The FTSE 100 has made a strong move forward, jumping nearly 4% in a week. Since the second week of October, the Footsie has gone up a whopping 7.4%. This strong month of trading is the trend reversal I have been looking for before looking for bargains. Right now, some blue-chip FTSE 100 shares look very cheap and ready for liftoff. Here are two names from my watchlist that look ripe for picking before 2023. 

Dirt-cheap energy share

SSE (LSE:SSE) is an energy company that operates wind farms and hydroelectricity units. It has become a key part of the UK’s push to make renewable energy more affordable and accessible. 

The energy industry has undergone a drastic shift over the last two years. Oil prices have remained close to the $100-mark throughout 2022. This has increased the demand for renewables and I am keen on investing in an FTSE 100 green energy share.

SSE has been growing its wind energy reserves recently. In the first quarter (Q1) of 2022, the company was 5% ahead of energy generation targets. Compared to Q1 2021, output increased by 24% year on year.

SSE also expects adjusted earnings per share of at least 120p this year factoring in expenditures and investments in excess of £2.5bn. This shows me that the company is healthy financially despite sizable acquisitions.

SSE shares are currently trading at 1,592p at a price-to-earnings (P/E) ratio of just 6.6 times. The FTSE 100 stock also comes with a sizable dividend yield of 5.3% making it a growth option for my portfolio that also offers a lot of value. 

The energy sector is expected to undergo a major shake-up given skyrocketing profits. The recently announced de-facto windfall tax on renewables will cut earnings significantly.  But this is not a permanent move. 

While revenue will drop momentarily, the industry will continue to gain prominence. I think this is the best period for me to invest in renewable energy in the UK. Once the taxes are lifted, earnings will grow, attracting more investor interest. And I am looking to capitalise before this happens. 

Telecom giant with growth potential

Airtel Africa (LSE:AAF) shares have been on my watchlist for a while. Owned by Indian giant Bharati Airtel, this FTSE 100 company offers mobile connectivity and digital payment software in 14 major countries across Africa. 

In fact, Africa is a global leader in digital payments and Airtel Money offers comprehensive digital fund transfer solutions, empowering low-income communities. The company is growing its offering by securing more 4G licences and is well positioned to be a 5G giant in the continent. 

Despite a 20% jump in earnings this year, its shares are down 13% this year. It is trading at a P/E ratio of 8.1 times with a dividend yield of 3.6%. To put this context, Airtel Africa shares are up over 240% since the first pandemic crash.

Expansion and the switch to 5G will prove to be cash-intensive. This could drop earnings over the coming months and years depending on when frequency bands are offered to private firms. 

However, I am bullish on the firm’s tested business model and steady recent revenue growth. It currently looks attractive but I am waiting to see price action towards the end of the year before making an investment. 

The post FTSE 100 recovery: 2 cheap shares I’d buy on their way up  appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Airtel Africa 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 falling fast and is at its lowest level in over 15 months. However, share buybacks by top Footsie companies are at all-time highs. Several industries are seeing record profits and will come out of this slump in a better financial position. 

I see this as the perfect opportunity to load up on some quality stock at great prices. And one firm looks like a good value pick to me.

DS Smith (LSE:SMDS) shares are currently trading at 267p. They have a price-to-earnings (P/E) ratio of 13.1 times and offer a dividend yield of 5.6%. This looks like a great bargain to me, and the company’s latest financial update has made investors very happy.

DS Smith shares could take off

Dividends stocks are under the spotlight right now. Chancellor Kwasi Kwarteng’s latest plans will see the tax on dividends lowered by 1.25%. This comes after share buybacks by UK firms hit a record of £16.2bn in the second quarter (Q2) of 2022. 

This shows that despite the turbulence in the market right now, investors who buy and hold quality shares will be rewarded. Returns from share price movements are low right now. But if I make smart decisions today and grow my passive income portfolio, I could benefit from higher payouts for decades.

This is where DS Smith shares look like a good option to me. The global packaging firm released a strong trading update this week. For the first half (H1) of 2022 (ended 31 October) operating profits are expected to be at least £400m, beating all previous estimates. To put this in perspective, total operating profits in FY2021 were £616m. 

This is great news for DH Smith’s dividend moving forward. The already sizeable yield could grow in the coming months if H2 performance meets expectations. Current full-year earnings projections will put year-on-year earnings growth at 10.9%.

After the update was released, DS Smith shares jumped over 12% in a day. But it is still trading 42% below its post-pandemic highs of 461p set in September 2021.

