Dan Peeke, Author at The Twelfth Magpie

UK shares: how I’d spend £1,000

Dan Peeke — Thu, 12 Aug 2021 06:21:08 +0000

There are two UK shares that I’d never thought much about until a couple of months ago.

The first is WPP (LSE:WPP), which is the world’s largest advertising company. Its clients include Nestlé and American Express. The second is Legal & General (LSE:LGEN). This London-based company has been providing financial services since 1836.

These UK shares aren’t exactly the FTSE 100’s most exciting constituents, but they’ve certainly caught my eye.

An impressive recovery from the pandemic

The pandemic hit WPP hard, but its cost-cutting has started to pay off in recent months. This has helped it reduce debt by £1.2bn in just a year, while its profits have recently approached £500m. This is huge when compared to losses of nearly £3bn in 2020.

This return to profit had further benefits. It meant the company could increase its interim dividend by 25% in 2021. At the time of writing, WPP’s dividend yield sits at 2.42%. This is on the lower end of the spectrum for UK shares. However, this is more encouraging than a less stable company offering huge dividends to draw in investors.

That said, as I mentioned earlier, the pandemic had a harsh impact on WPP. Should new variants cause further lockdowns, there could be a serious hit to its share price.

Luckily, the company’s share price has already managed to return to 2019 levels, which is more than can be said for many other UK shares. This reassures me that it has the ability to overcome issues and remain strong.

Despite this, its current price of 991p is 44% lower than its price of 1,780p exactly five years ago. My colleague Alan Oscroft theorised that this could be to do with institutional investors lacking confidence in its current management following the 2018 departure of Sir Martin Sorrell. This needs to be addressed.

One of my favourite UK shares for dividends

Like WPP, Legal & General has found itself in a strong position during 2021. Profits have gone from £946m in the first half of 2020 to £1.07bn in the first half of 2021. This isn’t a return to 2019 levels – it’s a 7% increase!

Plus, unlike WPP, its share price is up 30% in the last five years. For a company consistently providing impressive dividends, this is steady growth.

Its current dividend yield of 6.34% is exciting to many investors in UK shares. Not only is the company aiming to continue growing its dividend, but it is so well covered by earnings that it isn’t slowing business development or at risk of being cut.

My colleague Christopher Ruane also pointed out that Legal & General was one of the only insurance firms to maintain its dividend during the pandemic. This proves a commitment to its shareholders.

Of course, insurance firms pop up everywhere. The competitive nature of the industry means that newcomers could theoretically steal market share at any time, which could have a huge impact on Legal & General. Also, the fact that its share price often moves with the broader economy means that larger-scale financial issues could impact the company more than other UK shares.

On the whole though, these are two UK shares I’m very keen to add to my portfolio.

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Dan Peeke has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Here’s why I’m buying more easyJet shares

Dan Peeke — Fri, 06 Aug 2021 09:58:15 +0000

I first invested in easyJet (LSE: EZJ) in October 2020. A few months ago, my investment had doubled in value – and that was in the middle of a lockdown! The stock is actually up almost 48% year-on-year and at the time of writing, I’m still 63% up and about to buy more easyJet shares.

While there are still reasons to be cautious, here’s why I’m investing.

easyJet shares: ready for take-off?

I see plenty of reasons to feel easyJet shares still have growth potential. The most obvious is the simple fact that the company hasn’t yet resumed normal service. While nothing is guaranteed, it’s likely that whenever the aviation industry returns to ‘normal’, its share price will benefit.

Additionally, in Q2 2021, the company reported a 2,866% revenue increase year-on-year. This isn’t exactly a surprise, but it is proof that demand for air travel is there. When capacity is able to increase (it was operating at 17% of Q3 2019 capacity), this should be reflected in revenue.

I’m also expecting easyJet shares to benefit from Britons trying to make up for lost time. If pandemic progress remains positive, we’ll likely see an explosion of summer holidays in 2022. This could make its current £8 share price seem incredibly cheap.

