At the end of March 2013, the Games Workshop (LSE: GAW) share price was 634p. As I write, it is 9,526p. It has risen by 1,402% in a decade. A £1,000 investment (technically £1,001.72 to get a whole number of shares) back then would have bought 158 shares in the hobby miniatures company whose major brands are Warhammer and Warhammer 40,000.

Those shares would be worth £15,051 now, for a total gain of £14,049. I think numbers like that demonstrate the value of long-term investing quite clearly.

The decision to buy

I didn’t buy Games Workshop shares a decade ago. I was not investing back then. I didn’t buy them after 50% was wiped off their value during the March 2020 coronavirus market crash. They went on to rise 245% to hit an all-time high in September 2021.

By this point, I was following the company, and I liked it. It was booming as people turned to gaming of all varieties to escape the tedium of lockdowns. But, with a price-to-earnings (P/E) ratio well over 30, I thought the stock was pricey.

Then came an opportunity. The markets turned on growth stocks and pandemic winners towards the end of 2021. By October 2022, Games Workshop shares were down 50% from their all-time highs. In November 2022, I bought, when the P/E ratio was back under 20.

I did struggle to decide to buy. I couldn’t help but look back at the price history and think that perhaps most of the gains had already been had. But, I ultimately ignored the price chart. Instead, I asked a few key questions of the company.

Games master

The first question was whether Games Workshop was well-run. I thought that it was and still do. Its management has always had a clear and simple strategic plan. They take ownership of mistakes instead of blaming external factors for everything. And, looking at the company’s impressive long-term revenue growth and profitability suggests they know what they are doing.

The second question was whether the company would be larger in 10 years. Again, I answered yes. Social media has helped to build wide-reaching communities around its core business of fantasy miniatures. Amazon has signed a deal to make TV shows and movies based on the company’s intellectual property. The long-term plan of getting a triple-A Warhammer video game made has probably become more likely as a result.

I thought the prospects for Games Workshop looked good in the long term. So, I bought and put those lingering fears about the stock’s price history to one side.

Games Workshop share price

So far my purchase is doing well. Hopefully, that continues. Do I expect a 1,400% return over the next 10 years? That would be nice, but no. In truth, I have no idea where the Games Workshop share price will end up.

My assessment of the company’s potential might be wrong. Things could change and I am prepared to review and reconsider as the months and years pass by. But for now, and indeed when I bought the stock five months ago, I do have confidence that its price will be higher in the long term than it is now.

The post If I’d invested £1,000 in Games Workshop shares 10 years ago, here’s how much I’d have now! appeared first on The Twelfth Magpie.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James McCombie has positions in Games Workshop Group Plc. The Motley Fool UK has recommended Amazon.com and Games Workshop Group Plc. 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.

How can I find my two best UK dividend stocks out of the 1,938 that traded on the London Stock Exchange in February 2023? A screen will help cut this number down to a manageable size.

I want to look for higher-than-average yields that look safe, and I would like a good dividend payment track record. Here are my screening criteria:

• Dividend yield over 4%
• Dividend cover greater than 2
• Interest payments covered by operating income 10 times over or more
• Market capitalisation greater than £50m
• Annual dividend streak of at least 8 years
• Net debt to equity (a measure of leverage) less than 25%

The screen generated 12 results. Here are the two that I think are the best picks from the list.

Black gold

FTSE 100 stalwart Shell (LSE: SHEL) has managed to maintain an uninterrupted streak of dividend payments for the past 10 years. I take that as a strong indicator of its stability and reliability as a dividend stock. Even during challenging economic times, Shell has continued to pay dividends to its shareholders. And the potential payouts are attractive at the moment as the stock’s dividend yield is 4.54%, which is significantly higher than the FTSE 100 average of 3.5%.

