With so much stock market wealth now concentrated in a handful of AI infrastructure giants, the market’s starting to look increasingly fragile. And this outlook’s only being amplified by the crisis in the Middle East that continues to simmer in the background.
That fragility does open the door to real volatility. But does it mean a crash is guaranteed? No. Even near record highs, there are still plenty of promising stocks to buy for shrewd investors willing to look past the mega-cap crowd.
So which non-mainstream names are institutional investors actually backing right now?
A builders’ merchant institutions can’t stop buying
One top pick today is Grafton Group (LSE:GFTU). The company distributes building materials and DIY products across Ireland, the Netherlands, Finland, and the UK, serving tradespeople and retail customers through household names such as Selco and Chadwicks.
Eleven analysts currently cover the stock, with 10 recommending it as either a Buy or Outperform. And more recently, several analysts, including Deutsche Bank and Berenberg, have explicitly been upgrading their outlook as UK construction volumes begin stabilising after years of decline.
In fact, stabilising earnings and improved balance sheet flexibility seem to be the running theme across analyst reports. And the latter factor matters in particular because Grafton has been quietly using its financial strength to buy back shares consistently to take advantage of a relatively undemanding price-to-earnings ratio of 14.2.
However, while analysts remain broadly bullish, there’s one critical weak spot. Grafton remains highly dependent on the European construction sector and its activity levels. If this industry starts to decline again due to energy-driven inflation, renovation and building demand could easily start disappointing again, taking Grafton’s shares with it.
A publisher riding an unexpected AI tailwind
Bloomsbury Publishing‘s (LSE:BMY) another top pick on some analysts’ radar. The team at Berenberg has recently reiterated its Buy rating, arguing shares have been unfairly derated over concerns about academic market trends and artificial intelligence (AI).
But so far, the business has seemingly been capturing this trend as a tailwind, delivering genuine growth from additional high-margin AI licensing deals and new blockbuster titles. And Berenberg isn’t the only bull in the room. Experts at Deutsche Bank have also shared a similar conviction, issuing a Buy recommendation as well.
But sadly, just like Grafton, Bloomsbury isn’t free from risk. With significant dependence on just a small number of bestselling writers, a single relationship breakdown could throw a major spanner into the works. And when looking to the more academic side of the business, rising levels of university and school budget pressures also create unwelcome headwinds.
