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.

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• 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?
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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.

Of course, as a private investor with a Foolish mentality of growing wealth over the long term, I can/should take such swings in my stride. With this in mind, here’s how would I invest £20,000 — the maximum annual Stocks and Shares ISA allowance today.

FTSE 100: buy the best

Rather than snatching at anything that’s fallen heavily, it’s important to invest according to my overall strategy. For me, this means only buying the best growth stocks around. The former approach might pay off if I were able to consistently predict where share prices will go next. Since I know I can’t do this, however, I prefer to focus on businesses with great fundamentals and outlooks instead.

One thing I really like is when a company possesses something that gives it a competitive advantage over rivals. An example that continues to jump out at me from the FTSE 100 is a stock like Diageo. Regardless of geopolitical events or monetary policy, I can be pretty sure that people will still want to drink premium spirits such as Captain Morgan, Johnnie Walker, and Smirnoff. It’s this portfolio of ‘sticky’ brands that also makes Marmite-maker Unilever a strong contender. Luxury product maker Burberry earns a spot for a similar reason. 

Another thing I like are growth stocks that have a near-monopoly in their respective markets. As such, both online vehicle marketplace Auto Trader and property portal Rightmove make the cut. This is despite not being ‘cheap’ in the traditional sense (forward P/Es of 27 and 28, respectively).  

Health and safety equipment manufacturer Halma would be another must-buy. Given ongoing regulation, I have little concern over its ability to continue growing. As a sign of just how reliable it is, the Amersham-based business has increased its annual dividend by 5% or more for the last 42 years! This makes the 20% fall in the share price in 2022 look like a wonderful opportunity to me. 

Since £20,000 will only go so far, the last position I’d take would be in Scottish Mortgage Investment Trust. While this FTSE 100 member has been hit hard by the rotation into value stocks seen in 2022, it’s still a great way of accessing disruptive companies from both the private and public space. 

No guarantees

As mentioned earlier, this strategy suits me personally. However, it does require me to have an interest in regularly following company news. If this weren’t the case, I’d probably be far more comfortable owning an exchange-traded fund that tracks the FTSE 100 index. In this scenario, I won’t outperform the market but nor will I underperform it either.

Another thing worth highlighting is that investing will never be risk-free, regardless of approach. I can’t assume that all of my picks will work out. That’s why it’s important for me to spread my cash around different sorts of growth stocks as I have above.

What I do feel more confident about, however, is that investing when sentiment is weak is likely to pay off eventually. So, regardless of whether I have £20,000 or a smaller amount, I’d have no hesitation in ‘buying the dip’ today.

The post Buy the dip! How I’d invest 20k in FTSE 100 growth stocks today appeared first on The Twelfth Magpie.

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• 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 owns shares in Burberry and Scottish Mortgage Investment Trust. The Motley Fool UK has recommended Auto Trader, Burberry, Diageo, Halma, Rightmove, and 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.

Multi-bagging growth stock

With a market cap of £1.4bn, international research and data analystics firm YouGov (LSE: YOU) isn’t exactly the market’s best-kept secret. However, nor is it a company that frequently hits the headlines. As a long-term Foolish investor, that piques my interest, especially when looking at the performance of the shares. 

In the last five years, YouGov’s valuation has jumped almost 400%! This goes some way to explaining why I have a good proportion of my money invested lower down the market spectrum. Picked carefully, the potential upside is greater since it’s theoretically easier for relative minnows — like YouGov once was — to grow revenue and profits at a faster clip. Indeed, it’s why I’ve been buying this investment trust in February.

Momentum reverses

Like many growth stocks, however, YouGov hasn’t fared so well in 2022, dropping 20%. That’s perhaps to be expected given recent global events and the stock’s still-eye-watering valuation of 47 times forecast earnings. To pay this price, I’d expect the company to be blowing analyst projections out of the water. However, management recently stated that growth would likely be only “slightly ahead” of its own forecasts. That’s hardly a bad thing but it’s clearly not been enough for some investors to stick around.

All this brings to light a key risk with buying high-performing investments; the bar for what is considered successful trading is set so much higher. Since no company is capable of executing perfectly, the potential to disappoint is greater.

