I’m delighted! Let me explain why.

Opportunity knocks

One of the great things about being a Foolish investor is that I can take a long-term view of stocks. I don’t need to worry too much about, say, the latest scandal at Downing Street, or a possible military conflict in Eastern Europe. That’s because I’m looking to grow my wealth slowly but surely over the years. Today’s headlines are tomorrow’s fish and chips wrapper.

Nor do I need to fixate on the quarterly or annual performance of my portfolio. Knowing the equities have consistently shown themselves to be the most lucrative asset I can own over decades is enough. 

Contrast this attitude with that of the typical professional investor. They know that underperforming a benchmark (the FTSE 100 in many cases) for too long could put their job at risk. As a result, they can be forced to move out of underperforming stocks, regardless of their overall quality.

One example of this, in my opinion, is health & safety equipment maker Halma (LSE: HLMA). As I type, its shares are down 22% in 2022. This looks like a great buying opportunity to me.

Quality FTSE 100 stock

I certainly don’t think there can be any doubt over whether Halma is a good company. For years now, the business has been steadily growing revenue and profits. And given no client wants to be seen to be compromising the safety of its employees, or bypassing regulations, I have no doubt this will continue for many years to come. 

Halma is also in a strong financial position. Having barely any debt on its books should mean that the £9bn-cap can continue acquiring smaller enterprises and throwing cash at research & development. 

While perhaps of less importance for the committed growth investor, it’s also worth pointing out that Halma’s history of increasing its dividends is second to none.

Although cash payouts are never guaranteed, I don’t know of many other FTSE 100 stocks that have increased their cash payouts by 5% or more in 42 consecutive years. Considering just how many challenges the UK stock market has faced over this period, that’s got to count for a lot.

Time to buy?

Despite falling so far, Halma’s shares still change hands for 38 times forecast FY22 earnings. That’s a rich valuation in anyone’s book. It is however, significantly lower than when I last looked at the company in November 2021. Back then, this FTSE 100 member’s P/E stood at nearly 50!

The fact that I was a prospective buyer even back then shows how highly I regard this business. Now that things have fallen back despite no negative news being released, I think it could be time for me to back up the truck.

Of course, the shares could get even cheaper as we progress through 2022 if the rotation into value stocks continues. Indeed, this is why holding a diversified portfolio of stocks remains vital. 

But quality stocks are rarely without friends for long. If ever there was a FTSE 100 firm where a 20% drop in its share price should be celebrated by long-term investors like me, it’s this one. 

The post This FTSE 100 stock has crashed over 20%! I think it’s a screaming buy 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 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.

Burberry

First on my list is luxury goods manufacturer and retailer Burberry (LSE: BRBY). Last week’s Q3 trading update certainly provided those already invested, such as myself, with the reassurance that it was managing to weather the storm.

While overall comparable store sales fell 9% in the 13 weeks to Boxing Day thanks to travel bans and store closures, Burberry reported “particularly strong” full-price sales growth in markets such as Mainland China and Korea. These sales were driven by new, younger customers, highlighting the £7bn cap’s growing inter-generational appeal. The “exceptional” consumer response to its festive campaign featuring footballer Marcus Rashford was another highlight.

And the downsides? A full recovery will still take time. As of last week, 15% of Burberry’s stores remained closed and 36% were operating with reduced hours. The tourist centres in which it has its stores also continue to see devastatingly low footfall. But I think any rebound in sales in Europe, the Middle East and Africa later in the year could be a turning point.

Diageo

I can’t talk about FTSE 100 shares that might rally in 2021 and fail to mention Diageo (LSE: DGE).

As is to be expected, the beverage behemoth has been hit hard by the closure of restaurants, pubs and bars globally. Similar to Burberry, however, I think Diageo’s share price can begin to rally as and when restrictions are gradually lifted. After all, demand for premium alcohol won’t have been permanently damaged by the pandemic. If anything, I think the opposite will prove the case as friends and families reunite. 

In the meantime, I can’t ignore the dividends. Despite its current trials and tribulations, Diageo continues to return cash to its owners. 

With its bursting portfolio of brands and global reach, I see this as one of the best ‘buy-and-hold’ options around.

Intercontinental Hotels Group 

A final FTSE 100 share that I feel should continue to rebound strongly is Intercontinental Hotels Group (LSE: IHG). Just like the other shares I’ve mentioned, its value was walloped by the coronavirus last March as lockdowns came into force. No tourists or business travel, no trade.

