Is 2025 going to bring with it a massive stock market crash? Nobody knows for sure, but I reckon it’s unlikely. One reason for my optimism is the weakness in American stocks through December.

US investors tend to be enthusiastic and that often leads to high-looking company valuations. But when the S&P 500, Nasdaq and the Dow Jones Industrial Average all ease, it’s like they’re letting off steam and reducing the over-valuation pressure.

Lacklustre UK markets

Meanwhile, there hasn’t been much of a Santa Rally for the UK stock market. The FTSE 100 and FTSE 250 have been doing what they often do well — move broadly sideways!

We British seem so reserved and often focus intensely on company valuations. Perhaps that approach tends to reduce the number of speculative bubbles blowing up this side of the Atlantic.

Many UK companies still look like they have modest valuations. So that’s the main reason I’m not waiting for any stock market crash to arrive. Some shares appear to be on sale now, so I’ve been working on building my watchlist.

For example, TP ICAP (LSE:TCAP) in the FTSE 250 looks cheap against several valuation measures. But I’m most impressed by the chunky dividend. With the share price in the ballpark of 260p, the forward-looking yield for 2025 is around 6.2%.

There’s a multi-year record of dividend rises backing up that high shareholder payment. The financial company lowered the pay out in 2020 when the pandemic struck, but it’s come roaring back since.

However, financial firms are known for their cyclicality and that adds risks for shareholders. TP ICAP operates as an inter-dealer, energy and commodities broker. On top of that, it’s provides over-the-counter (OTC) pricing data. So it’s facilitating transactions between various financial institutions.

Meeting and exceeding expectations

The setup makes the business sensitive to economic shocks and trends. It’s also affected by currency volatility. The earnings record shows how the fortunes of the business cycle up and down. Prior to 2022 there was a series of annual declines.

Nevertheless, in November a positive third-quarter update arrived and the directors said trading had been in line with expectations. City analysts are expecting single-digit percentage increases for earnings and the dividend this year and next.

For the time being, the business looks settled and is advancing steadily. So I see the stock as well worth my further research and consideration time now.

But it’s not the only company in my gaze. Another on my watchlist is Smiths News (LSE:SNWS). With the share price in the arena of 63p, the newspapers and magazines wholesaler looks cheap against valuation indicators. For example, the dividend yield’s above 8%.

However, the industry’s been in decline and this is no fast-growth proposition. So there are risks. 

Nevertheless, November’s full-year report featured modest results ahead of market expectations. Chief executive Jonathon Bunting described the firm’s news and magazine business as “resilient”. On top of that, cost efficiency initiatives have been paying off.

Bunting thinks Smiths News is well placed to deliver a resilient performance over the medium term. So I think the company deserves its place on my watchlist and is due sharp focus and consideration right now.

The post I’m not waiting for a stock market crash, these shares are on sale now! appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Tp Icap 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.

My Stocks and Shares ISA performed quite well in 2024. But the reality is the general performance of the market’s been a big contributor to its gains. 

The good news is there’s a lot of optimism out there for 2025. Trading and investing platform eToro recently surveyed 10,000 retail investors from 12 countries. Around 59% believe the bull market will continue next year.

Modest UK valuations

Nevertheless, analyst Sam North from eToro said high retail investor sentiment sometimes leads to a market pullback. However, US stocks often perform well when a new President starts.

I reckon American investors tend to be enthusiastic much of the time, which leads to some of the high company valuations often seen across the pond. The survey revealed optimism about some of the popular names such as Tesla, Apple, Amazon, Nvidia and others.

Here in the UK, I’d argue we tend to be more reserved with a stronger focus on valuation. Meanwhile, all the general economic challenges and shocks of the past few years have left many UK companies looking cheaper than their US peers. 

My guess is that general sentiment in the UK may be less optimistic than eToro’s survey suggests. But for investors with a long-term mindset, such a situation can be an opportunity to find decent value in the stock market.

Sometimes it can pay to adopt a bit of a contrarian mindset. When valuations have been beaten down, any positive company or general economic news ahead can ignite share prices. So I reckon there’s a fair chance of a bull market for UK shares through 2025.

I’ve been preparing by working hard on my watchlist and buying shares now for my stocks and shares ISA. For example, I’m attracted to Billington Holdings (LSE: BILN). The company looks like it’s been unloved and out of favour with investors for some time, resulting in a low valuation.

