For your portfolio, consider these three attractive small and mid-cap stocks from the UK

Abby Glennie of the Aberdeen UK Smaller Companies Growth Trust chose three UK small and mid-cap stocks

Although they have been overshadowed by their larger counterparts, UK small and mid-cap stocks are starting to make a comeback. The FTSE 250 has outperformed the FTSE 100 by about 6% since the beginning of April, which is noteworthy considering the continued political and macroeconomic unpredictability. Investors are becoming more aware of the opportunity, especially since UK small and mid-cap stock valuations are still significantly below historical levels. The FTSE 250 was about 21% below its long-term average at the end of the first quarter, while the FTSE 100 was only 4% below.

Although the FTSE 100 is frequently preferred due to its income profile and global diversification, small and mid-cap stocks have many of the same features. Dividend yields of about 3% are generally competitive with large caps, and over half of revenues are produced abroad. While some UK companies with a domestic focus face challenges from declining demand, cost inflation, and the overall state of the economy, others continue to produce robust growth and earnings. Access to a variety of end markets is made possible by the breadth of international exposure, which includes industries like mining, US infrastructure, defense, and global industrial production.

Invest in three small and mid-cap stocks in the UK.

AJ Bell (LSE: AJB) enjoys a strong position in UK asset management thanks to long-term structural growth, favorable demographics, and a slow reduction in state retirement benefits. Since 2018, the platform market has grown at an annual rate of about 11%, and AJ Bell is still gaining market share. Approximately two-thirds of the addressable market have not yet switched to platforms. Strong client retention underpins its diverse business model, which includes both adviser and direct-to-consumer channels. In addition to having outstanding Trustpilot ratings, about 81% of revenue is recurring.

Growth in customer numbers and profits is being driven by ongoing investments in the brand, technology, and pricing, which are supported by the management team's excellent track record of execution.

Mobile network operators seeking to increase coverage and enhance service quality consistently invest in Helios Towers (LSE: HTWS), a telecom tower operator with a focus on Africa. The deployment of 4G and 5G networks, growing data usage, and growing mobile penetration are important growth drivers. In the region, mobile connectivity is essential for both communication and payments, as evidenced by its widespread use in daily life. A scalable, mostly contracted revenue model that offers clear earnings visibility is advantageous to Helios. Additionally, the company is constructing long-term infrastructure assets that will support the ongoing deployment of its tower network while producing cash flow and returns.

Paragon Banking (LSE: PAG) concentrates on providing specialized lending in the commercial and buy-to-let markets. Although sentiment is still cautious, there is a 100 million share buyback program in place, the stock trades on seven times earnings, and the yield is six percent. Having successfully lent through several cycles, it continues to provide appealing returns of about 17% while maintaining strong credit quality. Long-term investors are encouraged to buy because of its emphasis on professional landlords, who are generally less impacted by government intervention, and its well-organized funding base.