My colleague G A Chester is also feeling positive about easyJet shares. He views a share price of at least £12 as very attainable. Assuming the company can work its way back towards its pre-pandemic profits and valuation, that is. This would be growth of at least 40%.

The company also has access to liquidity of almost $3bn. This is a comforting thought when faced with a variety of potentially very sudden upsets.

But it could still crash

Having said all of the above, there are always risks to be aware of. With new Covid-19 developments around every corner, many of easyJet’s goals could be ruined by new travel restrictions. This includes the all-important capacity issue.

The company has projected a capacity of up to 60% of Q4 2019’s level for Q4 2021, and profits of $240m are forecast for 2022. However, if Scott Kirby (United Airlines CEO) is right in his prediction that the aviation industry won’t be operating at pre-pandemic levels until 2024, then easyJet shares might not hit pre-Covid levels for a long time.

The pandemic also hit easyJet’s debt hard. In March 2021, the company owed around £2bn, which was four times more than a year earlier. It has been cutting costs successfully, but it remains to be seen how it will tackle this debt, and how further Covid-19 developments could impact it.

Royston Wild also pointed out another issue the company faces: rising fuel costs. Brent oil prices have risen by 77% in the last year, which means that a company very conscious of its spending will be paying a lot more than usual for its fuel.

While these downsides are making sure I’m not expecting fireworks from the company in the short term, I’m very optimistic about easyJet shares in the long term. I’ll be buying more.

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Dan Peeke owns shares in easyJet. The Motley Fool UK has no position in any of the shares mentioned. 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.

2 FTSE 100 shares I’m buying after ‘freedom day’

Dan Peeke — Tue, 27 Jul 2021 16:23:04 +0000

Instability has rocked FTSE 100 shares recently as various reasons to pause the unlocking of the UK put the promise of ‘freedom day’ in jeopardy. In the end, despite rocketing cases of Covid-19 around the country, most restrictions have been lifted.

This decision has had a big impact on what I’d be tempted to invest in over the coming weeks and months.

Rolls-Royce will benefit from the return of aviation

I’ve spoken a lot about Rolls-Royce (LSE:RR). Back in April, I described the company as “a little too risky for me at the moment,” but I might have changed my mind since then.

Civil aviation demand is returning. The very fact that you can see planes in UK skies once again is a good sign for many FTSE 100 shares. For Rolls-Royce, it’ll mean more engine sales, and even more crucially, more opportunities to fix engines.

Furthermore, its defense division makes up almost a third of its revenue, and despite the pandemic, this grew by 4%. This makes me quietly confident.

One of the key factors in my decision here is simply share price. At the time of writing, it stands at 96p. During lockdown on 17 March2021, a share was worth 127p. At the start of 2020 – 233p. On paper, this looks like a worrying decline, but with the company currently now much more operational, that 96p does seem cheap either way.

Of course, with cases rising and the re-opening of the UK likely to only accelerate this, there’s no real way of knowing if we’re out of the woods yet. Another Covid-based blow for the aviation industry could spell disaster for these FTSE 100 shares.

In fact, the company has already started selling assets. It has sold Bergen Engines and is looking to offload its 50% stake in AirTanker. It’s hard to tell whether these decisions are down to panic, or simply smart decisions to help its financial situation in preparation for a post-pandemic world.

SSE: FTSE 100 shares with green credentials

SSE (LSE:SSE) is the third-largest gas and electricity supplier in the UK. Despite this, the company has never really been on my radar. Until recently, that is.

One of my favourite things about SSE is its green credentials. It aims to triple its generation of renewable power and reduce carbon intensity levels by 60%, both in the next 10 years. I think this is a great sign for the long term.

However, there are a multitude of financial reasons to be excited by SSE as well. The company currently offers a dividend yield of more than 5%, which is nearly double the average of most FTSE 100 shares. It also managed to remain profitable during the pandemic, and reported a 4% increase in profit before tax for the year.

But as with any investment, there are downsides. Manika Premsingh went into detail on how the Consumer Price Index could impact the company’s dividend back in May.

More generally, the energy sector is very competitive. This means SSE will have to fend off bigger companies such as British Gas and EDF as it attempts to grow further.

