Investors bought Ocado anticipating strong growth tomorrow, rather than profits and dividends today. Yet their enthusiasm has faded, with the Ocado share price down 53% over 12 months. It’s now one of the worst-performing FTSE 100 shares, rather than the best.

There’s no dividend and most years Ocado makes a loss rather than a profit, and now investors are fretting over when those profits will arrive.

I’d buy one of these FTSE 100 shares

UK supermarket rivals are catching up in online fulfilment, and Amazon remains a constant threat. Inflation is also squeezing grocery market profitability. The UK government’s mooted online sales tax wouldn’t help either. 

Most FTSE 100 shares face a list of challenges, but Ocado’s are mounting. It still boasts cutting edge pureplay technology. Bumps in the road were supposed to be expected, but it looks too risky for me to buy right now.

Mining giant Anglo American (LSE: AAL) thrashed most FTSE 100 shares over the last five years. It came in second place with a total return of 283%. The last year has been strong too, as it returned another 16.3%.

Like all commodity giants, this £43.37bn stock is benefiting from today’s soaring raw material prices. However, its share price slumped last week when it reported a 10% drop in first-quarter output. It blamed Covid-related staff absences, high rainfall in South Africa and Brazil, and problems at its metallurgical coal and iron ore operations.

I reckon this could also be a buying opportunity, with the stock trading at just 7.8 times earnings. It also offers a juicy 6.6% yield. 

The strict Chinese Covid lockdown could hit demand and prices, as we’ve seen with the falling copper price. Yet Anglo American remains one of my favourite FTSE 100 shares, and I’m sorely tempted by today’s low valuation.

A company with pricing power

Real estate investment trust Segro (LSE: SGRO) doesn’t always get the limelight. Yet it’s the third-best performer among FTSE 100 shares measured over five years. It delivered a total return of 223% and continues to race along, up 37.9% over the last 12 months.

Segro owns, manages and develops modern warehousing and light industrial property, and recently reported a strong first quarter. Total new headline rents signed during the period jumped to £25m, up from £18m last year,

Supply chain and inflationary pressures could hamper its construction plans and drive up costs. Yet management reckons it can pass this to customers in higher rents. Today’s yield may look low at 1.79% but board recently hiked its full-year dividend by 10%. Further progression seems likely. The downside is that the stock is expensive, at 41.8 times earnings. That’s the price investors pay for buying market-beating FTSE 100 shares like this one.

I wouldn’t buy Ocado, but I would place Segro on my watchlist. Of these three FTSE 100 shares, dirt-cheap Anglo American is the one I’d buy today.

The post These 3 FTSE 100 shares grew fastest over five years – I’d buy 1 of them today appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Up 16% in a day! Here’s why shares in this FTSE 100 dividend machine are soaring!
• Can anything save the Ocado share price?
• Forget buy-to-let! Aim for a million with a Stocks and Shares ISA instead

Harvey Jones doesn't hold any of the shares mentioned in this article. 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.

Tesco (LSE: TSCO) and Ocado Group (LSE: OCDO) are two FTSE 100 supermarket stocks that have experienced different fortunes over the past couple of years. While the Tesco share price went into freefall in early 2021 during the coronavirus pandemic, the Ocado share price soared in tandem with rising consumer demand for online grocery shopping. However, things have changed recently. On a 52-week basis, the Tesco share price is up by 19% compared to a -45% drawdown for Ocado. 

Let’s examine which stock I believe offers better value at today’s prices.  

Tesco share price: a value proposition 

Tesco is the UK’s largest supermarket chain. It also runs operations in central Europe and Asia in addition to a retail banking division. With consistent demand for its groceries and a traditional bricks-and-mortar business approach, for me, Tesco stock is a defensive investment prospect. The company’s market cap is over £28.3bn and Tesco has historically offered shareholders reliable dividends and earnings growth.  

The Tesco share price stands at around 273p, slightly towards the upper end of its five-year trading range from a low of 210p in 2017 to a high of 337p in 2018. Tesco’s price-to-earnings ratio sits just above four, making it one of the cheapest FTSE 100 shares. Moreover, the stock’s current dividend yield of 3.28% is pretty close to that of the FTSE 100 index as a whole, at 3.56%.

