The IAG (LSE: IAG) share price has soared over the last year, rocketing 110%. In contrast to this, easyJet (LSE: EZJ) shares have slumped 6%. The performance gap continues. Over the last month, IAG is up another 7%, while easyJet is down 12%.

This divergence raises an intriguing question. Can IAG maintain its momentum, or is easyJet now the better recovery play?

Both airlines are benefitting from a post-pandemic travel resurgence. However, IAG has raced ahead, which I put down to its premium offering, robust demand for long-haul flights and stronger transatlantic business. It also has greater pricing power due to its flagship brand, British Airways, and its ownership of Iberia and Aer Lingus.

One FTSE 100 airline is flying, the other is grounded

Meanwhile, easyJet has faced cost pressures, including fuel prices, wages and air traffic control issues. As a budget carrier, it struggles to pass higher costs to customers without denting demand.

Another key difference is financial resilience. IAG has higher operating margins of 13%, nearly double easyJet’s 7%, indicating superior efficiency. Yet despite their markedly different performance, both companies look relatively cheap.

IAG’s price-to-earnings (P/E) ratio is just 7.6, roughly half the FTSE average. EasyJet also looks cheap, trading on a multiple of eight times earnings. However, IAG’s stronger margins and momentum make its lower P/E look like more of an opportunity.

There’s one big issue though. IAG still has net debt of around €6bn. It’s steadily whittling that down but it remains a burden. By contrast, easyJet has a net cash position of £181m, giving it more of a safety net and greater flexibility to invest in its offering.

Neither stock is a strong income play. easyJet’s trailing dividend yield of 2.4% beats IAG’s 0.77%. However, IAG is restoring dividends rapidly, with a forecast yield of 2% this year, narrowing the gap with easyJet’s predicted 2.9%.

Both value stocks have their charms 

Despite recent underperformance, easyJet’s shares have plenty of scope to recover. The airline is expanding its holiday business, providing more stable revenue streams. It also has a strong brand and could benefit if European consumer confidence lifts.

If easyJet can improve its cost control and benefit from ongoing travel demand, its shares could take off. The budget airline sector remains highly competitive, but easyJet’s balance sheet strength gives it some breathing space.

Meanwhile, IAG continues to benefit from high-margin business travel and transatlantic demand, positioning it well for future growth. With the airline industry in recovery mode, both stocks could fly.

I’m a little nervous about buying easyJet. I almost took the plunge last summer but given subsequent share price volatility, I’m glad I resisted. Momentum is a powerful force, and right now, IAG has it. While I wouldn’t expect the shares to double in value this year too, there may be more to come. Of the two, I think IAG appears the stronger pick for investors to consider today.

I’m a long-term investor and also a fan of dividend shares that give me regular payments just for holding the shares. As the old adage goes — a bird in the hand is worth two in the bush. 

Investing in high-yield stocks can provide a steady income stream and I think this is crucial for my long-term financial security. As I continue to save and invest, I’ve been keeping an eye on FTSE 100 companies that are in defensive or non-cyclical industries that also pay shareholders handsomely.

Here are three stocks that have dividend yields near or above the Footsie 3.6% average that I’m considering buying at the moment.

High-yield tobacco giant

With a dividend yield of 7.5%, British American Tobacco (LSE: BATS) is one of the highest-yielding stocks in the FTSE 100. The company has a strong track record of returning cash to shareholders, with a consistent dividend payout policy. While tobacco sales may be in decline, the firm is investing in products like vapes and nicotine pouches to deliver future growth.

However, it’s not without risk. While payouts are high, that may be a function of limited opportunities for reinvestment. After all, regulatory risks in terms of government taxes and policy changes, as well as declining traditional cigarette sales, are cause for concern.

Multinational conglomerate

Unilever (LSE: ULVR) is a global consumer goods giant with brands from Dove to Domestos to Cornetto. It tends to deliver relatively steady dividends thanks to its broad product portfolio, which diversifies its earnings.

The stock is currently yielding 3.2%. While that’s not the highest in the market by any stretch, I like its long history of stable payouts. The company has also demonstrated an ability to pass on price increases to consumers, which is a testament to its brand strength and overall strategy.

That said, the company faces margin pressure due to rising input costs and changing consumer preferences. If Unilever struggles to maintain profitability in a high-inflation environment, future dividend growth could slow and impact on yield.