While each of these FTSE 100 shares have their own unique (and quite large) risks, I’ll probably be taking advantage of the low prices of what seem like good long-term investments.

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Dan Peeke has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Cineworld shares: why I won’t be investing

Dan Peeke — Tue, 25 May 2021 16:08:14 +0000

With almost 10,000 screens across its 790 sites worldwide, Cineworld (LSE:CINE) is the second-largest cinema chain in the world. It’s the UK’s biggest. Size doesn’t always matter, though, as Cineworld shares have been rocky for a long time now.

Over the last few weeks, I’ve been weighing up whether I’m interested in investing in the company. Here’s what I decided.

I’m not buying Cineworld shares

In March of last year, I managed to attain Cineworld shares at market crash lows of around 35p. Soon after, I’d doubled my money.

A few months later, I took a loss of about 20% out of concerns that the company wouldn’t recover from its October re-closure. It’s safe to say that I was wrong (in certain ways, anyway). By now, my initial investment would’ve doubled again. No need to dwell on it, though, because Cineworld shares are tumbling once again.

Understandably, last year had a big impact on the cinema giant’s revenue. It ended up experiencing losses of £2.2bn. This is pretty severe for a company in an industry that was already far from thriving. It also resulted in almost £1bn more debt from that year alone. Cineworld now owes a total of around £6bn.

As Kirsteen Mackay explains, Cineworld shares have been heavily shorted since before the pandemic. This lack of confidence from investors who are willing to bet on Cineworld’s failure makes it a risky investment.

It also has the continued rise of online streaming to contend with. Things don’t look great for the cinema industry as a whole, let alone Cineworld.

Disney+ has proven to be a hit, with over 100m paying subscribers able to view blockbusters whenever they want. Its Premier Access service also allows its audience to pay to see new films. This stops them from heading to the cinema. Should this become the new normal, Cineworld shares would be in serious trouble.

The company also sparked controversy in October 2020 when many of its employees found out that they wouldn’t be returning to work via news headlines.

This actually hasn’t had much of a long-term impact, but any further mistreatment of its employees be disasterous. We all know what happened when Deliveroo debuted on the London Stock Exchange just after its employees protested about working conditions.

But it’s not all bad news

All of that said, Cineworld is finally opening its doors again. Films like Godzilla vs Kong have already proven successful in the US, and soon enough we’ll be seeing huge, delayed films like No Time To Die released.

If UK film fans realise they miss the big screen enough to say no to streaming, the group could generate healthy profits and begin to pay off its debts.

Cineworld also currently offers a dividend yield of nearly 7%. This is a relatively attractive figure for investors looking for passive income, and not too much of a red flag for those concerned that Cineworld as a company might be in trouble.

It’s possible that I’ll be eating my words like popcorn in 2022, but at the moment, I’ll be avoiding Cineworld shares like another Pirates Of The Caribbean sequel.

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A FTSE 100 share I’m buying for the stock market recovery

Dan Peeke — Fri, 14 May 2021 14:57:50 +0000

Glencore (LSE:GLEN) is a FTSE 100 share with fingers in a lot of pies. It is a world-famous mining company and one of the biggest commodity traders in the world. It also happened to be ranked as the 48th biggest public company in the world by Forbes in 2020.

This sheer size probably had a hand in its weathering of, and hearty recovery from, the Covid-19 pandemic. On 23 March 2020, it hit a low of 112p per share. At the time of writing, it’s at 324p – that’s a 189% increase in a little over a year. A well-timed £3,000 investment would have seen profits edging towards £6,000 by now.

A promising investment

I also view the FTSE 100 share as a relatively safe investment. The fact that the company is so diversified makes it strong and resilient. For example, if zinc production in Canada dried up, the company would still be the biggest producer of copper in Africa. You get the idea.

Promisingly, the FTSE 100 share has really started to tackle its debt issues in recent years. In the last six years is has reduced this by almost $15bn, with a drop from $17.5bn to $15.8bn between 2019 and 2020. It plans to reduce debt even further over the course of 2021, targeting $13bn.