Ahead of expectations

However, in December, the structural steel and construction safety solutions specialist released a positive trading update. The directors upgraded the profit forecast and said the full-year results for 2024 will be ahead of previous expectations.

The announcement moved the share price higher and it’s possible the business may drive further gains ahead for shareholders.

Chief executive Mark Smith said the firm has a “solid” order book and a “very healthy” pipeline of future opportunities that are close to conversion. 

Meanwhile, with the stock in the ballpark of 499p, the forward-looking price-to-earnings (P/E) ratio’s around nine for 2025. I think that valuation looks undemanding when the outlook for the business is so optimistic.

However, although the company has a strong-looking balance sheet it operates in a cyclical sector. So there’s a risk of volatility in the business ahead for long-term shareholders. It’s also a small company with a market capitalisation of just £65m or so, suggesting even more uncertainty.

Nevertheless, I see the stock as well worth investors’ further research and consideration time now as a potential investment for 2025 and beyond.

The post How I’m preparing my ISA for the great stocks and shares bull market of 2025  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. Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon, Apple, Nvidia, and Tesla. 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.

Raspberry Pi Holdings (LSE: RPI) in the FTSE 250 index is causing a bit of excitement.

Maybe the home-grown technology stock’s about to offer British investors the chance to participate in eye-popping multi-year investment returns. You know, just like our American cousins enjoy from their many mega-sized technology companies.

The signs are encouraging with this one. Although the business has only been listed since June, it’s far from being a profitless start-up.

Fast-growing financials

The business has been building its mini-computers since 2012. Now it’s well-funded with a strong balance sheet. Additionally, it’s selling products like mad, is profitable, and has been throwing out the kind of earnings growth figures even a US tech company would be proud of.

There are some influential believers out there too. Technology giant ARM Holdings holds a slug of the shares, and ARM processors are built in to Raspberry Pi products. Meanwhile, investment bank Peel Hunt is acting as joint broker for the British company and has been super-enthusiastic about the business.

Raspberry Pi is one of the “best-known” tech brands born in the UK, the bank said. The company has already sold more than 60m of its “innovative” single-board computers (SBCs).

The enterprise creates semiconductor intellectual property (IP), optimised software, and engineers its supply chain to boost the unit economics of its SBCs. Okay, but the commercial bit is that SBCs help people to use cost-efficient computers in industrial and other settings — known as Edge computing.  

The idea is that companies, organisations and individuals can better take advantage of the artificial intelligence and machine learning revolution. SBCs can also help to make the much talked about internet of things (IoT) happen. To me, that sure sounds like it’s giving people an edge in the game!

Raspberry Pi’s been selling these things like hot cakes. Around 72% of sales have gone to industrial and embedded applications around the world via a network of approved resellers and licensees.

A future tech giant in the making?

Peel Hunt argues the company is serving a large and growing market and tips it as having the potential to become a tech powerhouse just like some of its big US cousins. If that happens, it’s possible the stock may transform my portfolio over the next decade.

But there are risks, as always. One is the current valuation. With the share price in the ballpark of 500p, the forward-looking price-to-earnings (P/E) for 2025 is around 45. That’s pricey.

On top of that, earnings have been volatile and forecast to come in down a bit for 2024 with a rebound next year. So that’s a bit unsettling.

Another risk is that well-minted competition may swoop in and eat into Raspberry Pi’s market share.

Nevertheless, to me, this looks like an exciting long-term growth proposition. So I’ve decided to embrace the risks of holding the stock with a 10-year time frame in mind.

The post Can the FTSE 250’s Raspberry Pi boost my portfolio over the next decade? appeared first on The Twelfth Magpie.

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Kevin Godbold has positions in Raspberry Pi Plc. The Motley Fool UK has recommended Raspberry Pi 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.

Warren Buffett’s first rule for investors is “never lose money”. That sounds like a joke, right? Nobody sets out to lose cash.

But many other top money managers agree. The general advice is to focus on risk management above all else. Buffett has five habits that help him do that.

Research and analysis 

One part of managing risk involves doing careful research and analysis before buying shares. 

Buffett’s known for poring over company reports daily. Maybe such dedication’s beyond the stamina of most. But I reckon it’s important to at least read the news flowing from the companies that interest us. 

