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.

Post mini recovery, the valuation of Deliveroo has dropped back again. In fact, it’s now hit levels not seen since the end of April, following its disastrous IPO. Could it fall further moving into 2022? And would I be a buyer if it did?

Gig workers rule

The latest obstacle faced by the company is news that the European Commission has drafted news rules for gig workers. These would compel firms like Deliveroo to classify their drivers and riders as employees, entitling them to a minimum wage, pension and paid holidays. To date, these businesses have regarded workers as independent contractors.

As you might expect, such a move would mean far higher costs for ROO and its rivals. And while some of this can be passed on to the customer, there’s clearly a limit on what they’ll be prepared to pay.

Right now, nothing is set in law. However, the 20% fall in the Deliveroo share price in the last month suggests investors are once again wary. 

Will the Deliveroo share price fall further?

There’s certainly nothing to stop things from getting worse before they get better. It’s not just the threat of new legislation either. Like many highly-valued stocks across the pond, Deliveroo remains unprofitable. That could prove very unattractive to investors if inflation were to force a hike in interest rates. Even if this doesn’t happen soon, the sheer amount of competition Deliveroo faces can’t be ignored. If it possesses an economic moat, I’m struggling to see it.

It’s also worth mentioning that Deliveroo’s free float (the number of shares available on the market) is pretty low for a company of its size, at just 70%. This means its stock has the potential to be more volatile than other UK heavyweights. 

Reasons to be cheerful

Of course, no one has a crystal ball. While my call in October turned out pretty well, it was little more than educated guesswork. And there are certainly reasons for thinking the Deliveroo share price could stage another recovery as we move into 2022.

The emergence of the Omicron variant, for example, has already pushed the number of people dining out down to its lowest levels since May. That could/should be beneficial to Deliveroo, just as it was during the three national lockdowns. People still need to eat and a takeaway is an affordable luxury to raise the spirits in the dead of winter.

It’s also worth highlighting that, due to legal challenges, it will probably be a good while before Deliveroo needs to factor the aforementioned gig worker rules into its business plan. This delay could prove profitable for traders, albeit less so for long-term investors like me. 

Still overvalued

To be clear, I’ve nothing against Deliveroo as a company. I’ve used its services on a few occasions and been more than satisfied. At £4bn, however, it still looks overvalued to me. Lose another 50% and that view might change. For now, I’m maintaining my wide berth. 

The post I was right about the Deliveroo share price. Here’s what I’m doing now 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 has recommended Deliveroo Holdings 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.

Today, I will be looking at two FTSE 100 shares that look like great long-term picks for my portfolio, one for steady passive income and one with growth potential.    

Market leader with 6%+ yield

The British insurance industry is a tough nut to crack. There are several established insurers and asset managers vying for a larger chunk of the market. But Legal & General (LSE:LGEN) has been a name synonymous with the industry for nearly two centuries now.

Recent share price returns have been underwhelming. One-year returns stand at 12.6% and LGEN ranks 50th out of the 100 stocks listed in the footsie for returns over the period. But I see an impressive recovery from pandemic lows when analysts expected inflation and interest hikes to have a more profound impact on the insurance sector this year. 

These returns coupled with the 6.2% dividend yield mean investors collected a tidy profit this year. And unlike previous market crashes, LGEN kept its yield steady across a turbulent 2021, upholding its investor-first strategy. The company is currently trading at a forward price-to-earnings (P/E) ratio of 7.5 times, driven by strong profits from its asset management and life insurance divisions. 

But, the British stalwart has to fend off strong competition from the likes of Aviva and M&G. Also, if Omicron fears strengthen, we could face another large market crash. And insurance shares could suffer as a result. But I’m watching LGEN closely, and will consider a £1,000 investment if the FTSE 100 recovery continues.

Top FTSE 100 performer

Ashtead (LSE:AHT) shares have been on an incredible run lately. One-year returns stand at an impressive 92%, making it the best performing FTSE 100 stock in this period, as of today. But. with Omicron fears plaguing the construction industry, the shares are down nearly 3% in the last month which I see as a rare buying opportunity. 

The company has also been bolstered by its growing presence in the US and Canada. US President Biden’s $1.2trn infrastructure investment plan and is great news for a company that specialises in renting out pricey construction equipment. I think Ashtead has a great business model, allowing smaller projects to cut down on construction costs. Although it’s not a new idea, Ashtead has scaled up its venture well and has attracted investors with consistently strong results. Revenue doubled from £2,546m in 2016 to £5,031m in 2021. The company simply shrugged off the pandemic crash while many large construction businesses struggled.