This comes just as rising expectations of inflation rocked the FTSE 100 this week. Glencore is in a good position here as its net debt to EBITDA ratio (earnings before inflation, tax, depreciation, and amortisation) is stable at less than 1.5. As such, it doesn’t have as much to worry about as FTSE 100 companies with more serious debt issues.

This reduction of debt also allowed it to reinstate its dividend at a sustainable, if not overwhelmingly exciting, 1.3% yield. It isn’t exactly a life-changing amount of passive income, but it’s certainly better than nothing.

Furthermore, as the world slowly recovers, the need for commodities to support infrastructure plans should start to rise. At the same time, the price of some of the commodities Glencore supplies is skyrocketing. Copper prices, for example, hit an all-time high this week. This should help it continue to recover after a 34% fall in revenue last year.

The downsides

Of course, as with every share, Glencore has its downsides. As my colleague Harvey Jones says, the company is no longer undervalued like it was last year. He explains that the company is trading at about 28 times its earnings, which isn’t unreasonable. This doesn’t necessarily make for a bad investment, but it certainly isn’t the bargain it would’ve been in March 2020.

There is also the underlying risk of a single, game-changing disaster. A collapse in commodity prices could easily send Glencore spiralling back into masses of debt. It’s happened before, so certainly isn’t impossible.

It also has to comply with a variety of strict government regulations around the world that could lead to serious repercussions if broken. It was even accused of bribery towards the end of 2019 and faced allegations of ‘failure to prevent corruption’ in the Democratic Republic Of Congo in June 2020.

Still, I personally think that the positives outweigh the negatives in the case of this FTSE 100 share, so this is one on the short list for my portfolio.

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GlaxoSmithKline shares: why I’m not buying

Dan Peeke — Thu, 06 May 2021 09:02:43 +0000

Since being founded in 2000, GlaxoSmithKline (LSE:GSK) has expanded to become the sixth-largest pharmaceutical company in the world, according to Forbes. It also has the fourth-largest market cap in the London Stock Exchange at £81bn. Many of my colleagues at The Motley Fool believe this is just the start of its recovery and are keen to invest in GlaxoSmithKline shares. I can understand why.

The case for GlaxoSmithKline shares

Cliff D’Arcy has been invested in the company for three decades. Despite his long-standing disappointment with GlaxoSmithKline shares – it is down £1 on its price 25 years ago – he is hanging on thanks to the potentially promising involvement of activist hedge fund Elliott Management.

Elliott’s aggressive activist involvement should encourage the company to increase its value. This should, in turn, increase the worth of its shares. The level of confidence displayed by the hedge fund through a nine-figure investment should hopefully lead to good things.

On top of this, GlaxoSmithKline shares have risen by more than 12% in the last two months. It also currently boasts a dividend yield of about 6%. One could conclude that now is a great time to buy a cheap stake in a huge company.

Why I’m not keen

As mentioned, its long-term performance has been pretty terrible. Many investors remaining from the last century are currently sitting on a loss. Even with Elliott on board, if the company hasn’t been able to grow in twenty-five years, there are certainly no guarantees now.

It also missed out on the chance to develop its own Covid-19 vaccine. This was a big factor in the recovery of other FTSE 100 pharma companies like AstraZeneca (LSE:AZN). Its low last March was £62.21, with its price currently up 23% to £76.93. GlaxoSmithKline shares hit £13.74 in March 2020 and have dropped by 3% since then.

With the current focus on Covid-19, I’m more inclined to follow the recovery of the companies working in that field.

The pandemic also reduced revenue from sales of non-Covid-19 vaccines by 32% as they were put on the backburner. It was even hit with a 19% drop in over-the-counter sales as more common illnesses became less prominent thanks to social distancing. This led to an 18% drop in revenue in Q1 of 2021 in comparison to the same period in 2021.

GlaxoSmithKline shares aren’t benefitting from other issues within the company either. Bintrafusp alfa – a cancer drug – failed an important trial in January, and a promising partnership with Sanofi has been hit with more delays.