Follow the cash

Company profits are open to interpretation. However, cash flowing in and out of a business can be a reliable guide. Buffett once said he focuses on cash flow when analysing businesses. To me, that means the habit looks like part of his risk management process. So company cash flow statements can be an investor’s friend.

Valuation

A focus on business valuations is a big part of Buffett’s process. Investment outcomes can be poor if the stock’s too expensive. He never intentionally overpays, and the habit helps him to manage risk.

Sensible position sizing

There’s often the temptation to put too much money into one stock. But sizing stock positions correctly can reduce risk.

A bit of diversification between several investments can help manage risk too. Nevertheless, effective diversification requires the Goldilocks approach — not too much and not too little. Buffett always has several investments on the go.

Stop losses

If all else fails, good risk management can mean stopping losses and selling. Many successful investors do it, including Buffett.  In recent years he sold his losing Tesco investment and his underwater shares in US airline companies. 

The tactic makes sense. If a stock drops by 50% it takes a 100% move to return to breakeven. So it may be a good idea to sell before a loss gets as big as 50%.

For long-term investors, I like UK investor Lord John Lee’s approach. He said he stops losses at 20%. However, different strategies will likely require varying stop-loss levels to make sense of an investor’s particular investment process.

A stock worth a closer look

One company that’s worth investors’ consideration now is Phoenix Group (LSE: PHNX).

The company is the UK’s largest long-term savings and retirement business. Over many years it’s been acquiring and managing life and pension funds when they’ve closed to new business. The strategy has been a nice earner for the company and the success shows in the impressive multi-year dividend record.

However, the business is part of the cyclical financial sector and the share price may be volatile. If that happens, capital losses could neutralise income gains from the dividend. 

Nevertheless, with the stock in the ballpark of 500p, the forward-looking dividend yield for 2025 is just over a mighty 11%. So that’s an attention-grabbing reason to undertake deeper research and consideration.

The post 5 crucial Warren Buffett investing habits and a stock to consider buying now appeared first on The Twelfth Magpie.

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Kevin Godbold 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.

One of the great things about value shares is they can get motoring if some good news comes along.

However, that’s balanced by the patience that investors often need. Sometimes businesses with low valuations remain forgotten and overlooked for years.

In addition, there’s always the risk that an already cheap stock will just keep getting cheaper. So it’s possible to end up holding shares that grind lower over days, weeks and even years.

Sometimes it pays to hold and wait

It’s enough to make the dourest of value investors cry into their beer. But the waiting game can be worth it. An old stock market saying goes something like: “Patient money often wins in the end.”

That agrees with another expression: “Scared money often loses.” So a value investor who gives up waiting or cuts a loss might sell just before a stock turns around. That would be another reason to cry into beer. 

So value investing takes skill, faith, luck and a certain disposition. It’s not for the faint-hearted and there’s an increased risk of watered-down ale!

Nevertheless, one eye-catching success recently has been Greencore (LSE: GNC). The company operates as an international manufacturer of own-brand convenience foods for supermarkets and others.

It’s not an exciting business or a stimulating sector. So that’s maybe why the stock flatlined near its lows for a year through most of 2023.

There was plenty of time for investors to buy the stock — and a long wait for those buying at the end of 2022 when it first hit the bottom.

However, in the end, Greencore started releasing updates saying trading was ahead of the market’s lacklustre expectations. Then it kept repeating the trick at steady intervals.

The stock took off and began a long climb as earnings and the depressed valuation improved. With the share price near 199p, it’s around 110% higher than it was at the beginning of 2024.

So that value investment worked out for some. But what about opportunities for 2025? 

Could these zeros be next year’s heroes?

Right now, I reckon several shares measure up as being unloved. For example, the international home improvement retailer Kingfisher delivered a profit warning recently and the share price dropped.

However, the dividend seems to be safe for the time being and City analysts expect better earnings next year. Nonetheless, the sector is cyclical and those analysts could be wrong leading to further weakness ahead for the stock.

IG Design is another business that’s been down on its luck and now carries a low-looking valuation. But any good news on earnings may get the shares moving up again. 

However, nothing’s certain and one risk is that the company is another operating in a cyclical sector.

Housebuilder Vistry is also cyclical and the share price crashed during the autumn. But demand for housing remains strong. So it’s easy to imagine the company having its time in the sun again.

All three of these businesses strike me as worthy of investors’ further research and consideration now.