Concerns and verdict

With the FTSE 100 struggling to find stability, it is hard to say if this update alone could trigger a share price rise. In fact, the company posted decent results in line with expectations last year. However, its share price continued to fall. DS Smith shares are down over 30% in the last 12 months and 32% in 2022. 

Also, paper prices have remained high after the pandemic and are projected to rise over 2.5% annually for the next five years. DS Smith already has razor-thin margins. The e-commerce surge over the last 24 months has triggered a huge demand for packaging materials like cardboard. And rising paper pulp prices could put a strain on future revenue. 

However, I am optimistic that DS Smith can hit its new targets this year, which would increase investor interest. Given its size and global presence, I think the firm is well-placed to navigate rising raw material costs. I think DS Smith could offer a good mix of value and growth for my portfolio, which is why I am willing to invest if signs of recovery grow stronger. 

The post Are DS Smith shares the FTSE 100’s best bargain right now?  appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended DS 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.

The UK economy looks fragile at the moment. With the energy crisis driving inflation to historic highs and the pound falling, analysts expect the recovery to be sluggish and difficult. UK shares have been widely affected too, putting investors on high alert. 

Conversely, few sectors are currently witnessing a boom. But those companies that have continued to show strong growth are now receiving investor interest. I think this is the perfect time for me to diversify and pick up quality stocks on the way up. 

Shares that are defying trends

While the FTSE 100 is down over 6% this year, two overlooked gems on my watchlist have risen over 40% in three months. But looking at the fundamentals, they still look cheap. Let’s dive in. 

The energy sector is red hot right now. Despite the renewable energy push, oil is expected to power a majority of our industries for the foreseeable future. 

UK’s largest independent oil and gas business is Harbour Energy (LSE:HBR) and it has benefited greatly from this. Its shares are up over 41% in the last three months thanks to surging profits. 

In the first half (H1) of 2022, the company saw a 12-fold increase in pre-tax profits to US$1.49bn compared to $120m in H1 2021. The company cut down its net debt by 50% to $1.1bn and increased its 2022 shareholder payouts to $500m. 

Harbour Energy shares are trading at 448p with a price-to-earnings (P/E) ratio of 4.5 times. Given the current yield of 2.13%, which is expected to increase moving forward, this looks to me like a bargain. 

The next UK share on my list has jumped 47% over the last three months. 4imprint Group (LSE: FOUR) is a merchandise manufacturer that operates primarily in the US and controls 4% of the $23.6bn promotional products market.

The firm specialises in designing and manufacturing products that are functional adverts for large companies. 

In H1 2022, operating revenue was $515.54m, up 58% from H1 2021. Operating profits jumped a whopping 1124% to $43.98m primarily because of streamlined marketing and better pricing. 

4imprint doubled its new customer acquisitions and its order book grew 44% to 886,000 in 2022. The board is confident that the revenue target of $1bn will be achieved in 2022.

Its shares are currently trading at 3,645p at a P/E ratio of 20.9 times. Although this is not cheap on paper, I think its revenue growth in 2022 makes it a bargain. Many blue-chip businesses have struggled over the last few months, but 4imprint has shown considerable growth in a highly contested US market. 

Concerns and verdict

Tax cuts will plague oil companies moving forward. The world’s five biggest oil companies saw profits increasing by £50bn between April and June. This prompted a 25% energy profits levy in the UK that will bring the total tax on oil companies to 65%. 

Also, many US businesses are freezing hiring to improve margins. This is indicative of a slowing economy that could affect marketing spend. 

However, both businesses discussed here have reinvested smartly and have stronger balance sheets heading towards 2023. While there could be a slowdown, I think these shares have a lot of growth potential right now. I’ll probably make a lump sum investment in both shares when signs of market recovery become stronger. 

The post Up 40%+ in 3 months! These 2 fast-growing UK shares still look cheap appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Suraj Radhakrishnan 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.

Looking at the all-time FTSE 100 graph, the incredible bull run we are in right now is evident. The Footsie is up over 40% since the March 2020 crash. And I am looking at minor crashes along the way as opportunities to cash in on cut-price UK shares.

I hear investors lament missed market opportunities. Right now, some top-quality UK shares are down over 30%! Here are two companies I am watching closely to make an investment in the coming months. 

Reduce your bills

B&M European Value Retail (LSE:BME) is one UK share that has been on my watchlist for a few years. With inflation projected to hit 22% next year, I expect discount retail stores to see a spike in revenue. And B&M has quickly become a big player in this sector. 