Record profits in the oil and gas industry are being reported now. However, this is a cyclical business, and since it’s currently up, I would worry about it turning down. Earnings are forecasted to fall for the next two years at least. But, given this stock’s forecasted dividend cover is over still three, I do have confidence that the company can continue to reward shareholders. Perhaps there will be cuts. But given Shell’s solid balance sheet and track record, I feel reassured that I have years of dividend payments ahead of me from this stock as a patient, long-term investor.

Small-cap dividend stock

I have to admit I had not heard much about RWS Holdings (LSE: RWS) before. It works with clients to make sure their content, ideas, and brands and clearly, sensitively, and legally communicated and registered across different languages and cultures. In a globally connected world, this sounds like a useful service to provide.

There are risks from the rise of free AI language models which could in theory replace some of the group’s functions. But it has developed its own offering. And there is a trend away from globalisation. That might be a headwind going forward as well. But I would wager that although manufacturing might shift homewards, companies will still want to market their products globally.

Perhaps my concerns are unfounded. The company’s annual revenue growth of 36% over the last five years suggests that it is services are seeing increasing demand. That growth and solid margins have enabled the company to pay an increasing dividend since 2005. Its earnings are forecasted to grow by 8% in each of the next two years. Combining that with a forecasted dividend cover of over two, plus low leverage and RWS Holdings forecasted dividend yield of 4.4% looks like a fairly safe bet.

The post Are these the 2 best dividend stocks in the UK? appeared first on The Twelfth Magpie.

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James McCombie has positions in London Stock Exchange Group Plc and Shell Plc. 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.

The price of FTSE 250 stock Marks and Spencer (LSE: MKS) has been trending higher over the last couple of months. But, given it is well below its all-time high, I do think there might be reasons to believe the stock is undervalued.

An obvious place to start is with the company’s price-to-earnings (P/E) ratio and that of its peers.

Price-to-earnings ratios

Food and drug retailers listed on the London Stock Exchange have an average P/E ratio of 12.3 and for a diversified retailer, it’s 11.1. A weighted average of these two would be a good point for comparison. Since Marks and Spencer’s gets about 34% of its revenues from clothes and homeware, and 66% from its food business, those are the weighing factors.

The weighted average comes out at 11.5. Marks and Spencer’s P/E ratio is quoted at 10.4, so it looks undervalued.

Food glorious food

The company’s average operating margin of 3.9% in its food division is better than competitors like Aldi and Co-Op, which score 2.1% and 2.8% respectively. Those mouth-watering adverts seem to have done their job. Customers seem to be willing to pay a little more for treats at M&S Food. The tie-up with Ocado should help get the company’s food into more online baskets.

Suited and booted

A third of Marks and Spencer’s business is clothing and homeware. This has an average operating margin of 9% compared to 5.7% for House of Fraser. But it’s well behind the likes of Next, which gets 18.2%. Next does twice as much business online as it does in-store, which might explain the difference.

The good news is that Marks bought the technology of the now-defunct Thread.com. It gave personal stylist recommendations to online clothes shoppers based on their inputs and purchases. If integrated correctly, this could help drive online sales higher.

A well-known FTSE 250 stock

According to YouGov, Marks and Spencer is the most popular and fifth most famous home and department store in the UK. It scores well for popularity across generations compared to its peers, which is encouraging. I think this is a good sign for the company as it is easier to build awareness than it is popularity.

It is also a well-known food brand. However, it didn’t score as well when it came to the popularity of its food. It was more popular than some of the large supermarkets. But, It fell behind the discount supermarkets like Aldi and Lidl, which scored well. I think the survey might have focused on value for money. The M&S Food brand is built on being a cut above the usual in terms of quality but not necessarily cheaper.

Restructuring

Group operating margins declined from 13% in 2008 all the way to 2% in 2018. After years of restructuring, they are up to 5%. But they are still lower than individual businesses’ margins would suggest. That’s because adjusting and exceptional items are still being expensed at the group level, lowering the margins. It does not appear that restructuring is over yet.

It might well be that Marks and Spencer’s shares look undervalued because of uncertainty about the length and ultimate success of what is a bold and extensive restructuring plan. But, I am encouraged about the uptick in margins.

