2 high-growth stocks you might regret not buying

Shares of small-cap fund manager Miton Group (LSE: MGR) clocked up a 9% gain on Friday morning after the company said that results for 2017 should "exceed market expectations".

This is the second time this year that Miton has forced City analysts to upgrade their estimates. The business is often overlooked by private investors due to its modest £65m market cap, but in my view it's potentially a better buy than some larger rivals.

Still looks cheap to me

At the end of October, the group had £3,635m of assets under management. It said that it has seen net inflows of new investor cash over the second half of the year and this suggests rising demand for the group's investment expertise, much of which is focused on small-cap stocks.

Another attraction is that the group's top fund manager, Gervais Williams, has a 6.88% stake in the firm. Mr Williams also has a seat on the board, so I think it's fair to say that the company is unlikely to take short-term risks that could sacrifice long-term growth. Although he could unsettle the market if he ever chose to leave, this seems unlikely at present. On balance, I believe management interests are well aligned with those of shareholders.

Miton shares have risen by 28% over the last year, and by 69% over the last five years. Despite these gains, the stock currently trades on a forecast P/E of around 14, falling to a P/E of about 12 for 2018.

The dividend payout has grown at an average of 20% per year since 2011. A payout of 1.1p per share is expected this year, giving a forecast yield of around 3.1%. I believe further growth is likely in 2018, given the group's debt-free balance sheet and strong cash generation.

In my view, Miton certainly rates as a potential buy after today's news.

Follow the expert money

Miton's strength is its expert team of specialist fund managers. For investors with an interest in small-cap mining stocks, that kind of expertise is often hard to find. Companies can appear credible but later prove disappointing.

One way to select potential winners is to follow the investments of larger mining firms. For example, the Cascabel project owned by gold and copper miner SolGold (LSE: SOLG) looked an uncertain bet for many years, until autumn 2016, when the group secured financial backing from A$18bn firm Newcrest Mining Limited.

Newcrest has since invested $63m in SolGold in exchange for a 14.54% holding in the company. Based on information in the latest presentation, I estimate that the average share price paid by Newcrest so far is about 30p.

However, SolGold shares currently trade at about 27p, giving us the opportunity to invest at roughly the same price Newcrest has been happy to pay.

SolGold believes that Cascabel could be a world-class discovery, with as much as 10bn tonnes of ore potentially containing 60m tonnes each of gold and copper. The company is now well funded for now, with a supportive industry investor.

Although this is only a small investment for Newcrest, which reported a profit of A$408m last year, I believe SolGold shares could be a good long-term buy at current levels as part of a diversified portfolio.

10 steps could make you £1m

If you're looking for market-beating growth stocks to help your portfolio reach the magic £1m level, I believe SolGold and Miton could help.

But if you want to hit this ambitious target as quickly as possible, then I think there are other opportunities and risks you will need to consider. To help you get started today, our experts have produced Your 10-Step Guide To Making A Million In The Market.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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