Even GSK’s dividend is probably going to be cut. The firm plans to split in two in order to focus on consumer health in one division, and on HIV, vaccines, and pharmaceuticals in the other. This split would likely mean that it would no longer reach its current dividend yield.

For these reasons, I’ll be avoiding GlaxoSmithKline shares for the time being. As mentioned above, though, there are many factors to reconsider once the uncertainty of Covid-19 is a distant memory.

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Dan Peeke has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.

FTSE 100 shares: 3 I’m considering for my ISA

Dan Peeke — Thu, 29 Apr 2021 16:44:35 +0000

FTSE 100 shares are interesting, but there are three that have really been on my mind recently. I’ve been weighing up the positives and negatives of adding each of them to my ISA.

HSBC

Over the years, HSBC (LSE:HSBC) has lost its grandeur. It is no longer the giant of FTSE 100 shares it once was. It has started to withdraw from the US to focus on Asia, and is cutting more than 30,000 jobs.

Low interest rates mean that the company (like all banks) is struggling to make money. Plus, any further fines – like the $1.9bn it was forced to pay in 2012 – could be a serious setback.

However, HSBC’s focus on Asia makes sense. 42% of its capital is there, and more than 80% of its profits came from the region in 2019. Interest rates are a problem, but a potential rise in the future would be a huge boost. And you’d hope it had learned its lesson from that previous fine…

I also think the company is undervalued, making it one of my favourite long-term FTSE 100 shares. Its price-to-book ratio is currently 0.6. Rupert Hargreaves and I are in agreement that this is too cheap.

As such, I think this is a good opportunity for me to buy and hold for the long term.

British American Tobacco

I don’t view British American Tobacco (LSE:BATS) with the same mindset. With many consumers becoming more health-conscious, I can see the tobacco industry declining hugely in many years. Plus, ethical concerns are enough to put many investors off immediately.

Nevertheless, this is one of the FTSE 100 shares I am most keen to keep an eye on. Over the last five years, the company has increased its profits by almost 50%. At the same time, it has engaged with secondary markets (vaping, etc.) better than its closest competitor, Imperial Brands. The company even currently offers an enticing dividend yield of 7.8%.

Of course, investment in British American Tobacco is still a risk. Its share price is down almost 50% compared to four years ago, and talk of restrictions in the US on the amount of nicotine that cigarettes can contain pushed its price from 2,900p to 2,700p in a single day less than two weeks ago.

Rolls-Royce

The travel sector took a huge hit during the pandemic, with activity at Rolls-Royce (LSE:RR) hitting a brick wall.

For the company to begin a strong recovery, flying hours need to return to normal. It has forecast free cash flow of $750m by 2022 assuming 55% of 2019’s flying hours. This is ambitious, but if it is able to hit this target, then things should be looking up. Plus, with more flight hours, there will be more opportunities for Rolls-Royce to work on engine maintenance.

If it isn’t, then we could see a further decline in a share price that has already dropped by 65% since April 2018.

Add the potential for further lockdowns and the looming issue of the company’s debt – currently £3.6bn – and Rolls-Royce becomes one of the riskiest FTSE 100 shares.

I’m convinced that HSBC will be great for my ISA, but British American Tobacco and Rolls-Royce are still a little too risky for me at the moment.

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Dan Peeke has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. 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.

Lloyds shares vs Deliveroo: which would I buy?

Dan Peeke — Thu, 22 Apr 2021 11:42:37 +0000

There are two UK shares I’ve been keeping a keen eye on over the last few weeks.

One of them, Deliveroo (LSE:ROO), is a start-up success story that was at the heart of a much-publicised (and rather disastrous) IPO as it joined the London Stock Exchange at the start of April. The other, Lloyds Banking Group (LSE:LLOY), has a 300-year heritage and has been trading (in its current form) since 2009.

But are either of these contrasting UK shares going to make it into my portfolio?

Is Deliveroo going to fix its problems?

The most worrying thing about Deliveroo is there seems to be no end in sight to its downturn. It debuted down almost 30% on its 390p IPO price. Now, it sits around 232p – a 40% decrease.

