Whenever a FTSE stock announces an acquisition, I am interested to learn more. What’s the reason behind the acquisition and how will it help the company in question? Halfords (LSE:HFD) announced a major acquisition last week that I believe will boost its profile, growth, and performance in the short and long term. Should I add add the shares to my portfolio at current levels? Let’s take a look.

FTSE retail giant

Halfords is the UK’s leading retailer of cycling products as well as automotive products and services. It employs over 10,000 people and has more than 750 locations throughout the country. Halfords claims that 90% of the UK is never more than 20 minutes away from a Halfords shop or one of its auto centres.

As I write, Halfords shares are trading for 352p. A year ago, the shares were trading for 260p which is a 35% return over a 12-month period. In recent weeks, positive interim results and the acquisition deal  have boosted the shares. In December to date, Halfords shares are up 10%.

Acquisition and positive performance

On 1 December, Halfords announced it signed a sale and purchase agreement to purchase Axle Group Holdings Ltd for £62m. Axle owns the National Tyres and Autocare, Viking Wholesale Tyres, and Tyre Shopper brands.

This acquisition is a great move in my opinion. Halfords already has its own auto centres where it offers MOTs and services for motorists. Upon completion, Halfords will have approximately 604 garages, 234 consumer vans, and 190 commercial vans. This number will mean it has comfortably surpassed its target of 550 garages. Halfords places a great emphasis on motoring revenue and the National Tyres and Auto Care centres will help grow its motoring revenue stream. 

In November, Halfords also reported positive interim results for FY 2022. It confirmed that revenue, profit, sales growth, and cash generation had increased compared to 2021 levels. Many FTSE stocks in the retail sector have suffered due to supply chain issues. Halfords pointed towards the same problems but was able to leverage its competitive advantage and huge profile to record excellent results.

Risks of investing

Buying Halfords shares does come with risks, however. As mentioned, the current supply chain crisis has meant many businesses are unable to fulfil the demand for some of their products. Halfords has faced this issue in its burgeoning cycling department. If these issues persist, performance could be affected. Rising inflation and costs are a worry too. If these costs are passed on to customers, Halfords could lose customers and market share. This could affect performance and investor returns as well.

Overall, I believe this recent acquisition and the recent positive results will boost Halfords growth trajectory upwards. In addition, Halfords has a good track record of performance which fills me with confidence too. I understand past performance is not a guarantee of the future but I use it as a gauge when reviewing assessment viability. Halfords currently sports a price-to-earnings ratio of just 12, which I consider cheap. At current levels I would happily add Halfords shares to my portfolio.

Jabran Khan 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 late great investor, John Bogle, once said that timing the market is a loser’s game. Bogle, being the creator of the very first index fund, likely knew a thing or two on the subject. His advice is why I don’t worry much about timing the market. I’m more concerned about buying great stocks that I think are trading at a discount to their intrinsic value.

However, I can’t help but look back at what has been an interesting year in the markets and imaging what could have been. Since hindsight is 20/20, here are two top-performing FTSE 100 stocks I would have bought earlier this year if I knew then, what I know now. 

The FTSE 100 leader in 2021 (so far)

Ashtead Group Plc (LSE: AHT) has had quite the run, racking up 94.6% in share price appreciation, year to date. If I had known, I would have bought this stock in early January, when it was trading closer to 3,500p. This company is widely known as the parent company of Sunbelt Rentals, the equipment rental giant in North America and the UK. Sunbelt is a leader in this field with over 800,000 individual assets available for hire to a massive customer base.

In its latest quarterly report, Ashtead updated its expected revenue growth by 2%-5% by the end of the fiscal year. This bodes well for the stock, which has consistently created good returns for investors over the past five years. As a dividend stock, there’s not much to be made here as its current dividend yield is a miserly 0.68%. If I depended on a steady flow of dividend income, this would be concerning. But as an investor with a value orientation, I can appreciate reinvesting earnings. Ashtead has seen free cash flows quadruple over the past three years to almost $2bn.