The post 3 value shares for investors to consider buying in 2025 appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencore Group Plc and Vistry 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.

Since August, the easyJet (LSE: EZJ) share price has been flying. Near 573p, it’s up by around 35%.

However, that good performance masks a weaker trend for the whole of 2024. Since January, the move higher has been about 15%. Just like many cyclical stocks, the airline has been volatile. 

The beta metric that measures volatility is a high-looking 3.5. A reading of one represents the volatility of the general market, such as the FTSE All-Share index.  So that means easyJet’s stock volatility has been on average three-and-a-half times that of the general market.

Therefore, every time some piece of macro-economic news comes along and rocks the market either up or down, easyJet tends to exaggerate the move. So it can be a bit of a white-knuckle stock.

Good trading

But despite all the wiggling about, the underlying business has been delivering a steady and positive performance. After the crash in earnings in 2020 when the pandemic struck, losses reduced in 2021 and 2022. Then there was a surging rebound in earnings during 2023 and 2024.

Looking ahead, City analysts expect a further increase of about 11% for the trading year to September 2025 and a mid-single-digit percentage increase the following year. So it looks like the rate of earnings growth is reducing going forward.

Will the stock get back to £10 in 2025? After all, the share price was higher and plummeted down through that level in 2020 when Covid-19 arrived.

Near 572p now, the forward-looking price-to-earnings (P/E) rating for next year is about 7.6. But easyJet was on a higher valuation in January 2020 of about 14. If the stock can re-rate back to that level, the implied stock price is about £10.50 based on current analyst’s estimates for earnings.

So theoretically, £10 next year is feasible. But the big question is, does a high-beta stock backed by a volatile and cyclical business deserve a rating as high as it was before the pandemic?

A positive outlook

Shareholders will remember the anguish of coronavirus and perhaps never again bid up the stock to such heights. After all, there’s a lot that can affect airline and holiday businesses, such as aviation fuel prices, wars, pestilence, energy shocks and other things. 

The stock carries a lot of risk for investors and will never be one to buy and forget. One argument is that the business deserves a lower valuation because of the risk it carries.

Nevertheless, trading has been going well and easyJet posted a 34% increase in annual profits for the trading year to September 2024.

Chief executive Johan Lundgren said the positive outcome occurred because of the firm’s effective strategy. There was also strong demand for the flights and holidays offered by the business.

Looking ahead, Lundgren said the year’s trading was a big step towards the directors’ goal of generating over £1bn of annual profit before tax.

Cyclical enterprises like this can grow as well as being volatile. So I reckon £10 per share is achievable. However, that level is not guaranteed and neither is the time frame or certainty of achieving it. For me, it’s one to consider, but with caution!

The post Will the easyJet share price hit £10 in 2025? appeared first on The Twelfth Magpie.

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Kevin Godbold 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.

A fallen share price tends to get my value-receptors twitching and right now I like the look of JD Sports Fashion (LSE: JD) in the FTSE 100.

The global omnichannel retailer of sports fashion and outdoor brands has seen its share price drop by around 35% since September. Now the stock’s in the ballpark of 102p, as I write, on 11 December.

Recent volatile trading

The company issued a profit warning in its trading update of 21 November. But as often happens, the market saw it coming and the share price had already fallen a fair bit by then.

Despite the lower guidance, City analysts predict a double-digit percentage uplift in normalised earnings next year. So there’s a possibility of better value here now for investors.

In November’s trading update, chief executive Régis Schultz said there had been a volatile trading environment in the firm’s markets at home and abroad. Weaker business during October led to the directors downgrading pre-tax profit expectations for the year to the “lower end” of earlier guidance.

However, the damage may not be as bad as it sounds. Analysts have pencilled in a little dip for normalised earnings this year worth just over 4%. But as mentioned, they expect earnings to come roaring back the year after with an increase of about 14%.

It’s no secret the retail environment has been challenging over the past few years. I think that reality shows in JD Sports Fashion’s share price chart. The current level of the stock was first reached around five years ago. It’s been swinging up and down ever since.

However, this is still a growth proposition. On top of its large UK market, the business has been making strides expanding in the US and internationally. Progress has been both organic and by acquisition. Meanwhile, annual revenue has grown from around £6bn in 2019 to about £10bn in 2023.

A keener valuation

That performance led to a doubling of normalised earnings per share over the same period. So it looks like the main casualty of all the general economic challenges experienced by the company has been the valuation.  