The post 5 reasons the market might be undervaluing this FTSE 250 stock appeared first on The Twelfth Magpie.

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James McCombie has positions in YouGov Plc. The Motley Fool UK has recommended Ocado Group Plc and YouGov Plc. 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.

I last looked at the small-molecule drug development company Sareum (LSE:SAR) in June 2021. Back then, this FTSE AIM member was flying high on the potential for its treatments to be used in the fight against Covid-19.

I thought that investors were overestimating the chance and the magnitude of any Covid-19-related success. My hunch was that the price would continue to rise, but would also likely fall back as breakthroughs failed to happen and interest waned. I was not interested in investing in it.

Now that Sareum’s share price has fallen back, I thought it was worth taking another look.

Cash burn

The Covid-19 applications look to have been a distraction. All that is left of that plan now are passing references to potential applications in respiratory illnesses. Sareum is back to its core mission of developing next-generation kinase inhibitors for the treatment of cancer and autoimmune diseases.

But, the Covid-19 episode was not entirely wasteful. The company did take advantage of its inflated stock price. It issued an additional 10.6m shares in the financial years 2020 to 2022, raising £7.9m of cash, or 74p per share. In the previous six years, £5.9m of cash was raised from the issue of 27.1m shares. That works out at just 21p per share.

Sareum needs cash. It has not generated any meaningful revenue in a decade. Yet, it burns through £1.12m of cash on average each year. The £2.9m of cash listed on the balance sheet at the end of 2022 will not last long.

Clinical trial progress

The company has managed to get approval to start phase one clinical trials on its SDC-1801 TYK2/JAK1 inhibitor for the treatment of autoimmune diseases. But this is happening in Australia, after what sounds like timeliness and responsiveness issues on the side of the UK regulator. This will require a subsidiary to be set up there, adding additional costs. The rate of cash use will be higher than average going forward.

I think it is likely that another equity raise happens within the next year or so. That would mean further dilution for long-standing shareholders. They might say that progress is being made, and that justifies the dilution.

Sareum is weighing options for its other developmental drug, SRA737, a Chk1 inhibitor. This was licensed to Sierra Oncology, which took it through phase two trials for solid tumours. Sierra was bought by GSK in July 2022 for its rare cancer treatment portfolio. After the purchase, the rights and data assembled on SRA737 were returned to Sareum.

Sareum share price

For real success, Sareum’s offerings have to be more effective or similarly effective but better tolerated by patients. That has to be shown in phase three trials, which have not begun. Yes, with some positive results from the latest phase one trial, the Sareum share price might move higher. But looking at average rates of success across the industry, it’s more likely that it will not.

Although the rewards are potentially enormous, drug development is an expensive and risky business. Ultimately, I would not invest in Sareum. My risk appetite will not allow it. And even if it would, I would choose a basket of stocks like Sareum within a larger portfolio in the hope that one big winner pays for all the other disappointments.

The post Should I get invested in this FTSE pharma share? appeared first on The Twelfth Magpie.

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James McCombie has positions in GSK. The Motley Fool UK has recommended GSK. 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.

Rising bank rates mean that some Cash ISAs offer around 4% fixed for a year. But, given the long-term decline in rates over the last decade, I can’t be confident of that kind of return lasting. For long-term income building, I’d still plump for a Stocks and Shares ISA.

Build a portfolio first

Before I can draw a meaningful income I need to build my portfolio. At the moment I am paying as much as I can afford into my Stocks and Shares ISA and buying a mix of dividend and growth stocks. I am reinvesting any dividends I receive. When it is time to start taking an income, I will start withdrawing those dividends instead of reinvesting them. But, what kind of returns should I expect as I build my portfolio?

Well, according to IG Group, FTSE 100 total returns have averaged 7.75% per year since its inception. That includes the effect of dividend reinvestment.

I do need to be aware that historical performance is no guarantee of future performance. And, I need to plan for the long-term, if I am using a long-term average rate like this. Also, my portfolio should look something like the FTSE 100, if I am using a rate based on the performance of that index.