Betting on the future 

I wrote an article earlier this year about the success of Entain (LSE: ENT), which has flown right in the face of the pandemic. The past year has seen this stock shoot up by 54.97%, and I wish I had been along for the ride. Entain is one of the world’s prime gambling stocks. It benefits from massive brands such as Ladbrokes, Bwin, Party Casino, and a 50% stake in BetMGM. The FTSE 100 company has actually been so successful that it has attracted the attention of the US gambling group, Draftkings. Even though the $20.4bn offer by Draftkings to purchase Entain fell through, it was evidence that many in the market believe Entain is not only a great business but also currently undervalued.

Again, if I were a dividend driven investor, I would be wary about the mere 2.8% dividend yield on this stock. Also noteworthy is the tiny bottom line this company generates considering it consistently has gross profits of over 60%. It did well nonetheless this year, and I expect it to continue to do so in 2022.

Stephen Bhasera 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.

Penny stocks possess greater risks than more established stocks. Some of these picks can provide lucrative returns in the long term, however. I believe Esken (LSE:ESKN) could be a good recovery play for my portfolio. Should I add Esken shares to my holdings at current levels?

Aviation and energy

Esken is a UK infrastructure company. It has two divisions, which are aviation and energy. Its aviation division helps manage airports and run day to day operations. It currently manages London Southend Airport. Other aviation services include baggage, checking-in, and other logistics solutions. The energy division helps provide fuel to biomass plants.

Penny stocks are those that trade for less than £1. As I write, Esken shares are trading for 14p. This means it is one of the cheapest shares on the FTSE index right now. A year ago shares were trading for 21p. The pandemic has affected the share price. Aviation and travel stocks have had a turbulent 18 months due to restrictions and the pandemic.

For and against investing

FOR: Despite the current issues in the aviation industry, I like that Esken’s business has a diversified offering. Aviation may eventually pick up if the pandemic eases but it continues to operate its energy division, which has seen growth recently. I especially like penny stocks that have a diversified offering and don’t rely on one form of revenue stream.

AGAINST: Aviation is the larger division. The well documented issues that the aviation industry has faced since the pandemic started put me off. With the threat of new variants, which could result in more restrictions and less travel, the aviation industry’s woes may continue for a long time. There is a school of thought that living with the pandemic is the new normal and there will be peaks and troughs of travel.

FOR: A half-year report announced in November for the six months ending 31 August showed me signs of recovery for Esken. It reported that revenues increased by close to 8% compared to the same period last year. This was mainly driven by its energy division and its growth. Furthermore, aviation losses had declined less than the same period last year. Esken also managed to make a profit based on an earnings before interest, taxes, depreciation, and amortisation (EBITDA) basis for the half-year period.

AGAINST: Esken shares are still way off pre-pandemic levels which is understandable but still an issue for me. Furthermore, it was reporting consistent losses prior to the pandemic which is usually a red flag. If aviation woes continue and energy cannot pick up the slack, Esken may not report a profit for some time.

Contrarian penny stock option

Every now and then I like to pick a contrarian stock for my portfolio. This is usually a stock that has potential and is currently dirt-cheap so I am not risking lots of my hard-earned cash.

I place Esken in this contrarian bracket. Despite some credible risks and issues, for 14p per share, I would be willing to buy a small amount of shares for my holdings and keep an eye on developments. I see some potential in Esken in the longer term. If this potential doesn’t materialise, I wouldn’t have lost a substantial amount of money buying this penny stock.

Jabran Khan 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.

Today is not a great day for the FTSE 250 index, or a particularly bad one, for that matter. As I write, it is down by 0.7% from last week’s close, which is just not a big enough number to take note of. However, some stocks are trading very strong today in any case. One of them is the greeting cards e-retailer Moonpig (LSE: MOON). It is up some 7.2% as I write, an increase second only to Jupiter Fund Management, which is up by an even bigger 8%.

My latest article on Moonpig was published only this Saturday. And in that, I had said that I would refrain from buying the stock right now. My sense was that it was way too pricey for me. Yet, cut to Monday, and it is rallying. What is going on here? And more importantly, was I wrong in deciding not  to buy it?

Why is the Moonpig stock rallying?