Interim results from YouGov are due on 22 March. If the share price drops further, I might have to consider adding the stock to my own portfolio. In spite of the high valuation, this looks to be a very decent company with great geographical diversification and a robust sales pipeline. It’s also worth pointing out that YouGov has consistently hiked its annual dividend by double digits for many years now. That’s never a bad sign. 

Off the boil

Kettle safety device-maker Strix (LSE: KETL) is another under-the-radar, AIM-listed stock that’s done well for early holders such as myself. Between March 2020 and September last year, the share price increased roughly 185%! No doubt some investors had become aware, like me, of the fat margins and seriously high returns on capital this company consistently achieves.

Unfortunately, recent performance hasn’t been so great, with shares falling 35% in the last six months. Like so many other businesses, Strix has faced supply chain issues and higher freight costs. Today’s news of a “cyber incident of Russian origin” won’t exactly boost sentiment either. That said, the company has already stated that there’s been “no impact on customer orders or sales“.

Speaking of which, the £500m cap business recently said that it would log revenue growth of around 30% for 2021. Pre-tax profit has also been in line with market expectations. Numbers will be officially confirmed on 30 March.

With the shares now trading at 15 times earnings and a new factory in China effectively doubling manufacturing capacity, I may well increase my stake in the near future.

The post 2 under-the-radar growth stocks I’ll be watching in March 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 owns shares in Strix. 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.

Revenue and profit rocket!

Revenue for 2021 came in at just under £305m. That’s a jump of 48% on 2020. This makes sense given that everything came to a virtual standstill in the latter and Rightmove was required to offer discounts to estate agents. 

For this reason, it’s probably better to compare last year’s numbers with those achieved two years earlier. Tellingly, the former is up 5% on the pre-pandemic £289.3m achieved in 2019. In other words, Rightmove seems to be doing all the right things and getting customers to sign up for more products and package upgrades.

A similar pattern emerges when it comes to profit. Compared to 2020, underlying operating profit in 2021 was 67% higher (£226.1m). However, it was also 6% up on 2019.

Now none of this should really come as a surprise. After all, every prospective homeowner knows just how hot the UK property market has been. For evidence, the average UK house price hit £275,000 by the end of 2021.

The key question therefore, is whether it can continue.

More to come?

Thanks to ongoing innovation in its product offering, Rightmove thinks recent trading momentum is here to stay. That said, it does expect the number of transactions to slow as the housing market “normalises“. That seems infinitely prudent to me. 

Sure, a holding in the FTSE 100 member certainly isn’t without risk. The UK property market may easily go into reverse if the post-pandemic economic recovery stalls (perhaps due to high inflation). Even if the company is confident it won’t be “materially impacted by the property market cycle“, I’d still need to ensure I was sufficiently diversified, just in case. 

There’s also scope for the price to fall further if traders continue to shun growth stocks en masse. Despite today’s uplift, the share price is still down around 17% year-to-date.

An escalation of fighting in Eastern Europe, further news on rising prices and/or some other ‘known unknown’ could quickly erase today’s gains and send stocks crashing down again.

I wouldn’t like to be a trader right now. Thankfully, I’m far more Foolish than that. 

FTSE 100 market leader

I believe that quality counts for an awful lot when it comes to generating great returns over the long term. And, based on its fundamentals, Rightmove is very much a quality business.

Some of the numbers in today’s statement were truly mind-boggling. Property hunters spent an average of 1.5 billion minutes per month on the site in 2021. That’s up from 1.3 billion in 2020 and 1 billion two years ago. Site visits were also up 56% from 2019.

To me, the £6bn-cap has the sort of ‘economic moat’ that most businesses would kill for and Warren Buffett would likely approve of.

Yes, a valuation of 26 times forecast earnings before the market opened may look expensive, given current events. However, I think it’s a price worth paying. Considering its sky-high margins and a bulletproof balance sheet, Rightmove continues to look like a great candidate for a growth-focused portfolio like my own.

The post Here’s why this FTSE 100 growth stock is flying today 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 Rightmove. 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.

ITV

Broadcaster ITV (LSE: ITV) is down to publish final results on 3 March. 