Essential infrastructure provider

National Grid (LSE: NG) is a leading UK energy infrastructure company with an impressive 5.7% yield. I like the essential nature of the services it provides given I am looking to invest through the cycle with a 3- to 5-year minimum time horizon. 

However, National Grid does carry a significant debt load as most utilities companies do. That means a ‘higher for longer’ interest environment could hurt overall profitability if it is unable to pass on increases to consumers as anticipated.

One other factor when looking at regulated industries is new regulatory rules. Changes in government and the geopolitical environment can hamper profitability and that could hit future dividends. 

Why I’m considering buying

These high-yield dividend shares are just a few that I am considering right now. I think consistent dividend payers can help increase passive income and boost long-term returns.

I currently don’t have the spare funds to invest, but I am interested in adding National Grid shares to my portfolio if its price-to-earnings (P/E) ratio drifts closer to 20 from its current 22.5 level. Outside of these, I’m interested in the pharmaceuticals sector for its defensive qualities given how delicately poised the economy is right now.

I must confess, I’d taken my eye off Raspberry Pi (LSE:RPI) shares in recent months. I certainly find the company interesting, but I’d been put off by the stock’s earnings multiples and its lack of an economic moat.

However, Raspberry Pi shares have surged 106% over the past three months. That’s index-topping growth. And it means that a £5,000 investment then would now be worth £10,300. A truly impressive return for any investor.

Why’s Raspberry Pi flying high?

Raspberry Pi, known for its affordable computing solutions, impressed investors with its first set of results in September since listing on the stock market in June. The firm reported a 61% increase in revenue to $144m for the first half of 2024. Meanwhile, gross profit rose 47% to $34.2m, surpassing internal projections.

But investor sentiment really jumped when it partnered with Italian firm SECO to develop a human-machine interface based on its Compute Module 5, targeting industrial IoT applications. Analysts highlighted this as a step toward expanding its OEM market.

Additionally, US hedge fund SW Investment Management acquired a 3.59% stake, signalling further confidence in its growth. Coupled with a relatively small float — the Raspberry Pi Foundation and Arm Holdings hold more than half of the shares — the stock surged. A tight float can lead to more volatility given there are fewer available shares available to buy and sell.

Management’s forecasts remain cautious

On 29 January, Raspberry Pi’s stock price fell more than 3% in early trading following the announcement that its adjusted operating profit for 2024 would come in “not less than” $36m. This figure’s at the lower end of market expectations, falling short of the consensus estimate of $38.2m and representing a dip from the previous year’s $43.4m.

Despite challenging market conditions, the company reported a recovery in monthly unit shipments from their summer low, with total shipments reaching 7m for the year. Looking ahead, Raspberry Pi expects demand to build gradually through the year, with medium-term fundamentals remaining extremely positive. The company expressed confidence in its unit economics for FY 2025, supported by sufficient memory supply to meet expected demand into Q3.

The longer term

For the longer term, the company expects revenue to grow steadily from around $280m in 2024, with management aiming for $370m by 2026. Earnings however, are expected to grow faster. Here’s a table with the earnings per share (EPS) and price-to-earnings (P/E) data, based on consensus estimates.

Fiscal Period: December	2024	2025	2026
P/E ratio	121x	76.6x	59x
EPS ($)	0.0758	0.1202	0.156

Despite Raspberry Pi operating in a very interesting sector, and clearly its low-cost compute products are gaining traction, this valuation data’s enough to make me think twice about investing in the stock. What’s more, investors may be concerned by the lack of barriers of entry in the low-cost computing market.

For now, it’s not a stock I’m considering, but I’m thrilled to see a British tech stock gaining momentum.

Nvidia (NASDAQ: NVDA) stock’s down significantly this week. On Monday (27 January), it fell a whopping 17%.

While I’ve owned this stock for many years now and it’s a large position for me today, I’ve been toying with the idea of buying a few more shares lately. Is now a good time to do so? Let’s discuss.

Why’s the share price tanked?

First, let’s take a look at what’s going on here. Why has Nvidia’s share price suddenly tanked? Well, this is related to the emergence of DeepSeek, a Chinese generative AI app that’s similar to ChatGPT (and currently the most downloaded app in Apple’s App Store).

