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UK stocks often get a bad reputation for lacking innovation and growth potential. But Schröder British mid-cap fund manager Jean Roche disagrees. He argues that investors are more likely to discover high-performing 'multibagger' stocks (companies that are up more than 100%) right here in Britain.
Roche highlights the impressive success stories of a number of UK-listed companies that have generated exceptional returns for shareholders, including Cranswick, Halma, Diploma, Games Workshop, 4Imprint, Ashtead Groupand JD Sports.
These companies have not only prospered but have become multi-baggers, generating returns several times greater than the original investment. Its success challenges the idea that the UK market lacks opportunities for growth and innovation.
That got me thinking: where could we see the next multibagger?
Quantum trends
The quantum revolution promises to reshape technology, delivering advances in computing, cryptography, materials science, medicine and artificial intelligence. A central element of this change is innovation as Google's Willow Chip, which can perform calculations in five minutes that would take a conventional supercomputer 10 quadrillion years.
Oxford Instruments (LSE:OXIG) is a UK-listed company that will benefit as an enabler of the quantum revolution. In fact, it's one of the few UK stocks in the space, which is a shame given there are 39 quantum startups in the country, leading the continent.
The company's expertise in advanced instrumentation and cryogenic technologies positions it as a key beneficiary and enabler of quantum technologies. These cryogenic technologies are particularly important for obtaining the ultracold environment necessary to maintain qubit coherence: the ability of a quantum bit to remain in a predictable wave state.
With strategic investments in R&D and industry partnerships, including one to build the UK's first quantum computer around 2030, Oxford Instruments could emerge as a major player in the sector.
It's not a purely quantum play, but it could emerge as a multibagger based solely on forecasts that the quantum industry could grow 40-fold in the next 15 years.
However, investors should be wary of near-term earnings growth, which is not particularly strong according to forecasts. This could send the stock tumbling given the above-average valuation. The caveat is that these forecasts may not take into account a quantum boom.
There is potential everywhere
There is certainly potential elsewhere as well.
A promising candidate is Kodal Mineralsa small cap mining company focused on the Bougouni lithium project in Mali. With financing secured and plans to begin lithium production, growing demand for electric vehicle batteries could significantly boost Kodal's share price if operations proceed smoothly.
Celebrus Technologiesa data analytics company with a market capitalization of £116m, is also promising. Its Celebrus platform helps businesses optimize customer interactions, and steady earnings growth positions it well for expansion as demand for data-driven solutions increases.
In the sustainable construction space, Alumasc Group is an AIM-listed company that could benefit from an increasing focus on green building solutions. Alumasc specializes in water management and energy efficient products, which are increasingly relevant as industries adapt to stricter environmental standards.
Finally, Grasshopper Explorationan oil exploration company in the Falkland Islands, offers high risk, high reward potential. The stock has risen in recent months, but could rise further if all goes according to plan.
These companies operate in sectors primed for growth, but their smaller size and sector-specific risks make careful research essential.