As inflation rises, the Tesco share price could come under pressure. Rising food costs and supply chain disruptions could act as bearish headwinds. However, Britain’s largest supermarket looks better placed to cope with these threats than many direct competitors, such as Sainsbury’s and Marks & Spencer, due to strong customer loyalty.

Over 20m Brits own a Tesco Clubcard. Although Tesco operates in an intensely competitive market, the discounts Clubcard holders benefit from should mean the Tesco share price will resume its upward trajectory over the coming months in my view, despite the inflationary environment.

Ocado share price: a growth stock

In contrast to Tesco, Ocado is a more speculative stock for me. Ocado specialises in online grocery shopping, but it also resembles a tech stock in some ways. For instance, the company uses AI in its Ocado Smart Platform to offer efficiency improvements in its partners’ grocery e-commerce operations.

The Ocado share price typically experiences greater volatility than the Tesco share price. Furthermore, Ocado currently trades at a negative P/E ratio, does not distribute dividends, and has never turned a profit. This concerns me as Ocado has been trading for over two decades. 

Bulls can argue that Ocado is one of the most innovative companies in a sector dominated by more traditional business models, with its focus on software and warehouse robotics. If this really is the future of retail, Ocado shareholders should stand to benefit.

Nonetheless, Ocado posted a pre-tax loss of £177m for 2021. As consumers revert to their pre-pandemic in-store shopping habits, I’m struggling to be optimistic for Ocado’s share price.  

Which FTSE 100 stock is the better buy for me?

Right now, I’m looking to invest in quality stocks and de-risk my portfolio away from more speculative plays. Accordingly, for me, Tesco constitutes a good value stock to invest in for 2022. I view Tesco as a better buy for me than Ocado at present. 

The post Ocado vs Tesco share price: which FTSE 100 stock is the better buy? appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Here’s what a surging Tesco share price has done to £10,000 invested 5 years ago
• Can anything save the Ocado share price?
• Are Tesco shares losing their momentum?
• Tesco’s share price drops 2% on Q1 trading miss. What’s gone wrong?

Charlie Carman does not own shares in any of the companies mentioned. The Motley Fool UK has recommended Ocado Group, Sainsbury (J), and Tesco. 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 airlines have been hit particularly hard, with British Airways owner IAG down more than 16%, at time of writing. Ryanair is down 10% and easyJet down by 13%. Aircraft engine maker Rolls-Royce has fallen 5.5%, as fears grow over international travel.

FTSE 100 energy giants BP and Shell are also down around 5% or 6%, as any Covid resurgence could hit demand for oil.

Who’s afraid of a stock market crash?

Judging by the sectors hit today, it’s beginning to feel a lot like March 2020. As well as FTSE 100 travel and energy stocks, entertainment enterprises are in the mire. Cineworld, Mitchells & Butlers and Restaurant Group are firmly out of favour. Online grocery delivery specialist Ocado Group is bucking the trend by climbing.

As Hargreaves Lansdown markets analyst Susannah Streeter has noted, scientists are calling the mutations “horrific” and of “great concern”. Their dire warnings have triggered a sell off in Asia, where Japan’s Nikkei and Hong Kong’s Hang Seng both fell by 2.6%, while in Europe, the DAX, CAC 40, and Euro STOXX 100 are all tumbling.

I have cautiously backed both BP and Shell in recent days, but lacked the courage to buy airline stocks which look too exposed to pandemic uncertainties. That is one reason why I am relatively sanguine about today’s events (at least from an investment perspective). It’s not the most important one, though. As ever in the middle of a stock market crash, the idea of selling any of my shares or funds simply doesn’t occur to me.

I’ll buy FTSE shares once they get cheaper

I’m still more than a dozen years away from retirement, and that gives my portfolio plenty of time to recover from the current setback. With luck, today’s Covid fears will have been overdone. Even if they’re not, it’s impossible to assess the impact on stock markets. There are just too many variables, including how central bankers will respond.