To build this kind of app, it generally takes a lot of AI chips (or GPUs). In this case, the developer’s used Nvidia’s H800 chips – a scaled down version of its H100 chip (that it exports to China).

What has spooked investors however, is that it’s claimed the cost to develop DeepSeek was just $6m. This is far lower than companies such as OpenAI, Meta and Alphabet have spent to develop their own AI chatbots.

So all of a sudden, investors are recalibrating their expectations for spending on Nvidia’s AI chips in the years ahead. If DeepSeek was built at a cost of less than $6m, maybe AI giants like Alphabet and Meta won’t have to spend tens of billions on Nvidia’s products.

Up until recently, it was assumed that a ton of money would be spent on Nvidia’s chips in the years ahead. For example, Meta recently said that it would spend up to $65bn on AI in 2025.

The outlook may have just changed.

My move now

Given the uncertainty, I’m not going to buy more Nvidia shares just yet. My gut feeling is that I could be about to see a great buying opportunity here.

But I want to let the dust settle first. I also want to do a little more research and hear the opinions of experts in the AI space. Right now, everyone’s still trying to process the very-much-unexpected news (which is why the share price fell so much).

I would also like to see Nvidia CEO Jensen Huang (who I regard as one of the best CEOs in the world) address the issue properly. But with earnings coming up, he may not be able to say much as it’s a ‘quiet period’ right now, meaning that companies aren’t allowed to discuss new information.

It’s worth noting that if we take the current earnings per share (EPS) forecast for the year ending 31 January 2026 ($4.43), the price-to-earnings (P/E) ratio here’s just 29. That strikes me as relatively low.

It’s hard to know if we can trust that EPS forecast right now though (it may be too high). That’s why I’m going to wait a bit and do some more research before snapping up more shares.

The thing with bubble stocks is that they’ve risen a lot, just like the Rolls-Royce Holdings (LSE: RR.) share price. And I mean a lot. It’s soared more than 10-fold since its 2020 lows. And it’s nearly doubled in just the past 12 months.

I see reasons to fear we could be in a bubble, with the price rise just one of them. Buying after everyone else is already in can be a path to disaster.

I’m also wary of over-enthusiasm. The trouble is, often nobody notices it before it’s too late.

Bullish boss

Here we have CEO Tufan Erginbilgic, saying things like: “Our transformation of Rolls-Royce into a high-performing, competitive, resilient, and growing business is proceeding with pace and intensity.” That was at interim results time, when he was going on about “a relentless focus on commercial optimisation and cost efficiencies.”

That’ll just get more people piling in, won’t it? Pump that bubble. Even with November’s trading update, we had to listen to stuff about “a front-end-loaded delivery of profit and cash flow improvements” and that kind of cheeriness.

Yes, I know he’s lived up to his claims so far. And his upbeat words turn into positive results every time we get a new update. But that won’t convince a part-time pessimist like me.

Getting serious

You’ve probably guessed my negativity isn’t entirely serious. And I’m not getting on Mr Erginbilgic’s back. In fact, I’ve been seriously impressed by what he’s achieved at Rolls-Royce in the short time he’s been in charge. He seems like one of the best.

But there’s a serious side to this. And it’s based on years of experience of what can go wrong to dash investors’ hopes. I’ve just seen so many of them pump up their expectations, thinking their company is going to exceed them every single time.

Will Rolls-Royce some day manage just to hit its targets without going beyond them? Maybe it will, dare I breathe the words, fall slightly short of expectations? Or, horror of horrors, perhaps have to downgrade its outlook ever so slightly?

Off the boil

Something like that has happened to every single growth stock I’ve ever watched since I started in this investment game. And every time, a significant portion of its shareholders have run like the wind and down has gone the share price.

Now, there’s maybe a bit of poetic licence there too. And a growth spell can progress into a more mature steady period, with the company supported mainly by long-term investors with their eyes fixed on the far financial horizon. Those can be the best of times. And I can see such times coming for Rolls-Royce.

In the meantime, the stock’s valuation doesn’t scream ‘bubble’ to me. A price-to-earnings ratio dropping to 24 based on forecasts out to 2026 might be just fine. So we could be in for another good year, even if the share price might not double again.

On balance, I think it’s unlikely we’ll hear a loud pop in 2025. But I do see a decent chance we could be in for some fallbacks and better buying opportunities. I hope so.

