The UK stock market has witnessed remarkable performance in 2025, with both the FTSE 100 and FTSE 250 indices reporting double-digit gains since the beginning of the year. Notably, companies such as Rolls-Royce have seen their stock values double, prompting investors to turn their focus towards several underappreciated stocks poised for growth.
A key area of investment expected to thrive in the near future is artificial intelligence (AI) spending, which has seen significant success in the United States but is currently lagging behind in the UK due to various economic and political factors. Nevertheless, as macro uncertainties begin to dissipate, projections indicate that 2025 could herald a surge in AI investments across British businesses. In this context, Computacenter, one of the world's largest IT resellers, aims to leverage this expected growth. The firm assists clients in selecting and integrating solutions to automate and digitalise business operations. During the past year, investments in IT infrastructure have remained relatively subdued, particularly within the public sector, as it awaited details concerning the priorities outlined in the new government's October Budget. This has led to lacklustre share price performance, presenting a potential buying opportunity. However, challenges remain; should AI not meet expectations, many British companies may continue postponing investments, adversely affecting Computacenter's growth.
Another enterprise positioned at the lower end of a spending cycle is RS Group, which plays a vital role within global supply chains for more than a million manufacturers. The firm offers an extensive range of products, including over 750,000 items, but is currently facing dwindling demand, particularly in the electronics sector. The ongoing cost-of-living crisis has resulted in many consumers delaying upgrades to personal devices such as smartphones and televisions, which has subsequently led to decreased orders for parts and components from RS Group. Management has actively sought methods to reduce costs and enhance profit margins, yet the cyclical risks associated with this market remain pronounced and are likely to influence the company long-term.
Given the current market landscape, both Computacenter and RS Group present intriguing investment opportunities. Although their respective brands may not be widely known among consumers, they have established themselves as essential solution providers within their industries. This reputation has facilitated robust investment returns over the last decade, a trend expected to continue. Consequently, these two companies are under consideration for portfolio additions as potential growth stories in the upcoming year, should the anticipated recovery materialise.
Source: Noah Wire Services