But this also means that its shares are overvalued right now, trading at a P/E ratio of 32 times. And I expect operational costs to rise with its expanding presence in the US. The larger equipment cache means more repair and upkeep costs. And the company operates primarily in North America and the UK, overlooking developing regions in Asia and Africa that have mammoth expansion projects.

Yet I think its strong focus on stable, defensive growth makes it a good FTSE 100 option for my long-term portfolio today.

The post 2 top FTSE 100 shares I’m buying before 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.

GlaxoSmithKline (LSE:GSK) stock just received a major boost. After a week of dread following the news of the Omicron variant, we have some uplifting information. The antibody treatment developed by the drug manufacturer called sotrovimab (brand name Xevudy) has been approved by the Medicines and Healthcare products Regulatory Agency (MHRA) for use in the UK. The British regulatory body found that the drug “cut hospitalisation and death by 79%” in cases with mild-to-moderate Covid-19 symptoms. This comes after the pharma giant signed a deal, alongside Vir Biotechnology, with the US government for approximately $1bn in November.

The company’s share price has already jumped 1.6% in the last week while the FTSE 100 index has gone down 2.7% in the same period. One-year returns stand at a modest 10.4%.  However, given this major update, is the GlaxoSmithKline stock a good buy for my portfolio now? How do the long-term prospects for the company look? Let’s find out.

Money moves

In the extremely crowded pharma sector, GlaxoSmithKline is making huge strides in the R&D department. The company is focusing on areas like oncology, HIV, infectious diseases, immuno-inflammation and respiratory illnesses.

The third-quarter (Q3) report showed that HIV drug sales grew by 8%, mostly from new product sales. Its innovation products segment represents 29% of its vast drug portfolio, contributing nearly £1bn to sales so far in 2021.

Pharmaceutical sales in Q3 were £4.4bn with 10% growth in new and speciality medicines. Oncology drug sales grew 34% and vaccines sales were £2.2 billion, with new jab Shingrix (a vaccine for preventing shingles in adults) contributing £502m. Covid drugs sales stood at £209m.

Although the Covid drugs will bolster earnings in the short term, their contribution is small in comparison with other divisions. The pharma giant has a robust R&D framework to continue progress post-pandemic.

The company also hired vaccine executive Philip Dormitzer last week from Pfizer, banking on the future of mRNA technology. He played an important role in the development of Pfizer’s covid vaccine. Analysts see this as a strong move after a mini exodus of research talent from GlaxoSmithKline earlier this year.

Concerns and verdict

I think this move could push its vaccine research a long way. However, pharma shares do come with some pitfalls. Certain drug patents have a shelf life, which opens up the possibility of cheaper, non-brand alternatives. This could affect sales in global, developing markets, which is a concern for me when considering the GlaxoSmithKline stock.

Also, its dividend of 80p, which is unchanged since 2015, is set for a downgrade. Although the 5.5% yield looks meaty right now, the company is set to split off its consumer healthcare operations in 2022. The division valued at over £40bn could be primed for a takeover bid and this could subsequently dent GSK’s yield.

Despite this, I see tremendous value in the company. Given its vast R&D, it holds strong pricing power and market share. The positive news surrounding its new sotrovimab drug will also increase visibility among investors. The pharma industry has proved more crucial than ever over the last couple of years and I think the GlaxoSmithKline stock has a high ceiling. That’s why I’m tempted to invest in the company today.

The post Is GlaxoSmithKline stock the best ‘Covid pharma’ pick? 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 GlaxoSmithKline. 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.

While leaders have reinstated the mask policy and travel restrictions, the emergency G7 meeting today could force the government to restrict public movement as nine Omicron cases have been identified in the UK. Although I think a Christmas lockdown is unlikely, I would be unwise not to prepare for the worse. Here are two UK shares that I’d buy in the case of another lockdown.

Essentials supergiant

If another lockdown is likely, I think Tesco (LSE:TSCO) is a no-brainer. Although I do not expect the restrictions to be severe or long-lasting, the supermarket chain would become an essential business if we are restricted indoors again. Also, the business has been very stable across 2021, holding on to the consumers it gained during the pandemic. In the last six months, Tesco shares are up 24% (though down around 2.5% across the last 12 months). 