There are many reasons why the shares are performing poorly. Most obvious is the fact that Deliveroo had benefited from people being unable to leave their homes. With lockdown easing, we’ll likely see UK shares centred on hospitality soar as the demand for home delivery lessens.

On top of that, it was simply overvalued. It isn’t currently profitable and has major competitors in two other UK shares, Just Eat and Uber Eats, so there’s no economic ‘moat’ here. In fact, the only unique feature at present seems to come from the poor conditions for its riders.

I feel its paths towards rapid growth are mostly hypothetical: one of its competitors leaving the UK, signing up restaurants exclusively, or even another lockdown. Without any of these, I’m not hopeful that its shares can leap ahead fast.

Its Q1 trading update did offer some positivity though and it’s not as if the company is in decline. Deliveroo is actually performing well. The start of 2021 saw 91% more active users and a 114% rise in orders year-on-year. Its goal to reach 66% of the UK population by the end of 2021 is in sight, with more than 60% already covered. It has even successfully partnered with grocery shops for delivery both domestically and internationally.

These results are encouraging. But I think there are too many uncertainties that go beyond the numbers to invest any time soon.

The Lloyds share price is rising

Lloyds is a very different story. At the moment, it’s one of my favourite UK shares. If its current price of 42p can return to the 62p of two years ago, investors would be looking at a 47% increase.

With a convincing P/E ratio of 10.8, £1.4bn profit at the end of 2020 despite Covid, and a strong, consistent and familiar brand, I think this is possible. The bank has also recently resumed dividend payments at a yield of 1.3% after a year in which its dividends were paused.

But as with all UK shares, there are a number of reasons I might stay away from this bank. If interest rates stay low, it’ll remain difficult for it to make money consistently. And how will it compete with the rise of digital banks like Monzo? Plus, its dividend yield is considerably less than the FTSE 100 average of 3.06%, and is therefore much less enticing.

These downsides aren’t putting me off yet, though. I’ll be keeping a keen eye on Lloyds’ performance as lockdown comes to an end and likely making an investment myself.

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Dan Peeke has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.

Should I buy Roblox shares? Or is this NYSE newcomer a better investment?

Dan Peeke — Tue, 16 Mar 2021 08:59:05 +0000

The New York Stock Exchange has been busy recently. On March 10, online gaming platform Roblox (NYSE: RBLX) went public. The very next day, South Korea’s second-largest online retailer, Coupang (NYSE: CPNG), followed suit. Both were eagerly anticipated. Roblox shares jumped by 50% on their first day, while Coupang wasn’t far behind with a 40% increase. However, do I think they make good investments and will I buy?

Roblox shares: a great long-term investment?

Roblox is a gaming platform that allows users to both play and create games within an expansive virtual universe. Players are able (and encouraged) to make in-game purchases with the virtual currency ‘Robux’. With over half of under-16s in the US having used the platform, this is a great avenue for revenue.

Since listing on the NYSE, Roblox shares have looked like an exciting investment opportunity. The company expects an explosive Q1, pushed forward by 60% growth in active players and a doubling of revenue in comparison to last year. For 2021 as a whole, its expectations are a little more restrained. But roughly $1.4bn in revenue still represents growth of around 50% year-on-year. Impressive.

I’m also confident that Roblox shares would not be harmed by any negative pandemic developments. In fact, they could actually benefit if children are stuck at home once more (something we all hope doesn’t happen). The more likely scenario is that the world starts returning to normal in the coming months.

But this creates the very real risk that player numbers could start to decline to pre-pandemic levels.

Another risk is that Roblox shares are potentially overvalued. My colleague Edward Sheldon certainly thinks that its jump from a $4bn valuation last year to around $40bn poses a risk. This isn’t helped by the difference between its market cap and revenue resulting in a high P/S ratio of 27.

And don’t forget, all it takes is one viral gaming sensation to drive users away from the platform. Remember Fortnite?