If the stock market crash does lead to a more protracted slump, further stimulus could be forthcoming, bolstering shares. Investors have been quietly making that bet for years. The US Federal Reserve has effectively been backstopping share prices since the financial crisis.

My wider point is that nobody knows where stock markets will go next. They could crash further. If they do, I still won’t sell. Instead, I would take the opportunity to pick up my favourite FTSE stocks or funds at a reduced price.

History shows that stock markets always recover after a crash, if you give them long enough. In my opinion, they remain the best way to generate long-term dividend income and capital growth for my retirement. Today’s grim news won’t change that.

The post Stock market crash: I’m still buying FTSE shares despite ‘horrific’ new Covid warnings appeared first on The Twelfth Magpie.

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Harvey Jones 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.

The outbreak of the pandemic saw a major rise in the Ocado (LSE: OCDO) share price. However, since hitting an all-time high of 2,914p in February, it has fallen and is currently around 35% lower. Back in March, my fellow Fool Manika Premsingh explained why she was buying Ocado. So does this FTSE 100 stock’s share price still have the potential to rise as we seem to be coming out of the pandemic? Let’s take a look.

Ocado opportunities

The first positive is that the pandemic has changed consumer behaviour. At its height, many people switched to online grocery shopping. By August last year, more than three-quarters of consumers ordered at least some of their household shopping from supermarket websites. And I suspect many will continue to shop online, which provides opportunities for the Ocado share price to rise.

This view is reinforced through the firm’s latest financial results. The half-year results for 2021 showed 21.4% growth in revenue to £1.3bn, highlighting the continued strong performance of the business. It also found itself with what it called ‘’healthy liquidity’’, with a cash balance of £1.7bn. This provides stability, possibly giving investors confidence about the future. However, it’s worth noting that pre-tax losses were around £24m. Since its creation, it has rarely made a profit, which does lead me to question whether Ocado is currently overpriced. 

One key point in its favour compared to other grocers that operate online is its customer fulfilment centres.  These allowed Ocado to outperform rivals during the pandemic. Rivals could not always cope with the high demand, but Ocado’s automated systems streamlined the preparation of deliveries. Innovations like this make me optimistic for the future of the business.

Ocado share price risks

Of course, despite the potential I see, I have to consider the risks too. One major potential risk is a lawsuit the firm’s currently involved in. Norwegian robotics company AutoStore has filed complaints in the UK and US claiming Ocado’s automated warehouse systems infringe its patents. A successful lawsuit would block the import, manufacture, sale, and use of these systems. Sorting out the legal situation will inevitably be a long process, costing the firm money along the way. I believe this could be a reason behind the fall in the Ocado share price and I’m wary that the longer the lawsuit goes on, the more it may continue to fall.

To add to this, the grocery market is becoming more competitive, which could pose problems. Supermarket chains like Tesco boosted home delivery in the pandemic, while Amazon has also ventured into grocery with Amazon Fresh. This could have a massive impact on future revenues as these operations potentially poach the firm’s customers, directly impacting the Ocado share price.

Should I buy Ocado?

I like Ocado, and don’t believe that the sole reason for the rise in share price over the past few years is due to the pandemic. It’s an innovative business model with strengthening financial results. So why is the Ocado share price falling? I pin it down to the lawsuit and that means I won’t be buying yet. I may be missing out on a great opportunity, but I intend to keep Ocado on my watchlist until the outcome of the lawsuit is clearer.

The post The Ocado share price has fallen: should I buy now? appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Can anything save the Ocado share price?

Charlie Keough does not own shares in any of the mentioned companies. 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 Ocado Group and Tesco 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.

Ocado

Ocado Group (LSE: OCDO) is primarily known for its online grocery operations. 

Naturally, Ocado saw an influx of business in 2020 as more consumers and companies migrated online, making it a promising British investment for me. Its online grocery revenue grew by 35% to $2.18bn in 2020 thanks to an e-commerce boom driven by the pandemic. This figure is expected to increase if the habit of online grocery shopping remains sticky post-Covid.