Based on those earnings estimates for the trading year to January 2026, the forward-looking price-to-earnings (P/E) multiple is around seven. I reckon that looks undemanding and makes the company worthy of investors’ further research and consideration now.

However, it’s worth bearing in mind that this isn’t the only retailer with a recently fallen share price. We’ve seen similar plunges from the likes of Frasers, Card Factory, WH Smith, Wickes and others.

Such stock weakness underlines one of the main risks for shareholders in the sector — it’s highly cyclical. So that means shareholders in JD Sports Fashion may endure a volatile ride ahead as the business is buffeted by future general economic and geo-political events and shocks.

Even at this lower valuation, it would be easy to mistime an investment and lose money on the shares. Nevertheless, there’s an underlying growth story going on here. So it looks like a good time to become interested and research the opportunity while the valuation appears keen.

The post This FTSE 100 stock looks good to me, so should investors consider buying it now? appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended WH Smith. 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.

So far, I’ve failed to buy growth stock Games Workshop (LSE: GAW). That’s a shame because over the past eight years it’s risen by more than 2,100%. 

The miniature figure and games maker has proven to be quite a phenomenon, and I didn’t see it coming. 

I have my own inner nerd, but failed to understand the mushrooming attraction and enthusiasm for Games Workshop’s crafted fantasy universe — I have not been worthy.

A transformational agreement?

Is it too late to get involved with the shares? I don’t think so. The company reignited investor interest a year ago when it announced an agreement with Amazon.Com subsidiary Amazon Content Services.

The move was an early step towards the American giant’s prospective development of Games Workshop’s Warhammer 40,000 universe into films and TV shows along with associated merchandising rights.

Wow! If that doesn’t get any warm-blooded investor’s pulse racing, nothing will. However, all those potential future earnings were never going to arrive quickly. In December 2023, Games Workshop said the two firms planned to work together for a period of 12 months “to agree creative guidelines for the films and television series to be developed by Amazon”.

Fast-forward to today (10 December) — almost exactly one year later — and there’s another announcement from the company.

Games Workshop has reached a final agreement with Amazon Content Services and the two firms have developed those creative guidelines as promised a year earlier. Amazon now has exclusive rights in relation to films and TV shows set within the Warhammer 40,000 universe. 

This is awesome, right? If Amazon gets going on this, we could see another hit TV or video series ahead and more.  However, there’s a reality check in today’s statement. The firm said the production processes in respect of these shows “may take a number of years”.

An elevated valuation

On top of that the company said there’s no change to its forecast for the 52-week period ending 1 June 2025. Meanwhile, City analysts predict normalised earnings will likely rise by modest single-digit percentages that year and the one after.

If Games Workshop didn’t have the Amazon carrot dangling in front of it, there’s a case to make that the business might have slipped into slow-growth mode. The forward-looking estimates for earnings have been quite low for some time.

Meanwhile, investor enthusiasm has driven the share price higher and the valuation looks pretty meaty these days.

With the share price near 13,900p, the forward-looking price-to-earnings (P/E) rating is running at about 27 for 2026. At that level, one of the biggest risks for new shareholders now is the possibility of a de-rating lower over the coming years.

Nevertheless, Games Workshop has a strong balance sheet and a well-defended market niche. Its products are popular and there’s the potential for a step-change higher in earnings ahead. So I think the business may be worth investors’ research and consideration time now with a long-term holding period in mind.

The post Is Games Workshop a top stock to consider buying in December for the long haul? 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. Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon 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.

I’ve had high hopes for the FTSE 250‘s Finsbury Growth and Income Trust (LSE: FGT) for some time.

However, with the share price near 896p, it’s where it was about five years ago — how disappointing. The chart shows the stock’s been moving essentially sideways for half a decade. But better times may be coming for shareholders.

Even the trust’s well-known investment manager, Nick Train, thinks the performance has been rubbish. Train said in the recent annual report he’s been disappointed and recognises it’s been a frustrating period for shareholders.

Fantastic past performance

But under his management, the stock rose by more than 350% in the decade between 2009 and 2019. I think it can perform like that again. Meanwhile, stock market conditions today seem similar to those in 2009, just before it took off.

In 2009, the markets were licking wounds inflicted by the credit-crunch and financial crisis a couple of years earlier. One outcome of that was depressed company valuations in the UK.

