity in the current market environment.
Our Methodology
To compile our list of the 8 high-growth UK stocks to invest in, we used the Finviz and Yahoo stock screeners to find the 60 largest companies in the UK. We then narrowed our choices to 8 stocks with the highest 5-year revenue growth. We also included their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their of their revenue growth.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An accountant meticulously going over documents in her office, exemplifying the company’s commitment to accuracy and detail.
Burford Capital (NYSE:BUR)
5-Year Revenue CAGR: 18.02%
No of Hedge Funds: 25
Burford Capital (NYSE:BUR) is a global finance and asset management firm that provides litigation finance services. The company’s business model is built on providing capital to companies involved in legal battles in exchange for a share of the potential proceeds if the case is won.
Burford Capital’s (NYSE:BUR) track record is impressive, with a consistent history of delivering high returns on invested capital. According to its annual report, the company’s Internal rate of return (IRR) and Return on invested capital (ROIC) are 27% and 82%, respectively as of December 31, 2023. The company’s ability to settle cases quickly and realize returns has contributed to its high IRR, while its strong balance sheet and diversified legal portfolio have enabled it to maintain a high ROIC.
Burford Capital’s (NYSE:BUR) strong reputation is a significant competitive advantage, allowing the company to attract high-quality talent and access high-value cases. The company’s focus on serving justice while generating profits is also likely to boost its reputation in the media, society, and the general public. As the company continues to deliver successful outcomes for its clients, its reputation will only continue to grow, creating a positive feedback loop that will drive future growth and success.
Looking ahead, Burford Capital (NYSE:BUR) is well-positioned to capitalize on the growing demand for litigation finance. The number of commercial disputes is on the rise, with 74% of senior in-house lawyers expecting an increase in the volume of disputes over the next two years. The company’s management is optimistic about its prospects, stating that they have reached the point of financial capacity and maturity to “swing for the fences” and take on higher-risk cases with potentially higher returns. This approach is likely to further enhance the company’s reputation as a leader in the litigation finance industry and attract more clients seeking to monetize their legal claims. Industry analysts are bullish on the company’s stock price and have a consensus Buy rating at a target price of $19.70, which implies a 37.70% increase from its current level.
Overall, BUR ranks 7th on our list of high growth UK stocks to invest in. While we acknowledge the potential of BUR as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BUR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