Coupang: advantages and disadvantages

The performance of Coupang when it joined the NYSE was encouraging. The company is seen by many as the ‘Amazon of South Korea’, so demand was understandably high.

This interest comes on the back of a wonderful year for the relatively new company. Its revenue doubled in comparison to the previous year, reaching an impressive $12bn. It also managed to increase its market share from 18% to 25%.

However, both of these positives come with caveats. Its market share might be increasing, but strong competition makes innovation a must if it wants to avoid being smothered by the likes of Gmarket and WeMakePrice.

It also isn’t profitable. Despite its $12bn revenue last year, it actually ended up with losses of almost $500m. This is an improvement on the year before, but doesn’t guarantee that the company will become profitable any time soon.

This lack of profitability and the risk its competitors pose means I’ll probably hang back from Coupang for a while.

I’m willing to overlook the risk of overvaluation in regard to Roblox shares, though. Once the dust has settled over the next few days, I’ll probably be making an investment that I’ll maintain for the long term.

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1 growth stock down 67% to consider buying for the next 5 years

Should I buy these UK shares?

Dan Peeke — Sat, 20 Feb 2021 15:35:26 +0000

With the end of the pandemic in sight, many UK shares are finally on the road to recovery. For example, the FTSE 100’s current price of roughly 6,600p is down just 11% compared to the 7,433p of exactly one year ago, and up nearly 35% on its lowest pandemic price.

These developments are promising, and have put a couple of interesting UK shares back on my radar.

Whitbread

Best known for owning and operating hospitality brands like Premier Inn and Brewers Fayre, Whitbread’s (LSE:WTB) business hasn’t exactly been booming recently. In fact, its share price dipped by 55% between 19 February and 19 March 2020 to hit a harsh low of 1,808p.

That said, solid vaccination progress since late October has led its share price back to roughly 3,330p. This is despite UK accommodation sales being down 55% in the weeks leading up to December 2020. There’s a good chance of a continued rise throughout 2021 as its businesses reopen.

I’m not just thinking about Whitbread’s recovery, though. It’s also one of my favourite long-term UK shares, and Tim Charles agrees with me.

Despite its brands being closed, the company finished 2020 with £40m net cash. This speaks volumes of its ability to generate cash. This should be even more defined in a ‘normal’ world. Furthermore, its Q3 trading update confidently states that the group is “well-positioned to continue its outperformance versus the market”.

Premier Inn in particular continues to outperform its rivals. With plans in place to build even more hotels around the country, its share of the market continues to rise, while foreign travel restrictions mean UK holidaymakers have a good chance of booking themselves into a Whitbread-owned establishment this summer.

I’ll be keeping in mind the current volatility of hospitality before I make any decisions, though. We’re expecting this lockdown to be the final one, so another unexpected closure of hospitality venues could pose financial risks Whitbread is unprepared for.

National Express

I’ve actually owned shares in National Express (LSE:NXE) since earlier this year. My decision to invest mostly came from what I learned while researching for a previous article. The question is, should I now buy more?

Its recovery was strong, with its 90p share price low eventually rising by 163% to 237p at the start of 2021. This is roughly when I invested, and in the six weeks since then we’ve seen another 25% rise. Continuing at this rate would double my money by late June (though I’m aware that’s overly ambitious).

But I’m still happy with its long-term potential. As UK shares go, National Express is in a good position. In line with government initiatives to reduce emissions, the company has already committed to a zero-emission fleet in the next 10 years. Thanks to its size, it also has the financial ability to adapt quickly to the ever-changing landscape of the travel industry.

Personally, I’ll probably wait until National Express releases its full-year results on 10 March before deciding to invest more. That way, I can assess the risks posed by competitors and the company’s current debt. As of right now, its debt is approaching £1.5bn.

At the very least, I’ll be keeping a close eye on both of these UK shares. It wouldn’t surprise me if National Express coaches were driving a lot of customers to Whitbread-owned hotels this summer…

The post Should I buy these UK shares? appeared first on The Twelfth Magpie.

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Dan Peeke owns shares in National Express. The Motley Fool UK has no position in any of the shares mentioned. 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.