Here’s my top stock to buy in 2018

A Vimto delivery van

These days there are plenty of ways to retire as a millionaire. You could win the lottery, become a talentless reality TV star, or even invent an anti-ageing cream that actually works. But although not impossible, it’s highly unlikely that any of these scenarios will actually play out in your lifetime. What would be a tad more realistic in my mind is retiring as a millionaire by accumulating wealth through patient investing.

Energy boost

Of course, investing in the stock market isn’t without risks, but by cherry-picking the right growth stocks for the longer term, you’ll be surprised at how much wealth can be accumulated with a simple buy-and-forget strategy.

Of course that’s easier said than done, so today I’ve done some of the prep work for you and picked out one of the lesser-known London-listed companies that I believe could deliver spectacular long-term capital gains.

Nichols (LSE: NICL) isn’t a name that I expect most retail investors will be familiar with, but I suspect that most of you will have at least enjoyed its most famous product at one time or other. I’m talking about Vimto, the iconic soft drink that’s been around for over 100 years (since 1908 to be precise). It is popular throughout the world, particularly in the Middle East were it remains the beverage of choice during Ramadan. In case you’re wondering, the high sugar levels provide a welcome energy boost after a day of fasting without food or drink during the Muslim holy month.

Purple tonic

AIM-listed Nichols is also home to other popular brands such as Levi Roots, Feel Good, Starslush, Panda, and Sunkist – but of course Vimto remains its prized asset. The company gets in name from John Noel Nichols, who first created the purple tonic from a special secret combination of fruits, herbs and spices, in sunny Manchester.

Now based in Newton-le-Willows, near Warrington, it has enjoyed exceptional levels of revenue and earnings growth for the past decade or so. This theme has continued up until the present time, with the group delivering another strong performance in its last completed financial year, despite challenging market conditions.

Sugar levy

For 2017, sales of the Vimto brand in the domestic market were 9% ahead of the previous year, and significantly ahead of the 2.3% growth rate for the UK market as a whole. In addition, the company also looks well prepared for the introduction of the ‘sugar tax’, with 100% of the Vimto and Feel Good brands portfolio already below the levy threshold.

From a valuation perspective, a sharp pullback in recent months has left Nichols trading well below last year’s all-time highs of 1,958p per share, and on a slightly depressed earnings multiple of 21.6 for 2018. From where I’m sat (with a purple drink in my hand), I can certainly see the AIM-listed drinks manufacturer making a delicious contribution to your financial wellbeing in 2018, and far beyond.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Nichols. 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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