Dividend stock yields

Before I start working out how much I should regularly invest and for how long, I need a target. How big of a portfolio, and what kind of dividend yield will generate an income equivalent to £250 per month, or £3,000 per year?

Well, the average dividend yield of the FTSE 100 is around 3.5%. I would hope I could get that closer to 4% with some careful stock picking.

A £75,000 portfolio yielding 4% will generate £3,000 a year in dividends, which will satisfy that £250 per month income requirement. But I am not done with the maths yet. Now I need to establish how much I would need to invest, and for how many years at that assumed 7.75% rate, to hit £75,000 or more.

Stocks and Shares ISA income

With the help of Excel’s future value function, I discovered that investing £50 a month for 25 years won’t do it. However, £100 a month for 25 years is predicted to build an £88,274 portfolio, which is more than enough to generate £250 in monthly dividend income assuming a 4% dividend yield.

Investing £150 a month for 20 years would also do the job. So, I have options. But now comes the hard part. I need to keep investing regularly in a basket of quality growth and dividend stocks for the long term and hopefully one day I can sit back and enjoy a steady stream of passive income from my Stocks and Shares ISA.

The post How I’d earn £250 a month from a Stocks and Shares ISA appeared first on The Twelfth Magpie.

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James McCombie 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.

M. P. Evans (LSE: MPE) is a small-cap stock that has caught my eye for a lot of good reasons. This £456m market capitalisation company has been growing its revenues by 27% annually on average over the last five years. Its average operating margin of 24% is impressive. Cash flow and earnings on a per-share basis grew at 33% and 44% on average each year for half a decade.

The company continues to impress with its balance sheet. Liquidity looks great as current assets are at least twice what current liabilities are. A debt-to-equity ratio of 0.35 means low leverage. So far so good. But the business that M. P. Evans is in makes me pause for thought.

Problematic palm oil production

In 2015 I was in Penang, Malaysia. The air was hazy and smelt of smoke. This smog had drifted across the sea from Indonesia where forests were burning. The World Resources Institute suggests most of the fires are human-caused and linked to the agriculture industry, particularly palm oil, of which Indonesia is the world’s largest exporter.

M. P. Evans is a producer of Indonesian palm oil. It does, however, make a case that it does this sustainably. All the palm oil produced from company-owned estates is certified sustainable according to the Roundtable for Sustainable Palm Oil’s standards. The same is true for managed smallholders. But the company also accepts oil palm fruit from non-verified independent growers for its mills. As of 2020, the date of the last standalone sustainability report, 27% of the total production could not be confirmed as sustainable.

The plan is to increase that number to 100% by sometime next year. That would be reassuring. But why accept unverified products at all? Why not only take from smallholders where the company is satisfied they produce sustainably? Well, because the company can process significantly more oil-palm fruit than it and its verified smallholders can grow.

Small-cap stock watchlist

M. P. Evans is also currently exiting its property development operations in Malaysia. It disposed of 70 hectares of land from a wholly owned subsidiary to a joint venture in 2021. It still has 200 hectares left. I am likely being cynical, but this arrangement does suggest there is scope to sell off parcels when group earnings are not expected to meet forecasts. However, I like M. P. Evans’s plan to focus on one thing: palm oil.

Palm oil is the world’s most popular and most traded vegetable oil. Demand for it has increased by 7% each year since 1990. According to one report, about half the products in UK supermarkets contain palm oil. It appears to be a decent business to be in. And the company’s operating numbers support this.

However, it’s worth pointing out that the company’s operating margins tend to dip when the average annual price of crude palm oil falls and rise when it rises. That’s because it is a price taker in a commodity market.

All things considered, although M. P. Evans is now deservedly on my watch list, it won’t end up in my Stocks and Shares ISA just yet. The next standalone sustainability report is due soon. I would like to see what progress has been made on this front and see how I feel about this small-cap stock then.