Despite these six-month returns, I wouldn’t consider Tesco shares under normal market conditions. I think there are better investment options. The supermarket sector has been operating under razor-thin margins and fear of being undercut by discount retailers. Also, the Amazon invasion has hit the supermarket sector, with the multinational company increasing its physical store presence globally.

However, Tesco utilised the last lockdown to improve its home delivery service in the UK. If the government decides to impose certain restrictions, I think public spaces, including restaurants and bars, will be closed. And this could cause a temporary surge in sales for Tesco. Also, Tesco shares look very cheap at the current price of 280p, trading on a price-to-earnings growth (PEG) ratio of 0.1.  I would consider Tesco shares if a Covid-driven market crash becomes inevitable.

Gaming growth stock

Team17 Group (LSE:TM17) is one UK stock I have been following ever since the 2020 gaming boom. The industry gained a lot of momentum the last time we were forced indoors and I expect a similar reaction from investors this time around. With the Metaverse gaming project gaining traction, the gaming industry is trending towards virtual, collaborative world-building games. The popularity of multiplayer games is exciting for TM17. Its focus and most successful titles have been in this genre.

When I look at TM17’s market performance over the last 12 months, things look bleak. A 20% fall in share price in a year might be alarming at first, but I think it was expected after the 2020 gaming boom. Looking at the core financials, TM17’s Return On Capital Employed (ROCE) stands at 23%, higher than the industry average. I see this as a positive sign for the company, which has a large pool of insider investors as well.

However, the gaming space is incredibly unpredictable at the moment and in such a fast-evolving space, it is hard to maintain stability. Large investors are still sceptical when it comes to gaming companies and prefer the most tested avenues. But I am very optimistic about the space and, if we face an Omicron lockdown, I think TM17 offers a good option that I would hold for the long term.

The post Stock market crash? I’d buy these 2 UK shares appeared first on The Twelfth Magpie.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon 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.

News of the Omicron Covid variant has sent markets reeling around the world, providing patient investors with an excellent opportunity to buy shares they had on their watchlists. However, not all are the great deals they may seem and I am personally avoiding as many as I am buying.

Rolls-Royce

I’ve talked a lot about Rolls-Royce and I stand by what I’ve said. It has great brand recognition, an excellent history of making good quality products. Royce has also been able to secure military contracts with both the UK and US governments, which will bring in revenue for several years to come. As a high-quality manufacturer, however, it has high operating costs and potential upsets to global supply chains knock investor confidence. This is why I believe the share price fell by nearly 12% on Friday. There aren’t many deals as good as this on the stock market and I am adding it to my portfolio as we speak.

International Consolidated Airlines Group SA (LSE: IAG)

IAG has fallen a further 12% since last week as news of the Omicron variant brought back fears of international flight shutdowns. The airline seems to be a favourite of investors who think that an end to the pandemic will bring its share price roaring back to pre-2020 highs.

The only problem with that assessment is the assumption that the pandemic will simply be announced to be over one day. The world will eventually get through this storm, but it could be years before the final cases are completely eliminated.

Between now and then, who knows how many new variants will be discovered? Even in ordinary times, IAG is a highly volatile asset. It has spent years bouncing between highs of nearly 500p and lows of just under 100p. It is currently trading near just shy of 100p, but since I’m not willing to become a trader, this is one I’m steering clear away from.

SSP Group (LSE: SSPG)

SSP is a multinational food contract service. It operates around 2,800 branded retail units in airports, train and bus stations around the world. Naturally it was hit hard by the initial Covid lockdowns. The share price has taken a further loss of around 15% over the last few days, and currently trades for 214p. However, I think that SSP will fare far better than IAG. In the years before Covid, SSP increased its revenue and its profit margins. It also paid down debt and saw steady, sustainable growth in its share price.

There is a lot of pent-up demand for both air travel and food services. But reopening small cafes domestically have far fewer issues than operating international flights. Small retail units also have much lower operating costs than airlines. Once the world gets back on track, I believe SSP is in a good position to regain its pre pandemic share price of 550p.

The future

No one can be sure what will happen because of the Omicron variant. This could be a flash crash or the start of a much longer decline. But Warren Buffett famously said “Be fearful when others are greedy and greedy when others are fearful.” I see a lot of fear right now.

The post Omicron variant flash crash: 3 shares I’m buying or avoiding now appeared first on The Twelfth Magpie.

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James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has recommended SSP 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.