The biggest threat to Ocado Group at the moment is increasing competition, I feel, including Tesco and Sainsbury’s. Should it lose ground to such competitors, the company’s bottom line could be at risk.

But I feel it has enough in its unique technology offer continues to grow. It has seen its stock price soar 54% in the past 12 months from 1,368p to 2,115p. However, with the Ocado share price down almost 15% to 2,115p from 2,481p in three months, I’m adding it to my watchlist as a discount buy.

Games Workshop

Games Workshop (LSE: GAW) is a British manufacturer of miniature wargames, best known for its ‘Warhammer’ series. This ‘nerdy’ company may not seem like a typical tech stock, but its 5m online users beg to differ. It’s one of the FTSE 250’s top performers of the past decade, soaring more than 1,800% in that time. And, the Games Workshop’s share price has soared more than 110% in the past year, from 4,896p to 10,402p today. 

Operating profit doubled to £92m in the six months ended November 2020, while the company currently forecasts a repeat doubling of operating profit. Online channel revenue has also surged 87% as consumers continue to enjoy gaming during lockdown.

One major concern for me is that as lockdowns end, gamers who’ve come to the firm’s products anew could lose interest, resulting in a sales decline. The company has a big job ahead of it to maintain this strength. But with an expensive P/E ratio of 35, shareholders will need to see long-term growth potential in order to justify the price. 

Yet I believe that Games Workshop has not yet scratched the surface of its online potential. That’s why I’m adding it to my watchlist now. 

Blue Prism

Blue Prism (LSE: PRSM) makes robotics software in more than 60 countries and added 490 new customers in 2020, while maintaining a gross revenue retention rate of 98%. Its board has also discussed plans for a US listing, where it believes it could receive a higher valuation, based on recent performances of US-listed tech stocks that saw their share prices soar in the past year.

The company is currently valued at more than £1.25bn, and despite coronavirus-induced volatility in 2020, its share price has risen 15% in last year from 1,121p to 1,299p.

Its £40.3m 2020 losses are a concern for me. Although these losses had narrowed year-on-year, the company was forced to restate its financials in January, meaning that the actual loss was £5m higher than originally stated. Though this was just a once-off event, it isn’t a good look for the company and leaves a black mark on its record. 

For now though, I’m giving Blue Prism the benefit of the doubt and adding it to my April watchlist.

The post 3 top FTSE tech stocks to buy in April appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Forget SpaceX shares! I’d rather buy these FTSE 100 growth heroes
• Can anything save the Ocado share price?
• Just 103 shares of this FTSE 100 stock unlocks a £500 passive income!
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The Motley Fool UK owns shares of Games Workshop. 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.

Measured over five years, Ocado is up 599%. Over the same period, Fevertree is up 299%. They’re among the best-performing UK shares of the pandemic,too. Over 12 months they have grown 53% and 168% respectively.

But as companies get bigger, the pace of growth must eventually slow. FTSE 100-listed Ocado now has a market cap of almost £15bn, while Fevertree is worth more than £2.5bn. It’s not so easy to grow 600% or 300% from that starting point, but expectations remain high.

The Ocado share price slips

Investors have been pricing in plenty of future growth, which makes them liable to be disappointed by the mildest setbacks. That’s what has happened today, as both UK shares have fallen, despite posting halfway decent results.

The Ocado share price is down 4.27%, while Fevertree is down a hefty 14.93%. That’s bad news for them but good news for me, as I now have an opportunity to buy these two UK growth shares at a reduced price.

Ocado Retail has benefited from Covid lockdowns, as more people have opted for home deliveries. Today’s trading statement reported a 40% rise in sales for the 13 weeks to 28 February. Christmas revenues totalled £599m against £428.8m last year. Chief executive Melanie Smith predicted “strong growth over the coming years as we continue to lead the charge in changing the UK grocery landscape, for good”.

