Contrarian thinker

Cathie Wood has shown herself to be unafraid of going against popular investing opinion. In fact, she’s gone on record as saying that the “most exciting times” are when she’s on the receiving end of criticism. Her controversial early investment in US electric vehicle pioneer Tesla is a great example of this. 

As one might have guessed, the fund benefited hugely from this early call when Tesla multi-bagged in value last year. Since then, it’s come off the boil (fuelling further criticism of Wood’s strategy). However, it’s still the top holding in ARK Innovation.

Wood’s conviction is something I’ve tried to apply to my own investing. While I still don’t feel comfortable holding stock in Tesla directly, I do think it’s important to regularly evaluate the consensus view on any stock. In fact, this is essential if I’m to beat the market. I can’t generate better results than the herd if I’m doing exactly the same thing as the herd. Of course, stock-picking also raises the potential for me to underperform as well. 

Embrace disruption

The world is in a constant state of flux. Everything changes and nothing lasts. Rather than fight back against this, Cathie Wood embraces it. Linking in with her purchase of Tesla, she is a huge fan of disruptive companies — those that shake the foundations of an industry and change it for the better. As she puts it: “In a world driven by disruption, be on the right side of change.“

Although I can’t say that all of the stocks I own are disruptive, I do recognise the importance of looking ahead rather than in the rearview mirror. After all, a company’s past performance is no guarantee of future returns. It’s not hard to come up with examples that are now shadows of their former selves. Think mobile phone makers Nokia and Blackberry being impacted by the arrival of Apple.

So, when I’m investing in a specific stock, I regularly ask: “Will this company still be around in 5-10 years and, if so, will it be worth more than it currently is?” If I’m not at least cautiously optimistic, I don’t buy. 

Expect market corrections

Despite being very bullish on technological progress, Wood is experienced enough to know that the fund’s value, and stock markets in general, will never go up in a straight line. In fact, the former is down 10% in the last six months. Regardless of the reason, she knows that downturns are inevitable and, again, embraces them, saying: “Corrections are good, they keep us all humble.” 

Cathie Wood walks the walk too. When Tesla slumped back in February, she bought more of the stock. I’ve tried to do the same with my own investments, particularly during the coronavirus crisis.

This isn’t easy. However, I try to remind myself that, despite being volatile, equities have delivered the best gains of any asset class over the long term. This is the risk/reward trade-off. It’s one I — and clearly Cathie Wood — think is worth signing up for.

The post How I’d invest £5,000 using lessons from Cathie Wood appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Apple and Tesla. The Motley Fool UK has recommended BlackBerry and has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. 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.

2021 may go down in history as the year of the meme stock. Indeed, the rise of meme stock favourites such as AMC Entertainment, GameStop, and BlackBerry (NYSE: BB) has been incredible to watch. Some significant moves in certain stocks have grabbed a lot of attention of late. Accordingly, questions remain as to whether such meme stocks are worth considering right now. 

In this article, I’m going to highlight two stocks that are on my watch list right now. These are meme stocks (or potential meme stocks) that I think have excellent upside in their own right, aside from the meme stock trend.

Meme stock watch: Cineworld

While not necessarily being a meme stock yet like sector peer AMC, Cineworld (LSE:CINE) certainly is a comparable company. And I think it’s a possible meme-stock-in-waiting. With pandemic restrictions ended, reopening is key for both cinema operators. As we all yearn for dinner and a movie, expectations are that both will perform well over the near term.

Cineworld has seen a big price swing in a relatively short amount of time. The shares went from around 25p in late 2020 to nearly 125p early this year. Currently, Cineworld shares are up over 64% compared to their price of a year ago. So it’s trending in the right direction.

Yet Cineworld is also one of the most-shorted UK shares right now, meaning there are plenty of experienced investors betting it will fall. Given its relatively low price per share and high short interest, Cineworld exhibits some key meme stock traits. Should the price fall, this is a stock I’ll be considering for my portfolio.

Of course, there are still concerns around how robust its recovery will be. New Covid variants could see a return to lockdown measures, which could mean cinemas having to close again. Should additional lockdowns be imposed, Cineworld is one UK share that could suffer. These are risks I’m monitoring closely with Cineworld shares and it’s not a Buy for me at present.

BlackBerry

One company that comfortably falls into the meme stock category is BlackBerry. This former smartphone-maker-turned-software-company has been on my watch list for some time.

BlackBerry’s meteoric rise this year was the result of two key catalysts, I feel. Of course, frenzied retail buying played a huge role in taking BlackBerry shares from around $5 per share in late 2020 to nearly $30 in January. This was one of the first meme stocks, and continues to hold this title.

However, in late 2020, BlackBerry also announced a key partnership with Amazon to develop BlackBerry IVY. This is a scalable, cloud-connected software program aimed at car manufacturers. This platform allows for real time data and analytics functionality to improve the passenger experience in the connected car market. Given the growth we’ve seen in this sector, this is something I’ve been excited about since late last year.

That said, BlackBerry remains a turnaround stock. The company’s transition to a pure software business hasn’t been as smooth as I’d like to see. In fact, two of the past four earnings reports undershot revenue expectations. 