While many grocers felt the brunt of rising raw material costs, B&M managed to maintain stable revenue and sales in the financial year (FY) 2022. The group recorded a pre-tax profit of £525m, exactly the same as in FY21. Two-year sales growth (compared to FY20) was at 13%, showing that the business managed to retain a large chunk of its customers gained during the pandemic. 

By focusing on in-demand products and avoiding overstuffing store stock, the company has managed to keep costs low and generate a profit. In fact, overall gross margins went up to 37.4% from 36.9% in FY21. 

Supply chain issues are a big concern for supermarkets right now and B&M is no different. Disruptions in Asia could affect operations in the coming months. Also, rising energy costs mean higher transportation costs that the company will have to deal with.

However, I am impressed by B&M’s frugal business model and its commitment to its dividend policy. Its yield stands at 4.3% and the board is confident about maintaining current levels.

Its shares are down 39.7% in 2022 and are trading at a price-to-earnings ratio of 8.9 times. Given the market share and business model, I think B&M is the best bargain option for my portfolio right now. 

Cheap UK defence share

The world is reeling from the war in Ukraine and defence budgets across the globe are shooting up. I think investing in the sector could be a good growth option moving forward. One UK share that has caught my eye is Babcock International Group (LSE:BAB). 

The firm specialises in electric systems for combat vehicles across land, air, and water. Along with engineering, the company also provides training, assistance, and data management services for militaries. 

In FY22, group revenue jumped 3% to £4.1bn with an underlying operating profit of £238m. The company recently signed defence contracts with Australia, France, Indonesia, and the UK. This has boosted its order book significantly.

There is always an underlying threat of trade restrictions when it comes to defence shares. A ban on sales could vastly impact Babcock’s revenue. The company is also dealing with rising metal prices, which is crucial to an engineering firm’s margins.

But I am still bullish on Babcock shares for my growth portfolio. It has fallen nearly 4% in the last month after a 50% rise since January 2021. I think this presents an attractive entry point at 328p. Currently, this UK share looks like a bargain to me given the high interest in defence, the company’s quality, and momentum. 

The post 2 dirt-cheap UK shares that look ready for liftoff appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value. 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.

Thanks to the electronic vehicle (EV) revolution, lithium prices have surged nearly nine times since 2020. Car manufacturers are clamouring to secure lithium reserves after reports show that prices for the soft metal could continue this historic rise. To capitalise, I am looking at two UK shares in the EV space that fit my portfolio. 

Wonder metal 

While most commodity prices have taken a hit in 2022, lithium is still trading close to all-time highs of US$70,000/ tonne. And analysts expect lithium prices to rise anywhere between 150% and 250% year over year until 2028. 

To put the current inflation in lithium prices in perspective, let us look at the price action across 2022. In January, lithium cost $10,000 per tonne. Right now, it is trading close to $68,000. This 580% jump in seven months has made it one of the fastest growing commodities in history. 

And with European EV sales at an all-time high, I think this is the perfect time for me to look at lithium shares in the UK.

Two top UK shares I’m watching

To cut out crude oil, the first step is to develop the battery tech to power our machines. And Ilika (LSE:IKA) is a British battery manufacturer with a focus on lithium-based batteries for EVs and medical devices. 

The firm is working on its ‘Goliath’ battery line, which could become a premium option for the automobile belt in Europe. After years of research, Ilika is finally looking to scale up manufacturing efforts to meet this sudden spike in demand. 

The company is already working with the UK Battery Industrialisation Centre (UKBIC) to create a dedicated 100 MWh manufacturing line. Also, Ilika’s tech was recently accepted into the coveted APC programme to help the UK automotive industry reach net-zero emissions.

The next UK share on my list, Rio Tinto (LSE:RIO). The FTSE 100-listed mining giant has actively been securing lithium reserves across the world. These include the Rincon lithium project in Argentina for $825m and the highly promising $2.4bn Jadar lithium project in Serbia. 

The Serbian government recently revoked the license for the Jadar project, citing environmental concerns. This forced Rio Tinto to propose a new plan that promises a 15% reduction in emissions. According to estimates, lithium from Jadar would meet 90% of Europe’s current needs. And Rio’s board is confident that a resolution can be reached.

Concerns and verdict

Despite the estimated demand for batteries, projects like Ilika could meet huge roadblocks. The company is yet to become cash-positive given its high R&D budget. And the journey to being a new product to the market is tough, especially for smaller firms.

