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Investing in UK small cap stocks can sometimes be a dangerous business.
When economic conditions become more difficult, the growth potential of younger and smaller companies can come under rigorous scrutiny. This, in turn, can lead to painful falls in the share price. Smaller companies may also be more vulnerable to failure in tough times due to their weaker balance sheets.
However, buying certain early-stage companies can also boost an investor’s long-term returns. Earnings can grow much faster than those of more mature stocks, leading to above-market capital appreciation.
With careful research, it’s still possible to find the best small-cap stocks to buy, despite uncertain near-term economic prospects. Here are three that I think are great investments today.
aura energy
The extraction of raw materials is a complex and often expensive business. For aura energy (LSE:AURA), earnings could suffer if it encounters problems developing its Tiris uranium-vanadium resource in Mauritania.
However, I believe that the potential benefits of purchasing this Alternative Investment Market (AIM) share make it an attractive investment. As countries transition away from fossil fuels, demand for nuclear power is projected to grow strongly, which means higher demand for radioactive uranium.
Rising energy demand from rapidly expanding emerging markets also means consumption of the yellow commodity could skyrocket. That’s why the International Atomic Energy Agency believes that nuclear capacity will more than double in the next 27 years, to 873 gigawatts-electric (GWe).
Demand for Aura Energy’s product could also increase as construction of nuclear submarines increases. saxophone bench said last week thatwe expect nuclear and uranium demand to increase” when Australia announced plans to build a fleet of new submarines under the AUKUS program.
Finally, I like Aura Energy for encouraging drilling work at Tiris. In February, he announced a “major resource update” in assets, with measured and indicated resources increasing by an impressive 52%.
With the company also developing the Häggån uranium project in Sweden, I think it could have a bright future.
Business group
IT companies like Business group (LSE:IOM) could experience some earnings turmoil in the near term. Even in our increasingly digitized world, technology spending could fall if the global economy remains weak for longer.
However, as a long-term investor, I think this small-cap stock is still very attractive. As remote work grows in popularity, I expect the demand for its services to rise steadily.
Iomart provides cloud computing platforms that allow workers to perform their daily tasks from anywhere. He is also an expert in cybersecurity, connectivity and data management, and provides IT consulting services to companies.
This wide range of services gives you ample opportunities to generate profit as the digitization of the workplace advances. telecom giant AT&T predicts that the hybrid work model almost double from 42% of workplaces in 2021 to 81% for next year.
It is true that Iomart does not have the financial clout or brand power of industry giants like Microsoft either IBM. But recent strong trading suggests it could still deliver excellent earnings growth despite stiff competition.
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