Since then, we’ve seen some green shoots. In October, the business behind brands such as Regent and Crowne Plaza posted a 53.4% drop in third-quarter revenue per available room. This was actually an improvement on the 75% drop endured in Q3. Occupancy levels also rose from 25% to 44%. Should Intercontinental reveal a further improvement to trading next month, I think the share price should rise accordingly.

Let’s not forget though, such firms have been hit hard by the pandemic and will take time to fully bounce back. But in better times, IHG has shown itself to be a quality operator. It usually generates decent margins and high returns on the capital it invests. I can see those good times returning. A resumption of global travel, should boost the shares.

The post 3 FTSE 100 shares I’d buy for the 2021 stock market rally appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Burberry. The Motley Fool UK has recommended Burberry, Diageo, and InterContinental Hotels 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.

Today, I’m looking at two solid growth stocks that should contribute to this ongoing rally. As luck would have it, both also reported to the market this morning. 

FTSE 250 flyer

As stock market sentiment improves, online investment platform AJ Bell (LSE: AJB) has welcomed yet more customers over the final three months of 2020. The number of people using its services moved 6% higher in the quarter, bringing the total to a little over 312,000 — a 30% rise over 2020.

Total net inflows also jumped 100% to £1.6bn and total assets under administration climbed 11% in the quarter to £65.2bn. 

As good as these numbers are, shares in AJ Bell were pretty much flat in early trading. This would suggest the market had already priced in today’s news. That’s not altogether surprising when you consider the stock has already climbed nearly 90% since last March’s market crash. The fact AJB was trading at 50 times forecast earnings before today’s statement may also have deterred would-be investors. 

Is that valuation too rich? Possibly. If 2021 proves to be tougher than expected, it’s likely highly-priced UK companies will be hit the hardest. 

Then again, there’s little doubt that AJ Bell is a quality business. It consistently generates great returns on capital and sky-high operating margins. It’s also got a shedload of cash on its balance sheet. Valued at less than £2bn, the company has a lot more room to grow than its near-£8bn-cap FTSE 100 peer Hargreaves Lansdown.

As things stand, I’m more than happy to continue holding and will look to add on any weakness. 

Resilient earnings

Another share supporting the FTSE 250’s recovery over recent months has been pet product retailer and veterinary services provider Pets At Home (LSE: PETS). Like AJ Bell, I suspect the shares will continue to reward investors long after the coronavirus storm has passed.

Today’s Q3 trading update — covering the 12 weeks to the end of 2020 — showed total revenue had grown 18% to £302m. Based on this performance, Pets maintained its previous guidance and expects to generate “at least £77m” in pre-tax profit for the full financial year.

And the shares? Like AJ Bell, Pets at Home has been in great form. Those investing at the depths of the coronavirus crash would have doubled their money. The question is whether there’s more to come in 2021. 

Naturally, nothing rises in a straight line and there may be some profit-taking in the weeks ahead. An undeniably punchy valuation of 32 times forecast earnings may also lead some growth-focused investors to refrain from loading up on the stock for now. 

Notwithstanding this, I struggle to see why the share price won’t continue to rise over time. After all, spending on furry companions tends to remain resilient, even in tough economic times. What’s more, the boom in pet ownership over the pandemic should mean the FTSE 250 member continues to attract and retain customers through its membership and subscription services.

Factor in the possible rollout of new stores inside the M25 and further gains in 2021 certainly aren’t out of the question.

The post Stock market rally! I think these FTSE 250 growth shares will continue rising in 2021 appeared first on The Twelfth Magpie.

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Paul Summers owns shares of AJB. 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 are big gains, to be sure.

But still burnt from the 2020 experience, I’m plagued by the question – can the stock market rally continue? The question gains importance because there are indeed risks to the stock market rally. 

On balance though, I think the odds right now are in favour of a continued FTSE 100 increase.

Here are three reasons why:

#1. Brexit-driven stability

The UK and the EU managed to put together a free-trade deal in the nick of time. A no-deal Brexit would have started from 1 January otherwise. This would have made a chaotic beginning to 2021 if the two sides hadn’t managed to see eye-to-eye.  

That threat has passed now.

And it’s showing up in investor confidence as the FTSE 100 index moves closer to 7,000. Brexit uncertainty has kept the FTSE 100 index in limbo for years. I reckon there’s a lot of pent up investor interest that will continue to drive up the UK’s stock markets from here.

It’s true that some aspects, like the financial services sector, cold do with more clarity. But for now there appear to be more positives in investor perception from the Brexit deal than not. 