Miners like Rio always run the risk of government interventions that could affect operations. Also, with lithium prices skyrocketing, some analysts are wary of the instability. If the demand from China cools down, lithium prices could drop again, effectively ending the surge. 

However, the EV industry looks unstoppable right now. Even Elon Musk has stated that Tesla could enter the lithium mining market to cut costs. And the two UK shares on my watchlist can help address this demand. If the demand for EVs extends into 2022, I would be tempted to make an investment in both to cash in.

The post Lithium prices skyrocket: 2 UK shares I’d buy to capitalise  appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan 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.

With the global economy in turmoil, UK shares that were pandemic darlings are down significantly in 2022. But a lot of these companies are robust businesses operating in exciting sectors. Here, I’m looking at two such pandemic performers that seem to me to be primed for growth for the next market recovery. I’m searching for ‘future-proof’ UK shares available at a discount and these two companies look like good picks for my portfolio.  

The future of grocery 

Ocado (LSE:OCDO) was a big pandemic winner. With people restricted indoors, this online grocer’s sales blew up. And while Ocado is still an online grocer, it has slowly transitioned into a tech company that sets up automated warehouses for other big chains. And its designs and workflow systems are backed by over 500 patents. 

The economic slowdown has caused many UK shares to fall from pandemic and post-pandemic highs. And Ocado shares, which rose 160% between February 2020 and February 2021, have fallen 69% since. In 2022 alone, the Ocado share price is down 45%. And there are some solid reasons behind this drop.

Ocado’s operations are very cash-intensive right now. The company has reinvested earnings and borrowed over £4bn since its initial listing. And just this week, it placed a further £575m of shares on the market, which added up to 9.7% of its share capital. Its huge R&D spending means the company has recorded pre-tax losses for two consecutive years.

But I’m still very bullish on this fast-growing UK share. It’s clear to me that automated warehousing is the future of e-commerce. And Ocado’s recent partnerships with grocery giants like Morrisons and Kroger back this up. The board expects steady revenue when warehouses that are still under construction start functioning. And its automation products saw a 301% jump in contracts last year. 

I believe its tech will become immensely valuable in the next five years. Ocado tops my UK shares to buy watchlist but the market is still volatile and I think the current bear run could present a better buying opportunity in the near future.

FTSE 100 darling

Equipment rental company Ashtead Group (LSE:AHT) was a big winner in 2020-21. Its shares jumped over 310% between March 2020 and December 2021. However, so far in 2022 they’re down 45% at 3,400p with a price-to-earnings ratio of 14.8 times. And I think the company is a bargain growth option at this price. 

It’s already the second-largest equipment rental company in North America and the largest in the UK. And being a construction service provider, Ashtead avoids the pitfalls of construction like fluctuating commodity prices and environmental factors delaying deliveries.

The company will have to deal with growing overhead and repair costs and its sizeable £5.8bn net debt. This could eat into future revenue given its high acquisition spending right now. But the business is a strong cash generator, bringing in £1.1bn in 2022. 

This business is on my UK shares buy list because of its steady growth strategy and huge market share in cash-rich regions. Ashtead addresses a very specific problem in the construction industry and I’m bullish on its business model. I’d be tempted to invest in the company once the larger global economic climate shows strong signs of recovery. 

The post Down 45%, are these UK shares no-brainer bargains right now?  appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado 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.

All this has put me on the lookout for some outstanding UK shares to buy on their way up. With £1,000 to invest in June, here are two companies I have identified for my portfolio showing signs of explosive growth over the next decade. 

Top UK share to buy in the energy sector

Multinational energy firm SSE (LSE:SSE) has been on a solid run in the market. Since the Russian invasion of Ukraine, renewable energy sources in the EU have gained significant prominence. And the SSE share price has jumped nearly 20% since. One-year returns stand at 16.8% and the share has gone up nearly 10% in 2022 alone.

After the recently released results, I think this UK share looks very attractive. For the financial year 2021-22 (ended 31 March 2022), the company recorded a 23% jump to £1.16bn in pre-tax profits from the year before. This jump allowed the board to roll out a £12.5bn investment plan to grow offshore wind assets by 2026.

SSE’s full-year dividend stands at 85.6p per share, which brings the current yield to 4.7%. And given the growing retail price of energy, the board expects a 5% year-on-year dividend until 2026.

While these are great indicators of financial strength, there are a few concerns to address as well. The company has a net debt of £8.59bn, which could affect future revenue. Also, given the increased interest in the field, better alternatives could become prominent over the next decade, which could force a restructure. 