Unlike other loosely-labelled ‘value’ stocks, shares in the £4bn cap haven’t really benefited from the rotation away from growth plays in recent weeks. That’s despite Covid-19 restrictions coming to an end and the company making lots of positive noises about a recovery in advertising revenue when it last reported to the market in November. Perhaps traders are concerned that viewing figures will drop as people prioritise getting out more in the months ahead.

The invasion of Ukraine by Russia has shown just how few ‘safe havens’ there are in the stock market. I certainly wouldn’t include ITV in this category given the competition it faces from companies such as Netflix and Amazon. At seven times forecast FY22 earnings, however, I continue to believe that the shares are too lowly rated, especially if dividends are reinstated in the near future. 

The road ahead could still prove bumpy. Even so, I’d be willing to buy at the current level. 

Deliveroo

Also reporting next month is takeaway delivery firm Deliveroo (LSE: ROO). It’s down to release full-year results on 17 March. 

As an investment, I’ll admit to not being the company’s greatest fan. In fact, I stated last December that I’d only consider getting interested in the stock if it fell by another 50%. Since then, it’s tumbled by 45%. 

Now, a lot of this isn’t necessarily down to anything Deliveroo’s done or not done. The aforementioned exodus from highly-valued growth stocks since the beginning of 2022 has been pretty indiscriminate. That said, the company’s lack of profits can’t have helped. With rampant inflation now squeezing discretionary income, I’m wondering if there could be a few nasty surprises to come next month. 

Investors will be looking to see whether the company has managed to hit the 7.5%-7.75% gross profit margin guidance it gave in its last update. If not, I can see the share price being hammered again. Unsurprisingly, I don’t intend to snap up this stock before then.

Ocado

A final FTSE 100 stock I’ll be watching next month is Ocado (LSE: OCDO). An update on Q1 trading is expected on the same day as Deliveroo’s results: 17 March.

As impressive as the company’s automated warehouses are, I’ve long been perplexed by how an unprofitable business like this can occupy a space in the top tier. In fact, recent share price activity suggests more investors are tiring of the company’s ‘jam tomorrow’ strategy. Ocado’s valuation has tumbled 40% in the last year.

Sure, the recent full-year numbers weren’t bad. Revenue for the 12 months to 28 November was 7.2% higher (at £2.5bn) than the previous year. Five high-tech Customer Fulfilment Centres (CFCs) were also opened over the period. However, the big question now is whether trading has been impacted by galloping prices. If it has, Ocado’s downward trajectory could continue in March. 

I’m not going anywhere near the stock until I get some clarity on this. 

The post 3 FTSE 100 stocks I’ll be watching in March 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. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon, Deliveroo Holdings Plc, ITV, and 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.

Successful investing is as much about avoiding duds or taking on too much risk as it is picking winners. It’s why Warren Buffett and his business partner Charlie Munger are two of the wealthiest individuals on the planet.

As the latter once remarked: “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.“

Today, I’m going to focus on two UK growth stocks that, thanks to the ‘Sage of Omaha’ and his colleague’s advice, I thankfully never fancied and still don’t. 

70% down!

I was sceptical about global review platform Trustpilot (LSE: TRST) when I first looked at it last September. At the time, the share price had soared 70% or so since its IPO earlier in the year.

Despite such impressive gains, I just couldn’t shake the feeling that it lacked an ‘economic moat‘. This is a term coined by Buffett to describe a business with sufficient competitive advantages to consistently fight off rivals. Might it be possible to copy what Trustpilot has done with sufficient capital and eventually steal its crown? I believe it is. 

But this wasn’t the only red flag for me. As well as being concerned about the potential for Trustpilot’s review system to be abused by bad actors, I was wary that the company was not making a penny in profit. 

Since then, the shares in this growth stock have tumbled almost 70%!  

Trustpilot isn’t without promise. Back in January, the company announced it expected FY21 annual recurring revenue to hit $144m. That’s a sizeable jump from the $119m achieved in the previous year. Based on this, investors might suggest the stock is a potentially lucrative contrarian pick.

With the rotation into value showing no sign of abating just yet, however, the outlook for the share price looks pretty bleak. Like Warren Buffett, I’d prefer to stick to proven quality stocks rather than take on the additional risk here.  