#2.  Vaccine rollouts support FTSE 100 rally

Even though the UK is in the midst of yet another lockdown, there’s much hope. The vaccine rollout has begun. Some 1.5 million people in the UK have already been vaccinated and the number is targeted to rise to 15 million by mid-February.  That would be more than 20% of the country’s population. 

Both Pfizer-BioNTech and AstraZeneca-Oxford University jabs are being administered, which have high enough likelihood of bringing Covid-19 under much greater control. This hope is enough to continue driving stock markets upwards despite the emergence of the coronavirus variant. 

#3. New US president 

Last, the impact of the US on the global financial system is always something to bear in mind. And there’s been a lot going on there. 2020 was an exceptional year in any case. But it was perhaps even more so for the US because of the uncertainty about it’s national election results.

The election results coincided with the vaccine rollout making it near impossible to figure out how much the results drove the stock market rally. What we do know is that it probably didn’t pull back the vaccine rally either.

If there was still any sense of uncertainty, now with Biden sworn in as president, that too has passed. This can only be good for the financial markets. 

In sum, I think we can agree that 2021 has better prospects than 2020; with both greater stability and increased capability to deal with what comes next.

In the spirit of what 2020 has taught, I’m going to focus on long-term investments, because who knows what happens in the short term! Here are some stocks I’m happy to buy and hold till at least 2025. 

The post FTSE 100 investing: 3 reasons the stock market rally will continue appeared first on The Twelfth Magpie.

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Manika Premsingh owns shares of AstraZeneca. 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.

Can the market keep rising? Wealth management giant UBS believes so. In a recent research note, the firm wrote: “We believe the rally can continue.”

However, UBS also believes stock market dynamics are changing. Here’s a look at where the money manager believes investors will find the best opportunities if the market continues to rally.

Value stocks

Since Pfizer‘s 9 November announcement it has developed an effective coronavirus vaccine, cyclical and value stocks have outperformed growth stocks. The MSCI Europe, which has a more cyclical bias, has thrashed the growth-focused S&P 500 over this period.

Looking ahead, UBS believes this trend is set to continue. It expects value stocks to drive the stock market rally.

Smaller tech plays

In 2020, mega-cap US technology stocks such as Apple, Amazon, and Microsoft have delivered amazing returns for investors. These companies have outperformed the broader market by a wide margin.

Going forward however, UBS thinks this area of the market is unlikely to perform as well. It points out that, since 1973, if a US equity sector was a top two performer over the previous 10 years, it had only an 8% chance of staying there over the next 10 years. Worryingly, it had a 25% chance of falling into the bottom two sectors.

UBS believes that the next decade is likely to reward those who invest in disruptors in sectors undergoing technological transformation. It sees the greatest opportunities in areas such as 5G, FinTech, HealthTech, and GreenTech.

Green energy companies

Finally, UBS believes the Joe Biden administration is likely to add momentum to the green agenda. It expects the administration to use executive orders and other regulatory tools to promote sustainability. Green energy stocks therefore, could play a key role in a stock market rally.

Stock market rally: UK investment opportunities

The good news for UK investors is that it’s not hard to gain exposure to the areas of the market that UBS is bullish on.

In terms of value stocks, there are plenty of opportunities at the moment. Some value stocks I like right now include financial services giant Legal & General, which currently sports a P/E ratio of less than nine. Then there’s defence legend BAE Systems (P/E of 10) and insurance powerhouse Prudential (P/E of nine). These stocks – which have all underperformed this year – have bounced recently, but could have plenty more upside.

In the tech space, there are some really exciting up-and-coming players listed on the London Stock Exchange. Examples include identity management company GB Group, digital marketing group dotDigital, and data champion YouGov. All of these companies look set for strong growth in today’s digital world.

Green energy is another area where there are plenty of opportunities for UK investors. Not only do we have many fast-growing clean energy companies, such as ITM Power and Ceres Power Holdings, but we also have plenty of investment trusts focused on the industry. You can find out more about UK renewable energy stocks here.

Overall, there could be many opportunities for UK investors if we see a sustained stock market rally. The key, as always, is to diversify money over many different stocks to lower overall portfolio risk.

The post Stock market rally: UBS sees investment opportunities here appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Edward Sheldon owns shares in Apple, Amazon, Microsoft, Legal & General, BAE Systems, Prudential, GB Group, and dotDigital. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Apple, and Microsoft. The Motley Fool UK has recommended dotDigital Group and Prudential and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 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.