However, the energy sector is growing fast. And SSE’s impressive recent financials and above-average yield makes it one of the top UK shares to buy right now for my long-term growth portfolio. I’d be tempted to make a £1,000 investment if the share price falls below 1,750p in June.

Global consumer goods giant

Unilever (LSE:ULVR) is a fast-moving consumer goods company present in over 100 countries with 400 popular brands in its portfolio.

With a turnover of over €1bn in 2021, the company retained a lot of the customers it gained during the pandemic-driven hygiene products boom. Customer surveys show that the demand for anti-bacterial cleaning products will remain high across the next decade. The average consumer cares a lot more about personal hygiene after the pandemic, which is great news for Unilever. 

Its significant debt of €25.5bn is a concern. And given the inflationary pressure in the UK right now, profit margins could take a hit affecting future revenue. But I think the company has a robust supply chain, product demand and pricing power to overcome this. And given the current volatile market conditions, I think my portfolio is screaming for a fundamentally strong company with a global presence right now. If Unilever’s share price falls below 3,500p, I would happily make a £1,000 investment this year.

The post 2 top UK shares to buy now with a £1,000 lump sum appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. 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.

Investing via the stock market is often labelled as ‘risky’. But I’m happy to take that risk rather having a lot of my wealth sitting in a cash savings account. Allow me to explain why I’m buying UK shares.

Cash savings erode in value

Let me start by clarifying that I’m not against setting some money aside. I actually reckon this is very prudent. Having cash ready for replacing something that’s broken down in the house, for example, can take a lot of the sting out when it (inevitably) happens. 

Once I’ve reached a certain amount however, the benefits that come from keeping my wealth in this asset diminish massively. The reason for this is that inflation — the ‘silent killer’ of the financial world — gradually (or not so gradually) erodes the value of money.

Inflation isn’t always a bad thing. However, anyone with an eye on the headlines can’t have failed to notice the rising cost of living in recent months. In fact, inflation sat at 5.4% in December, far above the Bank of England’s 2% target. The state of affairs is even worse across the pond. At 7.5%, inflation in the US is now at its highest rate since 1982. 

Since any cash savings I have are now being  impacted, I think it’s wise for me to keep less money in the bank and more in the stock market. There are a few reasons for this.

Why I’d buy UK shares instead

First, equities have been shown to generate higher returns than all other traditional asset classes over the long term. So even though inflation may have the upper hand right now, this is unlikely to matter if I can lock my money away in the market for years (and ideally decades). True, past performance is no guide to the future, but nor is it completely redundant, in my opinion. 

A second reason relates to the valuation of stocks. Whether we attribute this to the pandemic, Brexit, supply chain issues and/or tensions between Russia and Ukraine, many UK shares are very reasonably priced at the moment. As Warren Buffett would attest, the best time to buy is when brilliant companies are on sale.

Third, owning UK shares gives me access to a source of passive income in the form of dividends. Yes, not every company returns a proportion of profits to shareholders. However, those that do can serve as a defence against rising prices.

Get personal

Of course, the above is conditional on me having already built up the aforementioned cash buffer. I’d also not want to be carrying any debt (aside from a mortgage). Yes, inflation is high, but the interest I’d be paying on credit cards is even worse.

It’s also worth bearing in mind that the specific UK shares (or funds) I buy will be dependent on a number of other factors that vary between investors. As someone in his early 40s, my portfolio may not have the same asset mix as someone in their early 20s, or a retiree.

Investing is very personal. Therefore, it’s vital to evaluate my own risk tolerance, financial goals and time horizon before I buy anything with the cash I move over from my savings account.

The post Cash savings accounts? I’d rather buy UK shares as inflation soars appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers 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.

I think a shift in investor mentality towards companies working with common Environmental, Social and Governance (ESG) goals will become vital in the next decade. Businesses embracing sustainability and working in areas that promote renewable energy sources are multiplying as we move towards a greener supply chain. And an important concern raised at last year’s COP 26 event is switching to more renewable power sources and phasing out coal power.

I feel UK renewable energy companies can benefit tremendously given recent trends. Here are three shares I’m looking at in this space that could explode in 2022.

EVs take off

If I had to pick one industry that grew enormously in 2021, it has to be electric vehicles (EVs). Car giants are increasing their EV offerings and global markets are opening up infrastructure possibilities that could enable the long-needed switch. And this is where firms like Nexus Infrastructure (LSE: NEX) stand to benefit.