So why are investors so negative about this top UK share? One reason is that future comparatives will not be as attractive, as trading normalises. The other is that the Ocado share price is massively expensive given that it has made a loss for the last four years. It is betting the farm on growth, in the hope of establishing itself as a global tech company for supermarket deliveries.

That story still holds good and I would consider buying Ocado for long-term growth, while expecting more bumps along the road. It’s down 20% in the last month, partly due to the wider risk-off tech stock sell-off. That’s good enough for me. I’d buy.

I’d choose just one of these UK shares

Fevertree is also expensive, trading at 50 times earnings, and needs to keep investors sweet by showing continued growth potential. The mood is sour today, as preliminary profits dropped 29% to £51.6m due to falling sales in bars and restaurants, which in non-Covid times make up almost half of its revenues.

Off-trade and retail sales were better than expected as more people have been drinking at home. Management also increased the dividend. This isn’t the juiciest income stock, with a forward yield of 0.8%, but cover of 2.5 gives scope for growth.

Fevertree should benefit once people are liberated to celebrate their freedom with a craft G&T and premium mixer. The big question is whether Fevertree can really crack the US, where revenues grew 23% to £58.5m. They already total more than half UK revenues of £103.3m, so the outlook is promising. This UK shares is just a bit too expensive for me, though. I’d buy Ocado first.

The post Top UK shares Ocado Group and Fevertree Drinks are falling today. Here’s what I’d do now appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Can anything save the Ocado share price?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Fevertree Drinks. 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.

But over the past few weeks, the share price has begun to decline. Why? And is this a potential buying opportunity for my growth portfolio? Let’s take a look.

Why did the Ocado share price fall?

The business published its full-year 2020 results in early February and I think the company is performing quite well. Total revenue increased by 32.7%, primarily due to UK operational growth. And its International Solutions segment looks like it’s taking off with revenue rising from £0.5m to £16.6m.

The firm remains unprofitable, but its losses also declined from £214.5m in 2019 to £44.1m in 2020. So why is the Ocado share price falling?

As I see it, investors are being more cautious due to two factors. The first is the potential introduction of a digital sales tax. The second is the expectation of a slowdown in online sales growth as more of the population gets vaccinated against Covid-19. Personally, I’m not overly concerned about either of these threats. And here’s why.

Ocado is building a robot army

As previously stated, the recent pullback in the Ocado share price is likely linked to its online supermarket segment. While that does currently generate the most significant portion of revenue, it’s no longer the primary focus of the business. But the stock pivoted in 2019, transforming into a technology-led software and robotics solutions company. So what does that mean?

Basically, it built a robot army to help automate the majority of the process of producing, packaging and delivering groceries to retailers worldwide. Today, over 10 supermarket chains — including Morrisons, Coles, and Kroger — have signed up to use its robot-driven platform.

What I find particularly promising is the prospect of a network effect forming. As more companies join the platform, its resources grow. This subsequently enables faster innovation to improve efficiency, which in turn attracts more companies to sign up. 

There are many challenges ahead

While the robot-driven platform is vastly different from the home delivery of food, it still serves the same market – groceries. This means that the regulatory requirements for producing and packaging food must be maintained. This is a task made even more complicated by its international operations as the rules vary from country to country.

Any delays or disruptions in the supply chain would likely damage Ocado’s reputation as well as the relationships with its platform customers. Even more so if the cause is a regulatory breach.

Another significant risk that may lead to operational disruption is the workforce itself. The majority of Ocado’s employees are EU nationals (for now). This adds additional complications as the UK is no longer a member of the EU. Thus most workers will have to acquire visas. While this is only a short-term problem, it could lead to the potential loss of key personnel.

Would I buy Ocado at the current share price?

There are certainly plenty of risks ahead, but the business is trying to redesign supermarkets’ grocery supply chains. If it succeeds, robots could become the new standard way of doing business for all grocery stores. Personally, I think the risks are worth the reward and so Ocado looks like it could be a fine addition to my portfolio.

The post The Ocado share price is around 2,300p. Would I buy now? appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Can anything save the Ocado share price?