At the end of its third quarter, Berkshire Hathaway had $325bn (£260bn) in cash just sitting there waiting for CEO Warren Buffett to invest. So which FTSE 100 companies could he afford to buy out? Let’s put aside the complexities of bids and go on valuation alone.

Berkshire Hathaway has enough cash to cover the market capitalisation of… well, any UK company Buffett might like the look of. Even London’s biggest, AstraZeneca, is valued at only £173bn. My two picks would look like small change.

What to look for

Buffett looks for companies that have good margins, healthy balance sheets, potential for long-term repeat business, and with shares cheap enough to provide a safety margin. I think JD Sports Fashion (LSE: JD.) might have what it takes.

In the words of CEO Régis Schultz, the first half delivered “record interim results with Group revenue of £5.0bn, and profit before tax and adjusting items of £405.6m.” Revenue rose 6.8% with an 8.3% increase in operating profit, in what’s still a very tough market.

We saw a 48.2% gross margin and a 9% operating margin. I think that’s pretty decent for a UK retailer in the current market. And JD Sports boasted £40.8m net cash.

Safety margin

Is there a safety margin in the current share price? After a five-year fall of 50%, we’re looking at a forward price-to-earnings (P/E) ratio of 10.5 for the year ending February. I might rate that fair but nothing special. But the strong upturn in earnings predicted for the next couple of years could drop that as low as six by 2027.

There’s a long time between now and then. And a potentially very competitive summer coupled with undercutting by the discounters could keep the shares under pressure. But that’s the kind of valuation I’d hope Buffett-style investors might at least take a closer look at.

He likes insurance

I wonder what Buffett might make of Legal & General (LSE: LGEN)? A P/E of 15 might not look all that attractive. But insurance stocks can be cyclical and P/E values can look higher near the bottom of a cycle. The weak outlook for the UK economy might not seem like the ideal conditions for an upswing. But inflation’s falling, and interest rates are pretty much certain to come down.

City forecasters are bullish about the sector. They reckon the Legal & General P/E could drop to under 9.5 by 2026. And this year’s predicted 8.8% dividend yield could rise to 9.5%.

Show me the cash

Liquidity’s key in the insurance business. And with first-half results the company reported a strong solvency II coverage ratio of 223% after generating a capital surplus of £897m. There was enough cash to cover a £200m share buyback too.

I do fear that the high-ish current P/E could depress the shares for some time. And the whole sector isn’t out of the economic woods yet. But I think would-be long-term Buffett emulators might do well to consider these two FTSE 100 stocks.

What’s a second income worth? How much effort’s considered a fair amount to dedicate to building towards one? Many people take on two jobs to earn an extra income, waking early and working late into the night.

By comparison, putting aside a fiver a day seems like too simple of a solution. In fairness, it’s not the same as it won’t bring in any immediate income. Rather, this strategy focuses on reducing today’s expenses to secure a more comfortable future.

Set and forget

A core tenet of this strategy is ‘set-and-forget’. Once it’s set up, it can be left to do its thing without further action. All it requires is saving £5 a day and investing it into the portfolio. With certain accounts, this can be automated to occur monthly.

This is considered a good strategy for beginner investors because it avoids the risk of panic-selling. Investors lacking market experience are more likely to make mistakes by trying to actively manage a portfolio. Often, a portfolio has a better chance of growing if left to its own devices.

That is, assuming the right stocks are chosen. Volatile growth stocks in emerging industries are not the way to go here, as their futures are uncertain. A better option could be an investment trust or index fund with a long history of solid performance.

The aim’s to compound the investment exponentially until the desired amount’s reached. At that point, it can be rebalanced into a portfolio of high-yield dividend stocks. The regular payments from the dividend portfolio could deliver a steady second income.

A stock to consider

When considering a set-and-forget strategy, the usual mix of 10 stocks won’t do. Even the most well-diversified portfolio needs the occasional rebalancing. For experienced investors willing to put in the time and effort, it can be more successful. But for the aim of this exercise, an index tracker like Xtrackers MSCI World Value ETF (LSE: XDEV) may be the best option to consider.

The ETF’s enjoyed annualised growth of 8.7% over the past 10 years. Since it’s highly diversified across almost all markets in the world, it’s resilient against a downturn in any individual region or industry. Even though past performance isn’t indicative of future results, I believe its growth trajectory’s fairly reliable.