Another struggling growth stock

A second company I’m steering clear of is furnishings and homewares retailer Made.com (LSE: MADE). Just the fact that I’ve never looked at this growth stock until now speaks volumes.

While investors in Trustpilot enjoyed early gains, anyone backing this other relatively new stock will only have seen their stake sink in value. From a 52-week high of 214p, Made.com’s shares are now languishing at 73p a pop.

Again, the lack of economic moat strikes again. With so much competition, is there anything that will compel me to only shop with Made? Not at all. Contrast this with Buffett’s huge holding in Coca-Cola. The owns so much of the beverage titan because he knows a lot of people refuse to drink any other brand. This advantage arguably makes it far less risky. 

On top of this, the rise in the cost of living can’t be good for business. The boom in home improvement we’ve seen since the pandemic arguably peaked long ago too. Yesterday’s news that CEO Philippe Chainieux is stepping down is another unfortunate development.

With a market-cap now below £300m, perhaps the fall has been overdone. The website certainly looks slick and Made appears savvy when it comes to social media. For me however, this mostly presents as another unprofitable story stock that was opportunistically listed. 

The post I’m listening to Warren Buffett and avoiding these growth stocks like the plague! 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.

With a good few decades of investing ahead of me, I’m always on the lookout for great growth stocks to buy. Even better if their share prices are going through a period of temporary weakness.

With this in mind, here are three quality companies now trading near 52-week lows.

Fevertree Drinks

Late in January, one-time market darling Fevertree Drinks (LSE: FEVR) announced that cost headwinds would be more significant than expected, meaning that margins at the mixer specialist are likely to “remain broadly flat in 2022“.

This announcement succeeded in taking away most of the gains made in the second half of 2021. Fevertree’s share price now stands close to its 52-week low. So is now the time to buy the stock?

Well, a valuation of almost 49 times forecast earnings suggests not. Anything this high implies/demands a company should deliver perfectly on its strategy. That’s not easy considering the ‘interesting’ economic outlook right now.

Then again, this is not a stock that’s ever likely to trade at a bargain price. Prior to the pandemic, returns on capital — a key metric for star fund manager Terry Smith — were seriously good. Fevertree’s finances also look solid with hardly any debt on the balance sheet. There’s lots of ‘white space’ left for the company to grow into and it already possesses a great brand. 

I think there’s a good chance of this company recovering strongly, in time. For now however, it stays on my watchlist.

Softcat

IT solutions provider Softcat (LSE: SCT) is next up. The FTSE 250 member’s share price is also getting close to its 52-week low (1,419p, set last April). Considering its stellar track record, this selling pressure grabs my attention.

Like Fevertree, Softcat has a history of generating seriously good returns on the money it invests in the business. It’s clearly benefited hugely from the increased demand for support from clients over the pandemic too. 

That’s not to say Softcat is without risk. Margins, while decent for its industry, are average relative to the rest of the market. The stock also trades on a P/E of 33. That’s pricey, considering that earnings aren’t expected to grow much at all this year. 

Given that the stock could fall further if the rotation into value stocks continues in 2022, Softcat only makes it to my watchlist, for now. 

Games Workshop

A final growth share that’s let off steam has been the fantasy figurine-maker Games Workshop (LSE: GAW). The shares are now down over 20% year-to-date and only slightly above the 52-week low. Product release delays and increasing costs are partly to blame.

Of the three mentioned here, this is the stock I’d be most likely to buy today. While fixating on valuation is never a good idea, a forward P/E of 22 looks very reasonable, considering its dominance of this niche market. Again, its finances are robust compared to many other companies.

Yes, there’s a risk the share price could dip lower if margins continue to be squeezed. As such, it may pay for me to buy in tranches if I end up pulling the trigger.

There was a time when Games Workshop was knocking on the door of the FTSE 100. Assuming it is able to successfully push its Warhammer franchise over the next few years via games and films, I’m confident this could still happen. 

The post 3 top growth stocks near 52-week lows 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 Fevertree Drinks, Games Workshop, and Softcat. 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 (LSE: OCDO) share price is down heavily today. That’s despite the company reporting what appears to be a fairly robust set of full-year numbers. What’s going on?