First, let us talk about why the FTSE 250 stock could be rallying. I reckon this is directly to the Omicron variant. From my own portfolio of FTSE 100 stocks, I can see the trend among gainers today. These include the likes of AstraZeneca, Ocado, and Rentokil Initial. All three are good defensives against a potential virus-induced market meltdown. 

For instance, AstraZeneca is the Covid-19 vaccine maker and healthcare stock, which is a good safe stock at anytime. The Ocado stock saw its most glorious times last year as we ordered groceries in during the pandemic, and Rentokil Initial, the pest controller and hygiene services provider, saw strong demand for the latter during Covid-19 as well. Similarly, Moonpig also saw a spurt in growth last year, as its bricks-and-mortar competitors were temporarily removed from the game. As virus fears rise again, it is little wonder that investors are betting on the stock again.

Robust fundamentals

Moreover, as I pointed out in my article, its performance is still pretty decent. It might have declined after the lockdown boom, but compared to 2019 it is strong. This could bode well for it in the future as well. This is especially since we are still quite hopeful of recovery next year, which is a good time for discretionary consumer spending.  

But even if the latest variant sends us back in to lockdown or makes us cautious about going out, I reckon that the Moonpig stock could stand to gain like it did last year. In other words, this is one stock that could be a winner either way. 

Should I have bought the FTSE 250 stock earlier?

So was I wrong in saying that I would not buy it?

The fact is, I still believe the stock is too pricey. In fact, the latest update price-to-earnings (P/E) number is 143 times. I think that is an eye-watering number, and I can think of multiple FTSE 100 stocks that could give me good returns at lower relative prices. Also, with rising inflation, I think consumers could cut back on discretionary purchases going forward. I maintain, that for now it is just too risky for me to buy the Moonpig stock.

Manika Premsingh owns AstraZeneca, Ocado Group, and Rentokil Initial. The Motley Fool UK has recommended Jupiter Fund Management 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.

It’s not always possible for people to put large amounts of money into setting up passive income streams. But I think the good news is that even with a relatively modest amount, I could aim to start earning extra money without having to work for it. Here is how I would do that by investing in dividend shares, in three simple steps.

1. Putting aside a regular amount

Putting aside £5 a day would give me £35 a week in investment capital with which I could start to try generating passive income. And £5 a day is what many people spend on a fancy drink, or a couple of coffees. It’s not a negligible amount, but with financial awareness I would be able to put it aside each day without thinking too much about it.

What is critical is that I actually start, rather than just thinking about doing it. If I set up a regular bank transfer, or had a savings jar at home into which I put a £5 note each day, I would actually start to see the money add up. That is something I don’t need to wait to start doing.

That £35 a week would add up to over £900 in just six months. My patient regular saving would mean I soon had some capital I could invest in dividend shares.

2. Choosing the shares

But on its own, the money wouldn’t earn me much, if any, income. That’s why I’d want to put it into dividend shares.

But I wouldn’t do that from day one, for a couple of reasons. First, most share-dealing accounts have some charges. So saving up my daily fiver until I had more funds to invest could help me reduce the percentage of my money eaten up by such charges.

Secondly, in order to reduce my risk, I would want to diversify across shares in different companies. That would be easier to do after a few months, when my money had grown. The good news is that I could make good use of this period of waiting before investing. It could allow me to research different shares and companies and find out which might be most suitable for my personal investment objectives.

To start with, I’d try to focus on large, established companies. Then I’d zoom in on their prospects of future free cash flow. I think that’s an important thing to look at in this situation as it is cash flow that is used to fund dividends. From Unilever to National Grid and Legal & General to BP, there is no shortage of such companies I would consider. But each faces specific risks as well as having its own business prospects. So I would look carefully into the company before making my first investment.

3. Setting up the passive income streams

After that I’d be ready to start buying shares.

I would buy them with an intended holding period of years. My passive income plan is about long-term investment, not speculation. After that, I would sit back and wait for dividends to be paid. They are never guaranteed. But by carefully selecting companies and diversifying across a few, over time I would be confident my passive income streams could start generating some extra cash for me.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.