The fund aims at high-value stocks using proven metrics like the forward price-to-earnings (P/E) ratio, price-to-book (P/B) value and enterprise value (EV) ratios. However, it still has around 40% of its allocation in North America, putting it at risk if this specific region’s dips. It also incurs a total expense ratio (TER) of 0.25% which is deducted from the returns.

An investment of £5 a day could grow to around £13,600 in five years. Even with a decent dividend yield, that would only return around £100 a month of income. That’s why it’s best to start as soon as possible and think long-term. Investing in the stock for 20 years could grow the pot to £100,000. Shifting that much capital into a portfolio of high-yield dividend stocks could pay out around £670 a month.

While that may not sound like much, it requires a small investment, little effort and minimal risk. A fiver a day seems like a small price to consider. 

The Scottish Mortgage Investment Trust (LSE: SMT) share price fell to 1,005p on Monday (27 January). That’s 5.1% down from the previous Friday’s close, and it’s all down to the Chinese. Well, the clever Chinese folk behind this new DeepSeek artificial intelligence (AI) thing that’s had US tech stocks facing a panic selling spree.

The developers claim it cost as little as $6m to train the new large language model (LLM), though some experts dispute that. But it’s a lot less than the billions the Magnificent Seven US AI companies have spent. And Scottish Mortgage owns some of those.

Nvidia, which has slumped 17% since DeepSeek shook the Nasdaq to its core, accounts for 4% of the investment trust‘s assets. The AI chip maker now has a market capitalisation of $2.9trn, which is still a lot. But it’s lost almost $600bn, which alone is about two and a half AstraZenencas, the biggest company on the FTSE 100.

AI risk

Compared to that, Monday’s Scottish Mortgage share price fall looks modest. And it regained 3.7% on Tuesday, the day after the dip. That draws my attention to a key thing I like about it.

Having some of my money in AI makes me smile. But I’m not the kind of growth stock investor who’s happy to take the biggest risks. Scottish Mortgage addresses that via diversification. As well as Nvidia (and Tesla, and Meta Platforms), it holds MarcadoLibre, Spotify, Moderna, Shopify, and a whole host of others.

To get back to risky stocks in the news, Bytedance is also in the mix, still facing uncertainty over its TikTok ownership. But it looks like the pressure is easing off there a bit.

And Scottish Mortgage is a big investor in SpaceX, a private company we can’t buy on its own. I like having small slices of all these, protected from the worst of their individual risks by that diversification. I also like the trust’s 11.5% discount, meaning I can get a slice of these companies cheaper than on the open market.

Toppy US markets

The main thing I don’t like is not the exposure to AI risk. No, I want some of that. My biggest fear is the high valuations of US markets. Prior to these latest falls, the Mag Seven had added around $15trn to the value of the Nasdaq since the end of 2022.

I’ve been looking at the S&P 500‘s Shiller price-to-earnings (P/E) ratio. Normal P/E values go off earnings figures for the previous 12 months. But the Shiller uses the past 10 years. And it’s been edging up towards the highest it’s been since the dot com bubble in the year 2000.

Still, we could be waiting a long time for US stock valuatons to fall. And in the meantime, the individual winners could keep on climbing. Even at today’s price, Nvidia is on a P/E of only 22 based on 2027 forecasts. That looks fair to me.

I think I’m far more likely to top up than sell.

Barclays’ (LSE: BARC) share price is trading near its 12-month high of £2.98, which was reached on 21 January.

This does not mean the stock has no value left though. It could be that the bank is just fundamentally worth more than before.

Or the market could simply be catching up to its true value. Indeed, it may be that this true value is still not fully reflected in the current share price.

To find out which is applicable to Barclays, I ran a deep dive analysis into its price and the issues surrounding it.

Share price valuation

The UK ‘Big Four’ bank currently trades at a price-to-earnings ratio of 10. This is top of its peer group, which averages 7.9. These competitors comprise NatWest at 7.5, Standard Chartered at 7.8, HSBC at 7.9, and Lloyds at 8.4. 

So, it looks overvalued on this basis.

However, on the price-to-book ratio Barclays presently trades at 0.6. Its competitor group average is 0.8, so it is undervalued on this measure.