The post Can I learn to love this small-cap palm oil stock? appeared first on The Twelfth Magpie.

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James McCombie 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.

Growth is good. Growth stocks offer substantially higher growth rates than the average for the market. If a company is growing fast, then over time its earnings should increase and so should its stock price. Here are two growth stocks that I plan to hold in my portfolio for the next decade and beyond.

Renewable energy stock

The Renewables Infrastructure Group (LSE: TRIG) invests in onshore and offshore wind and solar farms in the UK and Europe. This trust first listed around a decade ago. It has grown its renewable energy generating asset base to around £3.7bn since then. The UK and EU are keen to increase the amount of renewable power generating capacity for decarbonising and security reasons. There is scope for TRIG to continue to grow its asset base even more over the next 10 years.

If this trust can increase its net asset value (NAV) per share over the next decade, then Its share price should follow as the two usually move in tandem. But right now TRIG shares are trading at a 5% discount to NAV. I think that makes a good entry point. But it could also reflect investor concerns about energy caps and windfall taxes, rising rates, and cooling energy price inflation.

These are valid concerns. TRIG uses a revolving credit facility to purchase assets and then pays down the debt with equity raises. Higher rates makes this more expensive. Income is tied to inflation. But, the trust has delivered without rampant inflation in the past. Rates are expected to come down. Over the next decade, I think TRIG will continue to drive its NAV higher and its share price too, so I’m keeping hold of it.

Tabletop growth stock

Games Workshop (LSE: GAW) and its Warhammer franchise has delivered 21% sales and 33% earnings-per-share annual growth on average over the last five years. That is significantly better than the market average. And the company has an impressive management team with a long-term strategy that has always been clear and consistent:

• Continue to develop its Warhammer intellectual property, and make the hobby based around it and the business better and better
• Make the best fantasy and sci-fi tabletop gaming products in the world
• Explore licensing agreements outside the core business for its intellectual property (IP)

Games Workshop struck a deal with Amazon to make TV shows, movies, and merchandise from its Warhammer IP, and long-time Warhammer enthusiast Henry Cavill is set to star. That’s the sort of tie-up that should drive licensing revenues higher for years to come.

Of course there is no guarantee that bringing a fantasy or sci-if setting to the big (or small) screen will work as expected. Amazon and Netflix know this. A bad adaptation would not bring many new fans Games Workshops way and possibly annoy its core fan base. But I think the Amazon tie-up is an exciting prospect regardless.

It should make Games Workshop’s long-standing goal of getting a true triple A Warhammer video game developed by a major studio easier to attain. That and, whatever Amazon produces, should boost license revenue over the next 10 years and boost demand for the company’s core business products and services. That’s why I plan to keep Games Workshop in my Stocks and Shares ISA for the next decade.

The post 2 growth stocks for the next 10 years and beyond appeared first on The Twelfth Magpie.

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James McCombie has positions in Games Workshop Group Plc and Renewables Infrastructure Group. The Motley Fool UK has recommended Games Workshop Group Plc. 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.

After a newsworthy decline of around 7%, the FTSE 100 seems to have stabilised. But, I am not ruling out more bad performance. I think a stock market crash in 2023 is a real possibility. As it stands, the inflation rate in the UK is 10.1%. To inch it towards its target of 2%, the Bank of England (BoE) has been raising interest rates. The bank rate is currently 4%. It has not been that high since 2008. Raise it too high too fast and economic growth stalls.

It’s not just the BoE. Central banks around the world are juggling rates, inflation, and growth. The big concern over the coming months is that economies could slip into recession. The shocks reverberating through the banking sector after the collapse of Silicon Valley Bank add to the risk.

Stock market crash opportunity

Rather than breaking out in a cold sweat at the thought of a stock market crash, I could see it as an opportunity. There are a number of UK stocks that I really like. However, they are not cheap. If the market starts tumbling then it should drag their prices down. So long as their business is relatively unaffected, I can buy stock in these companies cheaply.