Today, the markets are wounded because of the pandemic, war in Ukraine, energy price shocks and inflationary pressures. Again, the UK stock market has been depressed along with company valuations. But value looks like it’s been building up in many businesses as operational progress continues. Not exactly the same situation as in 2009, but it rhymes.

Meanwhile, Train runs the trust with a long-term perspective. The strategy is to hold the shares of quality businesses that can compound a growing stream of earnings over time.

Going forward, Train is “convinced” the best way to get the share price moving up again is by the same approach that generated good returns before. That means running a concentrated portfolio of shares backed by “exceptional” UK companies. 

The trust is unusual because it’s so concentrated — the opposite to being widely diversified. But it embraces the theory that exceptional results can come from doing things different from the crowd. 

There are 20 equity holdings in the portfolio. But the biggest six account for just over 73% of the invested money. So for a big fund, that’s super-concentrated.

Turnaround and growth potential

The top six holding are London Stock Exchange Group, Experian, RELX, Unilever, Diageo (LSE: DGE) and Sage. Of those, the share price of Diageo has been particularly depressed lately. But I reckon it has the potential to bounce back during 2025. 

The general economic challenges of the past few years affected Diageo’s premium alcoholic drinks business. The company posted declines in normalised earnings in 2021 and for the trading year to June 2024.

I reckon that weakness in the business unsettled the market. Previously, Diageo had carried a full-looking valuation for many years. That arose because of the steady, defensive and cash-generating qualities of the enterprise.

But the market has marked down the valuation and the share price over the past three years, as the chart shows.

However, City analysts expect improving earnings ahead. So Diageo could regain its popularity among investors and prove to be a decent hold for the trust going forward.

Positive outcomes aren’t guaranteed, but I reckon Finsbury Growth and Income Trust is well worth investors’ research time and consideration now.

The post I think this FTSE 250 stock may explode higher in 2025, just as it has done before appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo Plc, Experian Plc, Finsbury Growth & Income Trust Plc, RELX, and Sage 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.

I’ve been wrong about Tesco (LSE: TSCO) for a while because the share price has gone up a lot — without me.

But one of my self-imposed rules is to shun the stock unless the dividend is yielding at least 5%. I want that amount of income to compensate me for the risk of holding the shares.

However, I wasn’t expecting to miss out on such a big rise in the stock price! But the shares have been flying in 2024. At around 374p, they’re up by almost 28% this year alone.

My yield target is now even further out of reach. By considering City analysts’ predictions, the anticipated yield for the trading year to February 2026 is just above 3.8%.

A modest earnings recovery

So I’m locked out of the rising stock and will just have to watch from the sidelines while other investors count their winnings.

But what’s the attraction? My guess is it’s the stability of the supermarket sector and its constant demand. On top of that, Tesco has moved from declining earnings in 2022 and 2023 to modest increases this year and expected ahead.

So there’s been a bit of a recovery in the business, albeit a modest one. Traditionally, supermarkets have been viewed as among the so-called defensive businesses. So when economies and geopolitics are all over the place — as recently — its’s perhaps unsurprising that investors have been buying stocks like Tesco.

I’m not chasing it higher though. One of my concerns is that supermarket margins can be wafer thin. There’s so much competition in the sector and cost pressures keep piling up with the potential to squeeze profits even more.

It wasn’t that many years back that Tesco got into big trouble financially and the share price came crashing down. So much for the defensive nature of the supermarket sector. The problem as I see it is that a similar scenario may one-day play out again.

The directors need to be good

On top of thin profit margins, Tesco is also juggling a chunky debt-load, although it’s running with an interest cover of just above eight, so debt isn’t an immediate concern.

But it could become a problem if shopping at Tesco goes out of fashion with the general public. The low profit margins and high-volume turnover figures mean there’s little margin for error.

One crucial factor for Tesco is that the business needs top-notch management to keep things on an even keel. One slip up in marketing or tactics could easily tip the whole business into lower earnings, as happened before.

Ideally, I want to invest in businesses that have such great economics that any fool can run them. That’s not Tesco.

However, the share price is locked in a strong uptrend and there’s some momentum in the business right now.

So be it. For me, it’s one that got away and I’ll stick to my 5%-yield rule before considering the stock for my portfolio.

The post Here’s why I’m shunning Tesco stock despite 2024’s strong share price rise appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco 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.