It is also undervalued on the price-to-sales ratio, trading at 1.8 against a 2.3 peer group average.

To get to the bottom of the pricing, I ran a discounted cash flow analysis. In Barclays’ case, this modelling shows its shares are 26% undervalued at their current £2.89 price. Therefore, the fair value of the stock is technically £3.91.

They may trade lower or higher than that based on varying market forces, of course. However, it confirms to me that the shares may be a bargain right now.

Core business outlook

A risk for Barclays is the recent decline in UK interest rates and the possibility of additional falls to come. This might further affect its net interest income (NII) – the difference between the interest made on loans and deposits.

However, in its Q3 2024 results it upgraded its full-year 2024 NII target to above £11bn from around £11bn. For Barclays UK, the NII forecast is now around £6.5bn, from around £6.3bn.

These upgrades have resulted partly from a shift towards fee-based – rather than interest-based – business. And it has also followed an ongoing hedging programme. This aims to offset the effects of interest rate reductions through various financial instruments. Indeed, to the end 2026, Barclays targets total income of around £30bn.

Analysts forecast its earnings will increase by 10.86% each year to the end of 2027. And it is ultimately these that power a firm’s share price and dividend higher.

Another boost may come from the Bank of England’s current efforts to persuade the government to reduce banks’ regulatory requirements to help boost economic growth.

Will I buy the shares?

I already have holdings in HSBC and NatWest, bought a considerable while ago. So, adding another banking stock to my portfolio would negatively skew its risk-reward balance, I think.

However, if I had a larger portfolio or did not have two banking stocks in mine, I would buy Barclays’ shares today.

Central to my view is its strong earnings growth forecasts in the coming years. These should push the share price much closer to fair value, in my view. It should also prompt a rise in its dividend yield, I think.

Shares in Greggs (LSE:GRG) have been falling as if a Chinese AI lab has launched a more powerful steak bake built at a fraction of the cost. The FTSE 250 stock is down 24% since the start of the year. 

As a result, the stock has been attracting the attention of investors – and rightly so, in my view. But there’s another household name for UK investors that’s higher on my buy list at the moment.

What’s wrong with Greggs!?

There’s not much wrong with Greggs as a business. But its recent results make me question its growth prospects. 

Like-for-like sales have been growing at 2.5% – barely keeping up with inflation. And the firm’s store count is close to its target of 3,000, so the scope for opening new outlets is likely to be limited.

A price-to-earnings (P/E) multiple of 16 doesn’t reflect much in terms of optimism about future growth. And the value Greggs offers customers should have a durable appeal. 

Investors who consider the stock today could have the chance to do well over the long term. But I don’t see it as the most attractive FTSE 250 opportunity right now.

WH Smith

That honour goes to WH Smith (LSE:SMWH). The firm looks like an unattractive high street retailer, but there’s a lot more beneath the surface – and that’s what I like about it. 

The company actually reported its earnings for the 21 weeks leading up to 25 January this morning (29 January). Overall revenues were up 3%, but this doesn’t tell the full story. 

I think WH Smith’s high street business is – in a word – bad. As far as I can tell, it mostly sells items that people can buy more cheaply either in the nearest Tesco or online at Amazon.

I don’t like the prospects of these outlets and the fact their revenues are declining at 6% per year reinforces this view. But this is only one part of the company’s overall business – and a small one at that.

A quality business

WH Smith’s high street retail division accounts for less than 25% of total revenues. And the firm announced recently that it’s exploring options to divest this. 

That leaves the travel part of the business. This operates stores in airports, train stations, and hospitals – places where competition is limited and e-commerce is a non-issue. 

These outlets are vulnerable to fluctuations in travel demand, which is a risk with the company. And that’s something to consider, but the growth in this part of the business is very impressive.

This segment of WH Smith’s operation is growing revenues at 7% and it generated profits of £189m in 2024. On this (pre-tax) basis, the current market cap implies a P/E ratio of around 8 – which is very low. 

UK stocks

Officially, shares in WH Smith are trading at a P/E ratio of 22. But that’s because one-off costs in the high-street business are offsetting the profitability of the travel division.

If the firm divests its high street stores, this could well change. And with strong growth plus scope to open new outlets — especially in the US — I think the stock is a more attractive one to consider than Greggs right now.