Revenue up

Let’s focus on the good stuff first.

At £2.5bn, revenue for the 12 months to 28 November was 7.2% higher than the previous year. As one might expect, the vast majority of this came from retail sales via its joint venture with Marks & Spencer. One thing that’s particularly worth highlighting here is that sales were also 41.5% higher compared to pre-pandemic levels. This, if anything, goes some way to endorsing CEO Tim Steiner’s belief that online grocery demand is “here to stay”.

Away from its retail arm, Ocado opened five of its high-tech Customer Fulfilment Centres (CFCs) over the period. Seen by many investors as the reason to own the stock, two of these were located in the US. This, in turn, helped revenue from its international solutions arm soar over 300% to £66.6m. A total of 13 sites are now up and running around the world.

What’s got investors so frustrated?

Unfortunately, the company hasn’t been immune to worker shortages. A lack of HGV drivers served as a growth headwind in the second half of the year. A fire at its Kent distribution centre last July also reduced capacity. 

Collectively, these factors — combined with the ongoing costs of developing its tech — may go some way to explaining why the Ocado is out of favour again today.

Ocado share price: opportunity or warning?

Taking into account today’s significant fall, the Ocado share price has now tumbled 23% in 2022 alone. The performance over the last 12 months is even more depressing for loyal holders. No less than 56% has been wiped off the company’s value.

As someone focused on growing wealth over the long term, should I see this as an opportunity to build a position?

Looking at the positives, it’s clear that Ocado’s tech is in demand with a total of nine CFCs due to open in 2022. Assuming the company really can help partners “go-live quicker, at lower cost and achieve higher margins and returns on capital“, I can only see this annual number rising in future years.

The company is also proving increasingly popular with shoppers. Customer numbers rose 22% over the last financial year and orders rose nearly 12% to 357,000. 

On the flip side, a £9bn valuation remains lofty considering this company made a loss of £177m in 2021 due to increased investment. And even if Ocado made all the right moves from here, there’s a possibility that shareholders could see the value of their holdings fall further in 2022 as the market grows increasingly averse to ‘jam tomorrow’ companies.

A safer bet?

The awful performance of the Ocado share price in the last year is further evidence that no investment is risk-free. It also highlights that sentiment towards even the biggest UK companies can quickly reverse.

Personally, I’m in no hurry to buy this beaten-down stock today. In fact, I’d be more inclined to buy a slice of market-leader Tesco.

While lacking Ocado’s technical know-how and growth prospects, its forecast £60bn revenue is 24 times that of its FTSE 100 peer. It has its own risks, but may also be regarded as a better option for coping with inflationary times due to its pricing clout and 3.7% dividend. 

The post What’s going on with the Ocado share price? 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 Ocado Group 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.

70% down! 

Online electrical-goods retailer AO World (LSE: AO) was a huge beneficiary of the multiple UK lockdowns. The once-in-a-lifetime pandemic temporarily turbocharged revenue at the Bolton-based business and nimble investors charged in while the going was good.

Since then, however, it’s all been downhill. In fact, the share price has now crashed 70% in the last 12 months. If anything, this highlights the risks involved in buying single company stocks lower down the market spectrum. It also serves as evidence that not every online retailer will thrive. 

As someone who isn’t afraid to adopt a contrarian mindset in the pursuit of long-term gains, I’m pushed to ask whether such a huge fall in the share price is justified. Regrettably, I think it is. In fact, I think the outlook looks increasingly bleak for the shares.

Strategic review

Last month’s Q3 update hardly inspires confidence. While UK revenues were “broadly stable” on a one-year comparative, the company is clearly finding things a lot harder in Germany. According to AO World, trading in the latter has been “significantly impacted” by a toxic mix of increased competition, higher marketing costs and supply chain disruption. Since these trends are expected to continue “for the foreseeable future“, it’s now conducting a strategic review of this division.

If AO World had a global presence, such a move wouldn’t worry me so much. But knowing that Germany represents its only other market — ironic given the company’s name — is deeply worrying.

