The best UK shares to buy aren’t always the best businesses. Similarly, they may not be the stocks trading at the cheapest prices. Instead, the most lucrative investments are stocks which combine these two traits – a terrific company at a dirt-cheap price.
By considering such businesses for the long term, investors can open the door to some impressive market-beating returns. And given enough time, this tactic can even enable an investment to double in value. So if I had £5,000 to spare right now, which UK company looks like its ready to double in the future?
Unpopular and underappreciated
Finding quality at a discounted price isn’t always straightforward. Searching financial media is often fruitless as too many other investors discover the same companies driving up stock prices.
So when hunting for triple-digit returns, the best place to look is often where no one else is. That means venturing into the industries and sectors that most investors have fallen out of love with. And right now, there are quite a few to choose from, including financial services, manufacturing, real estate, and electronics, among others.
In many cases, UK shares that have been sold off typically fell for a good reason. But for long-term investors, the trick is to discover whether that reason was a frustrating short-term hiccup or a long-term catastrophe. If it’s the latter, then it’s likely sensible to steer clear. Otherwise, a buying opportunity may have just emerged.
A chance to boost my returns?
Looking at the stock market, there are many businesses operating within unloved industries. And out of all of them, Alpha Group International (LSE:ALPH) currently has my attention.
The firm’s built its reputation as an expert in currency risk management services for small- and medium-sized businesses with international exposure. However, in the last couple of years, management’s begun diversifying its portfolio and has subsequently transformed the company into a fintech alternative banking solution.
Despite operating in a highly competitive industry, Alpha’s managed to carve out an impressive niche for itself. Subsequently, sales and earnings have been expanding by an average of 34.4% and 29.4% respectively over the last five years. But this could be just the tip of the iceberg.
Recent reports from Allied Market Research and Grand View Research have said the currency risk management market, along with the alternative banking market, are set to grow by 17.5% and 19.3% respectively between now and 2030.
Even if Alpha doesn’t continue expanding its current market share, these sector forecasts suggest the company could be on track to double its business within the next four-to-five years. That’s pretty encouraging since Alpha’s revenue has already shot up by around 140% since my first investment in 2020. And since then, the share price has almost tripled!
Of course, long-term forecasts always need to be taken with a pinch of salt. And don’t forget that this part of the financial sector can be quite cyclical. So it may take a bit longer than expected for the Alpha Group share price to double (and it may never happen, of course).
However, with the shares trading at a price-to-earnings ratio of just 9.8, the growth potential of this business seems to be getting ignored by investors right now.