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Adding companies regularly to a Stocks and Shares ISA can be a fantastic way to build long-term wealth. Here, I’ll take a look at a pair of UK stocks to consider that I think have the potential to generate attractive returns over the next few years.
Financial data powerhouse
First up is London Stock Exchange Group (LSE: LSEG), or LSEG as it’s known. At first glance, this might not seem like a ‘growthy’ name, particularly as just five firms have listed in London in the past six months, raising a paltry £160m. That’s a 30-year low!
However, listings only account for a small part of LSEG. Nowadays, it’s a diversified financial data company, with 44,000 corporate customers and 400,000 users globally.
Revenue has risen from £2.31bn in 2019 to £8.86bn last year, boosted significantly by its $27bn acquisition of Refinitiv in 2021. Now rebranded as LSEG Data & Analytics, this unit generates significant recurring revenue through subscriptions for trading terminals, data feeds, and risk tools used by banks, asset managers, and other institutions.
One risk here though is competition from Bloomberg and others. LSEG will have to stay on top of its game to keep customers happy.
This is where I think the company’s strategic partnership with Microsoft should give it an edge. The tech juggernaut has taken a 4% stake in LSEG, which plans to developed new AI‑powered analytics and workflows to boost subscription growth.
Some of these AI-enhanced products are now available for customers, and more are on the way. The company’s massive amount of high-quality data gives it a significant advantage in developing cutting-edge AI tools.
The FTSE 100 stock is trading at just under 25 times next year’s forecast earnings. Considering LSEG’s recurring revenue and ongoing share buybacks, I think this is reasonable. It’s one to consider.
On the move
Wise (LSE: WISE) is also in the financial space, but focuses on cross-border money transfers. It does so faster and cheaper than most, a one-two combo that’s seeing it gain market share among both individuals and businesses.
As CEO Kristo Käärmann puts it: “We built [our infrastructure] from scratch to replace the outdated correspondent banking networks that hadn’t been fit for decades.”
Last year, customers grew 21% to 15.6m as it transferred around £145bn. But Wise plans to ramp that up to trillions in future. This doesn’t look fanciful when you dig into the numbers.
In total, around £32trn is moved around by individuals, businesses and banks each year. Wise currently serves about 5% for individuals and less than 1% for businesses.
It’s actively integrating with more banks, including Europe’s Raiffeisen and Brazil’s Itaú — Latin America’s largest lender — to embed Wise-powered cross-border payments into their apps.
Looking ahead, Wise may see lower transaction volumes if the global economy slows, while the stock trades at a premium 29 times forward earnings. Any earnings missteps along the way might be punished by investors.
However, from a starting market cap of £11bn today, I think Wise has significant room to grow larger over the next decade. The market opportunity is simply enormous.
Finally, Wise has announced an intention to shift its primary listing to the US to raise its profile. Given the strong fundamentals and growth potential, I reckon many US investors may be interested. I know I am.