However, this is also a company with excellent long-term growth prospects relating to its Amazon partnership and exposure to the connected vehicle market. Sure, there’s potential near-term potential. But I’m thinking longer term with this stock, and watching it closely.

The post Meme stock investing: 2 top shares to buy right now appeared first on The Twelfth Magpie.

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Chris MacDonald has no position in any stocks mentioned in this article. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended BlackBerry and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. 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.

Indeed, the vast majority of active fund managers, who pick stocks for a living, fail to outperform the market on a regular basis. 

And for the individual investor, with limited capital and limited time, stock picking is extremely difficult. 

Sector struggles

Trying to pick the best companies in any particular industry is a complex process. But attempting to pick individual companies in the mining sector is a full-time job. 

For example, the sector’s largest players, Rio Tinto (LSE: RIO) and BHP Billiton (LSE: BLT) are overexposed to iron ore and coal, two commodities that are plagued by oversupply and falling demand. 

After its recent spin-off of non-core assets into a new company named South32, around 56% of BHP’s earnings will come from the production and sale of iron ore and coal — based on 2014’s numbers. Almost all of Rio’s earnings come from the production and sale of iron ore. 

Iron ore play

In some respects, if you pick BHP or Rio for your portfolio, you’re betting on the price of iron ore.

Due to seasonal restocking at Chinese steel mills the price of iron ore has recently rebounded to $63 per tonne, off a five-year low of $47 per tonne hit during April.

However, analysts forecast that the price of iron ore will remain below $65 per tonne for the next two years as the market grapples with oversupply. A price of $65 per tonne is approximately 50% below the all-time high iron ore price reported several years ago. 

Diversified pick 

BlackRock World Mining Trust (LSE: BRWM) offers a more diversified play on the mining sector. 

The trust’s largest positions are BHP and Rio, but the rest of the holdings are extremely diversified across all sub-sectors of the mining sector.

Holdings are both UK and international companies. The investment trust’s top ten holdings make up 60.4% of assets under management. 

Poor performer

Unfortunately, World Mining has underperformed BHP and Rio by 8% and 38% respectively, excluding dividends, over the past 24 months.

But this underperformance can be traced to one key mistake: London Mining.

At one point, World Mining had approximately 6% of its assets invested in London Mining. These included a royalty contract and one of the mining minnow’s convertible bonds.

When London Mining went out of business last year, the value of these assets was written down to zero, costing the trust £50m.

To make up for this mistake, World Mining’s managers apologised to investors and then started to shake things up. A new co-manager was taken on, fees were cut, and stricter investment guidelines were put in place. 

Management fees have dropped to around 1.1% and the trust trades at a discount of 12% to its net asset value.

Top income pick

Not only is World Mining a more diversified play on the mining sector but it’s also a top pick for income investors. 

Specifically, the trust currently supports a dividend yield of 6.8%, and managers have confirmed that, for the time being, this payout is here to stay. Rio and BHP currently yield 4.9% and 5.8% respectively. 

The post Is It Wise To Pick Miners Like Rio Tinto plc And BHP Billiton plc Or Should You Buy BlackRock World Mining Trust Plc? appeared first on The Twelfth Magpie.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

But the technology has been eclipsed by the now-standard Apple iPhone/Android form factor, with bigger screens and on-screen keyboards, and BlackBerry sales have crashed — and the share price has gone with them, closing at just $9.60 on 13 January.

Loyal users

BlackBerry devices do have a loyal, if relatively small, following, including US President Barack Obama. But even its latest offering, the $450 BlackBerry Classic focused on security and battery life, is unlikely to appeal to many outside the existing circle of aficionados.

It’s not surprising, then, that BlackBerry shares soared 30% on the claim that Korea’s Samsung has made an offer to buy out the company. A report by Reuters told us that Samsung has offered up to $7.5bn (approx £4.9bn), for a premium that could be as high as 60% on the previous close. The price responded on 14 January with a 30% hike, to finish the day at $12.60.

But it’s not a done deal, as BlackBerry has responded with denials saying “BlackBerry has not engaged in discussions with Samsung with respect to any possible offer to purchase BlackBerry” and refusing to comment further. The share price fell back in after-hours trading in response.

Why?

But what would Samsung, the maker of top-selling Galaxy smartphones want with BlackBerry anyway?

Well, it’s not going to suddenly shift to keyboard-based designs again, so it’s got to be after BlackBerry’s patents — especially on technology covering security. With more and more governments trying to legislate rights to snoop on private and business data, it would be hard to convince the world that you’ve got encryption and security sewn up based solely on Google’s Android platform. And a takeover would remove a competitor from the market too.

But what should BlackBerry shareholders want now? It’s really hard to say.

Return to growth?

There’s still that core following, and chief executive John Chen has said he hopes the company can return to revenue growth by 2016 — although nobody is holding their breath on that one. It could take years before BlackBerry’s profits and outlook are sufficient to justify a 30% uptick in the share price, even if Barack Obama does love the things.

The post BlackBerry Ltd Climbs 30% On Samsung Electronics Takeover Report appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.