Shorters assemble 

It’s not just me thinking things could get even tougher for AO World. Right now, the battered growth stock is the fifth most shorted company on the London Stock Exchange. In other words, a significant number of people are betting that the share price still has further to fall. 

For balance, it’s worth remembering that shorters can sometimes be spectacularly wrong in their judgement. If trading recovered then those betting against the company would be forced to close their positions as quickly as possible to avoid huge losses. This activity, when combined with long-only investors piling in, could theoretically lead to this FTSE stock’s value exploding. AO World’s small free float (the percentage of a firm available to buy and sell on the market) might help to move the needle to an even greater extent.

How likely is this to happen? The odds aren’t great based on what I’m seeing.

Better bets than this FTSE stock

Now, AO World can talk all it wants about the rise in online shopping. To stand a chance of making me money, however, I need to see that it’s taking the battle to the substantial competition it already faces. The trouble is, I’m struggling to spot the ‘moat’ that master investor Warren Buffett advises we all hunt for.

If I were looking to invest my finite capital in UK growth stocks today, I’m certain that this FTSE stock wouldn’t get on my buy list. Why take the chance here when I can buy quality companies like these that should compound in value over many years instead?

The post This FTSE stock has crashed 70% and I think things could get worse! 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 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 FTSE 250 is in fine form this morning, rising over 1% in early trading. Is this a sign that February might be a little kinder to investors?

Well, no one knows for sure where share prices will go in the near term. As such, I prefer to stick to my strategy of owning great stocks for years rather than weeks. With this in mind, here are two members of the index I’d be happy to buy, whatever happens next. 

Long term theme

Petcare retailer Pets At Home (LSE: PETS) is an example of a great FTSE 250 business that I could see myself holding for the long term. That’s despite its share price falling around 7% in 2022 so far.

A beneficiary of multiple UK lockdowns and the pet boom that accompanied them, the mid-cap continues to release encouraging updates. Group like-for-like revenue increased 8.7% in the 12 weeks to 30 December compared to the same period in 2020. Perhaps more significantly, it was also 28.1% higher than two years ago.  

This isn’t all that surprising. Pets At Home now seems to have every corner covered. In addition to its 455-store retail estate, the company is rapidly growing its online presence (evidenced by the 99% jump in omnichannel revenue on a two-year basis). It also has a burgeoning veterinary services arm, gaining 9,200 new registrations per week on average.

At 20 times forecast earnings, the shares aren’t exactly cheap. However, I can’t see the themes of “long-term pet ownership, humanisation and premiumisation” highlighted by the company disappearing any time soon. Moreover, the company is “firmly on track to report a record year of sales and profit growth”, according to soon-to-depart CEO Peter Pritchard. It also has net cash of £77m on its balance sheet. 

My only slight concern right now, aside from the need to replace its leader, is the extent to which inflationary pressures might impact the company going forward. They certainly won’t go away overnight. Then again, that’s true for all sorts of businesses. 

I’d be comfortable buying Pets At Home today but I’d back up the truck if the share price continues to fall over 2022.

Another solid FTSE 250 stock

Kitchen supplier Howden Joinery (LSE: HWDN) is another FTSE 250 stock that benefited from the three UK lockdowns. A hot housing market may have also contributed to what has been something of a purple patch for the near-£5bn-cap business. Like Pets at Home, however, the shares have lost a bit of momentum in 2022 so far. As I type, they’re down 12%.

Howdens is down to report its latest set of full-year numbers (covering the vast majority of 2021) later this month. Given that the company only recently stated that pre-tax profit should be “at the top end of analyst forecasts“, I can’t see its value tumbling from here.

Of course, I may be completely wrong. Now that we look to be coming to the end of the pandemic, there’s a possibility that more existing holders may look to bank some profit. After all, kitchens aren’t something that people replace every year.

Still, a P/E of 17 doesn’t exactly scream ‘overvalued’ when I consider Howden’s solid margins, strong brand, consistently high returns on capital and sizeable market share. So, even if the company does struggle to repeat 2021’s performance, I’m confident that this would still be a worthy addition to my quality-focused portfolio.

The post FTSE 250: 2 growth stocks I’d buy and hold for years 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 Howden Joinery 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.