The company’s primary focus is civil engineering and outfitting new homes with utilities. But it also specialises in installing EV charging ports in homes. Last year, the government passed legislation that made EV ports mandatory in all new homes in the country from 2022. This is great news for Nexus because it already works with established builders like Persimmon and Taylor Wimpey. EV ports can be an auxiliary service the company provides, which already gives it a large market share in an emerging space.

It should be noted that a lockdown remains possible given the Omicron spread. And Nexus’s primary business, civil engineering, could be affected given rising construction material shortages and inflation. This could eat into revenue and cause its share price to fall. And Nexus shares already look slightly expensive at 222p, at a forward price-to-earnings ratio of 34 times. But I’m watching this renewable energy stock closely to try and find the optimal entry point for 2022 and beyond.

Future power?

Eqtec (LSE:EQT) is a waste-to-energy company that has patented gasification tech to solve two separate environmental issues. The company uses waste to produce gas fuel to power industries. But this innovative tech is a risky pick that has high potential. And a lot of its future revenue rides on massive adoption.

Its share price has remained dormant for nearly a decade now, falling below 10p in 2015 and never recovering. But a new three-year deal with Toyota Motors and two new power plants could breathe life into this renewable energy stock. The company could build recent developments and work towards wider adoption, which is why it is on my watchlist. However, this remains a speculative pick for my portfolio. 

The next company on my list is ITM Power (LSE:ITM). The hydrogen electrolysis machines the company makes separate hydrogen from water and use clean hydrogen as fuel. This process has zero carbon by-products, which is vital. Hydrogen as a fuel source is still in its infancy, in terms of adoption. This makes me optimistic about ITM’s future potential.

Despite impressive tech, the energy firm was plagued by a massive debt pile in 2021, which led to a poor showing last year. The loss-making company expects a 31% increase in projected revenue which could plug the £250m debt hole. And right now, the company is at a crucial point in the market and could take off in 2022, which is why it is on my watchlist.

The post Renewable energy boom: my top 3 shares for 2022 appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan 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.

Historic data shows us that some sectors are relatively ‘inflation proof.’ By combining this data with shares that offer a healthy dividend, I think I have a winning combination of security and steady income that could potentially stabilise my portfolio during inflation. 

Cheap mining share

Rio Tinto (LSE:RIO) stock is up 8.8% in the last month and is currently trading for 4,848p at the time of writing this article earlier today. But it still looks very undervalued to me given its profit-to-earnings ratio of 5.5 times and the whopping 10.1% dividend yield. Here’s why I think the miner can be a good barrier to protect my savings during the UK inflation.  

Although a lockdown could dampen Rio’s sales, I think governments are better equipped to tackle Omicron. And I think construction efforts will continue without major disruptions. This is highlighted by the rising iron ore prices since mid-November, up 28.4% in a month. Also, investors and analysts often turn to commodities to during a period of higher inflation to counter the diminishing value of cash. And miners like Rio often see an increase in revenue with rising demand and prices. 

The rise of green tech is a major boost for Rio. The miner has an abundance of aluminium, copper, and lithium, all crucial in the manufacture of electric vehicles. And the ore prices of these three metals have risen steadily through 2021. 

But there are some issues that Rio has to tackle. Its Jadar mine in Serbia could make Rio a lithium superpower. But residents around the  project are calling for an environmental impact study, which Rio is yet to produce. Estimates suggest that 80,000 people could be affected by the operation. But the FTSE 100 firm is working on addressing concerns and I think it can continue its stellar growth in 2022. 

Inflation-proof share?

The UK’s housing sector has been on a roll lately, with property prices driven up by the increase in demand. And housing shares have historically performed well during periods of inflation. Real estate income could increase during inflation, and developers like Persimmon (LSE:PSN) stand to benefit.

The housebuilder‘s shares come with an incredible 8.5% yield at its current share price of 2,764p. And the company has an established supply chain and generates a lot of raw materials used in-house. This reduces the impact rising costs and could help the company maintain its above-average profit margins. Coupled with the large cash cache of £895m and zero net debt, Persimmon’s looks like a good option for my income portfolio.

The only thing that puts me off an investment in Persimmon today is the cyclical nature of the housing industry. We are at the end of a decade-long housing boom, and analysts expect a minor collapse soon. And with the economy looking turbulent, first-time buyers may think twice before investing in a new home.

But the FTSE 100 share still is an inflation beater in my opinion and I am watching it closely to capitalise on a drop in share price.

The post 8.5+% yields! 2 FTSE 100 shares to beat UK’s inflation appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan 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.