For example, YouGov (LSE: YOU) makes its money by conducting polls and surveys to answer questions that businesses pay to have answered. It has been growing its revenues at 16% per year on average. Its free cash flow has increased every year. And shareholders, like myself, should be happy with a 14.4% return on equity, and dividend growth of 29%.

But, YouGov stock trades at 23 times earnings. That is high. Its dividend yield is somewhere around 1%, which is low. Although as a shareholder I am not keen to see the price of this stock drop, if it did, that yield would increase. I would be tempted to add to my long-standing position in YouGov at a lower price.

Potential bargain stocks

Fevertree Drinks is a growing company I like the look of. The maker of premium mixers for alcoholic drinks has impressive dividend growth, but again the dividend yield on its stock is forecasted to be around 1.5% next year. It trades at a forward price-to-earnings (P/E) ratio of 53. That is shockingly high.

This is a low-yield expensive stock. Add to that a steady contraction in its operating margins and I am not interested. However, if a stock market crash wiped a chunk of its share price, and assuming the underlying business looked okay, I would be very interested in adding it to my Stocks and Shares ISA.

Experian owns a tough-to-replicate database of consumer and business credit information that banks and lenders pay to access. Experian’s revenue grew at a solid 8% per year on average over the last five years. Its operating margins averaged an impressive 23% over the same time frame. But again, the yield is low and the P/E ratio is high. A lower price would correct all that. Assuming the business looked healthy I would consider adding to my position at Experian which I established in April 2020, after the last stock market crash. So if something similar happens again, I will be looking for bargains rather than panicking.

The post 3 stocks I’d buy if the stock market crashes appeared first on The Twelfth Magpie.

More reading

• Up 1,146%! 7 things I’ve learned from the stunning Rolls-Royce share price comeback 
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• With a 6% yield and a P/E of just 7.4, is this share a screaming buy for a second income?

James McCombie has positions in Experian Plc and YouGov Plc. The Motley Fool UK has recommended Experian Plc, Fevertree Drinks Plc, and YouGov Plc. 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.

I’ve been wondering whether Coca-Cola shares are the best beverage stocks on the London Stock Exchange.

No, I haven’t lost my mind. It’s possible to buy shares in Coca-Cola that are directly listed on the LSE. Well, sort of. Coca-Cola HBC AG and Coca-Cola Europacific Partners are UK listed. They’re licensed to bottle and distribute Coca-Cola products on behalf of the US-listed Coca-Cola Company in Europe and Africa to Asia and the Pacific.

The choice dilemma

The Coca-Cola bottler companies aren’t the only beverage stocks listed on the LSE. The likes of Britvic, AG Barr, Nichols, and Fevertree are also there for consideration. So, which of these four drinks makers and the two bottlers do I like the most?

I’m biased towards quality over value, momentum, growth, or any other factor. I measure quality by looking at snapshot ratios for profitability, efficiency, leverage and liquidity.

Britvic had the best return on equity over the last 12 months. Fevertree and A G Barr have the best operating margins. Britvic and Nichols are the best at turning inventory into cash and getting the most from their assets, respectively. Fevertree and Nichols look the least leveraged and better prepared to handle their short-term debts. The Coca-Cola bottlers don’t stand out as being either good or bad across those measures. But they do trade at price-to-earnings (P/E) ratios — 13.8 for Coca-Cola HBC and 14.6 for Coca-Cola Europacific Partners — that are below average for the beverages industry.

Unfortunately, Fevertree doesn’t look cheap at all. It trades at a forward P/E ratio of 52. Nichols is better placed with its P/E of 20. But that’s still above average for beverage stocks. AG Barr is about average on 17 while Britvic has a P/E ratio of 14. So, AG Barr and Britvic look promising, along with the solidly performing Coca-Cola bottlers.

UK beverage stocks

The Coca-Cola Company has tight control of where and how much the Coca-Cola bottlers produce, and how profitable they are. Since they’re not in full control of their destiny, I don’t think I can consider them as my pick of the beverage stock bunch. So, I’m left with Britvic and AG Barr.