Zaven Boyrazian does not own shares in Ocado. 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 Ocado Group (LSE: OCD) share price has been a thing of wonder in the pandemic, doubling in the last 12 months. Its performance over five years is even more spectacular, as it rose 854% in that time.

The FTSE 100 has limped behind. Despite a strong recovery from the post-crash lows of last March, it trades more than 13% lower than a year ago. Its long-term performance also trails the Ocado share price. Over five years, it’s up just 14.5%.

If I’d invested £10,000 in Ocado five years ago, I’d have £95,400 today. By contrast, a FTSE 100 tracker would have turned £10,000 into just £11,450. With dividends reinvested, I might have £13,000. The Ocado share price is the clear winner. However, past performance is no guarantee of future success. There is a danger the buzz around Ocado has been overdone. And the stock trades at an incredibly high price-to-book value of 18.9.

The FTSE 100 could rebound

While individual equities can beat the index, working out which companies will repeat the Ocado share price’s blistering performance is never easy. Stock pickers like me will buy losers as well as winners. 

US billionaire investor Warren Buffett, possibly the most successful stock picker of all, recognises that. He has instructed trustees in charge of his estate to invest 90% in the S&P 500, via index trackers, for when he’s gone. I could apply the same logic to the FTSE 100.

Buying a low-cost exchange-traded fund or unit trust tracker is as simple as can be. I potentially get growth across the index, at minimal cost. History shows that in the long run, my index tracker should beat almost every other asset class.

However, I still think there’s a strong case for me to invest in individual stocks as well, as long as I understand the risks. The Ocado share price shows that. Would I buy it today?

Ocado is a tech-based company. It has built delivery infrastructure for supermarkets that it can sell worldwide. It has poured money into robotics technology, which is why it has only posted pre-tax profit twice since its creation 20 years ago.

I think the Ocado share price could climb

Its plans seem to be coming to fruition, as the surge in online food shopping during lockdowns drives underlying profits. Full-year profits at the Ocado Retail division, which started selling Marks & Spencer food last September, are expected to top £60m, up from the £40m originally anticipated. This was before the third lockdown was announced.

Ocado is now looking to expand into clothing and general merchandise, after buying two US-based robot developers. The bots will pick and pack goods for home delivery. Once it has refined the technology, it can offer its services all over the world. The Ocado share price is up another 20% in the past month in anticipation.

However, as I said, it is expensive. The stock is priced for rapid global growth and any setbacks could hit it hard. I mustn’t ignore the dangers.

I think FTSE trackers make a good core portfolio holding, but a few top stocks like Ocado can supplement that nicely. I’m aware that Ocado isn’t consistently profitable and I don’t know what will happen to the share price in future (it can fall or tread water as well as rise). But I’d still buy today.

The post Should I chase the Ocado share price higher or listen to Warren Buffet and buy a tracker instead? appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Can anything save the Ocado share price?

Harvey Jones 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.

Or, to put it another way, is the stock market rally the ideal time to buy beleaguered cinema chain Cineworld Group (LSE: CINE) and sell food delivery specialist Ocado Group (LSE: OCDO)? Or the other way around?

Measured over 12 months, the performance of these two stocks couldn’t be more different. The Cineworld share price has lost three quarters of its value, while the Ocado share price has doubled. However, since Pfizer announced its vaccine breakthrough on 9 November, they’ve streaked off in completely opposite directions.

Ocado and Cineworld are so different right now

Cineworld has outpaced the wider stock market rally, its share price rising 62% since the Pfizer announcement. By contrast, Ocado has fallen 10%.

Today’s valuations are extremely different, despite the stock market rally. Cineworld is still dirt cheap, with a price-to-revenue ratio of 0.2 and price-to-book value of 0.3. By contrast, Ocado’s numbers stand at 9.9 and 16.5 respectively. While these figures aren’t entirely comparative, I think they give us a fair idea of how cheap Cineworld is, and how expensive Ocado has become.

I’m certainly wary of buying Ocado, even though home food deliveries are rising again in lockdown 2.0, and Christmas is coming fast. I’m more concerned about 2021. If that vaccine works, people will rush out to enjoy the luxury of dining in actual restaurants. The demand’s there, just look at the success of Eat Out to Help Out.