Britvic has its own brands. But it also bottles and sells drinks in the UK on behalf of others like Pepsi. AG Barr does some bottling but not as much as Britvic. The sheer volume of Pepsi that’s sold in the UK probably explains why Britvic’s average operating margin of 10.4% is lower than AG Barr’s 15.5%. Britvic appears to be more like the Coca-Cola bottlers than I’d like.

While Britvic has an edge in size and overseas markets over AG Barr (which should reduce its risk), I prefer the latter. I like AG Barr’s focus on smaller markets where it might have an edge. It owns Irn-Bru, the top-selling soft drink in Scotland. And it recently bought an oat milk business (MOMA) with a strong position in a growing market.

All things considered, if I had to pick my prime beverage stock bet on the LSE, that’s the one I’d go for.

The post Are Coca-Cola shares the prime beverage bets on the London Stock Exchange? appeared first on The Twelfth Magpie.

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James McCombie has no position in any of the shares mentioned. The Motley Fool UK has recommended A.g. Barr P.l.c., Britvic Plc, Fevertree Drinks Plc, Monster Beverage, and Nichols Plc. 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.

The FTSE 100 is rising today. But, since last Wednesday it has fallen 7%. Looking back to the most recent high of 8,014, which hit on 20 February 2023, the FTSE 100 is down 8%.

Explanations as to why this has happened are plentiful and I won’t be repeating them here. What I want to work out is what I should be doing when the markets are not in rude health.

Stock market crashes and corrections

When it comes to stock market movements, there are a few terms that the investing community agree on. These are:

• Crash: an abrupt, typically double-digit percentage drop which occurs over hours or days
• Correction: a decline of 10% to 20% from a recent high, typically over weeks to months
• Bear market: a drop of more than 20% from a recent high, typically measured over months to years
• Bull market: a rise of more than 20% from a recent low, typically measured over weeks to months

Right now, the FTSE 100 is not quite crashing, and it’s not correcting or in a bear market. But as someone who keeps an eye on financial news, it certainly feels like it is.

Type “bull market” into a Google news search and 9,260,000 results are delivered. Search for “bear market” and the results are doubled to 18,100,000. Panic-inducing headlines are more common than their converse. Bad news, it appears, sells more. And I likely consume more of it, whether I want to or not, compared to more positive headlines.

Economists Daniel Kahneman and Amos Tversky discovered that people feel more pain losing £200 than they will joy when gaining £200. They called this phenomenon ‘loss aversion’. Those Google news search results suggest that headlines that warn of pain get more attention. I certainly find myself checking my portfolio when markets are dropping. I am certain I overact to declines and underreact to gains.

Catching the FTSE 100

According to Forbes, bear markets last 289 days and happen every 5.4 years on average. Bull markets are longer (973 days on average) and occur more frequently. The average length of bull markets is 973 days and they occur more frequently.

A graph of the FTSE 100 price since 2003 backs this up. Measure moves of 10% or more and the periods of gain are more frequent and cumulatively last longer than the periods of loss.

Since I regularly invest my spare money, then I am more likely to be buying at higher and higher prices. And I will do this quite happily. Yet when markets drop, I will want to stop investing. I won’t want to catch a falling knife, because I will likely get cut, right?

Well, maybe I will. But I could be buying at lower prices ahead of a transition to a rising market. That’s something I should be doing. And given I have decades before I need to start drawing my investment portfolio it makes sense that I do just that.

The post The FTSE 100: should I catch a falling knife? appeared first on The Twelfth Magpie.

More reading

• Up 1,146%! 7 things I’ve learned from the stunning Rolls-Royce share price comeback 
• 4 steps to building a £38,456 retirement income with ISA shares
• How investing in a Cash ISA could cost you a comfortable retirement
• How much could Barclays shares pay in dividends by 2028?
• With a 6% yield and a P/E of just 7.4, is this share a screaming buy for a second income?

James McCombie 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.