Ocado has offered a double blow lately, as new figures show rival Waitrose eating away at sales, while it’s being sued by Norwegian rival AutoStore for a warehouse technology patent breach. Its shares are up 850% in the last three years, and that level of success is hard to replicate.

If the stock market rally continues, Ocado could miss out. It still has plenty to offer, especially with its M&S joint venture showing strong trading. But I’d rather bank profits than buy today.

Cineworld is soaring on hopes that a vaccine will make people feel comfortable watching a big screen in a darkened room with hundreds of their fellow citizens. My worry is that the damage has already been done, as the cinema chain has run up an $8bn debt pile due to Covid-19.

Stock market rally may not be enough

Management is now doing all it can to stay solvent until the spring, when it hopes for a double shot in the arm from the vaccine and a fresh stream of blockbusters. It’ll be touch and go. I can foresee a time when cinema goers are queueing round the block to see the long-delayed James Bond film, but there’ll be some anxious times before then.

My worry is that Cineworld will be a greatly weakened operation, with fewer screens and audiences used to streaming at home. Right now, both stocks are too risky for me, although in very different ways. I’m now looking for better ways to play the stock market rally.

The post Stock market rally: should I sell overpriced Ocado shares to buy dirt-cheap Cineworld? appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Can anything save the Ocado share price?

Harvey Jones 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.

These two FTSE 100 shares could help protect your portfolio against a second lockdown this autumn, but there’s a problem. Both are pretty expensive.

It helps to be market leader in a niche product, and Spirax-Sarco Engineering (LSE: SPX) specialises in steam. This can be used to heat or sterilise food production, oil refining, beer making, and drug manufacturing.

Stock market crash survivors

The Spirax-Sarco share price is one of the top performing FTSE 100 shares. It delivered a total return of 768% over 10 years to 31 December 1999, with dividends reinvested. The group was beaten only by equipment rental specialist Ashtead Group (a whopping 2,589%!!) and life-saving technology specialist Halma (932%), according to research from AJ Bell.

Spirax-Sarco didn’t escape the March stock-market crash completely unscathed. It bounced back with tremendous speed, though, rising almost 25% over the last six months. Earlier this month, it reported an 8% drop in half-year operating profits to £119m, with revenue down 4% to £569.7m.

As the economy struggles to escape the clutches of Covid-19, second-half growth will be lower. Management still lifted the interim dividend 5% to 33.5p. It has form on this front, having hiked its dividend, at an average rate of 7% a year, for the last decade.

This FTSE 100 share is even more expensive

Don’t let that low 1.1% yield fool you. It looks small because the share price has risen so fast, up a thumping 230% over five years. The big problem that it is priced for growth, trading at 38 times earnings. Some may baulk at that price. If you do, put Spirax-Sarco on your watchlist and see what happens in the next crash.

The Ocado Group (LSE: OCDO) share price leaves Spirax-Sarco standing. The FTSE 100 group’s share price is up an incredible 134% in six months, and 624% over five years. Although best known as a grocery delivery group, investors have been buying it as a global technology play. Ocado hopes to “change the way the world shops”, in its own words, by selling its Smart Platform to grocery retailers around the world. It also has a joint venture with M&S.

Ocado benefited from rising demand during the lockdown but what really matters is whether it delivers on its promise to build worldwide sales. This FTSE 100 growth share has been losing money as it builds its business, but latest half-year losses narrowed from £147.4m in 2019 to £40.6m, as its online delivery technology generates new revenues in Paris and Toronto.

Ocado is priced for growth and is expensive to buy today, trades at a dizzying high price/revenue ratio of 10.6 times, way more than most FTSE 100 shares. That means you are at risk if Ocado’s momentum fades. It’s too expensive for me, but I said that six months ago and look what its share price has done since.

The post These 2 FTSE 100 shares have made investors rich in the market crash. Here’s what I’d do now appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Can anything save the Ocado share price?

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Halma. 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.