I’m increasingly worried about the risks of a full-blown stock market crash. Actually, I’ve been increasingly fretting about this outcome since late 2021, but it has yet to happen. However, the Russian invasion of Ukraine has triggered a meltdown in certain markets. As I write, the US S&P 500 index lies 13.4% below its all-time high, reached on 3 January.

Furthermore, the tech-heavy Nasdaq Composite index has crashed by 21.1% since it peaked on 22 November 2021. Thus, it has passed the 20% decline that signals a full-on bear market/stock market crash. That’s bad news for investors who had piled into high-priced US tech stocks last year. Meanwhile, here are four important points I’ve noted as the world watches war in horror.

1. Commodity prices are soaring

To watch huge volatility and price spikes, I’ve been monitoring commodity prices closely over the past fortnight. Last week, I saw one of the biggest weekly jumps in commodity prices since the oil shock of 1979. Across the board, commodity prices jumped for energy, metals, and foodstuffs. As a result, the Bloomberg Commodity Index (BCOM) has soared by 34.6% in 2022 and has gained 51.7% over one year. The bad news is that soaring materials prices will feed into inflation, lifting consumer prices. This could trigger a global slowdown — or even a recession leading to a stock market crash. Yikes.

2. Stock market crash: when investors panic, they sell what they can

As markets dived on Friday and Monday, I saw clear signs of investor panic. When fear overcomes hope, investors rush to sell what they can — typically, blue-chip shares. In this scenario, the baby often gets thrown out with the bathwater, as investors dump quality stocks to improve their liquidity. Hence, I saw many high-quality FTSE 100 shares take a beating over these 48 hours. In under two days, the Footsie lost 8.2% of its value, before rebounding on Monday afternoon. It’s now down just 4.7% over the past five days. As a naturally sluggish investor, I’m glad I sat tight during this mini-stock market crash, rather than rushing to sell.

3. Low growth and high inflation equals stagflation

As a young lad in the 1970s, I remember how tough that era was for low-income families, including mine. As oil prices skyrocketed and consumer prices soared, inflation went through the roof. This caused economic growth to collapse, while a wage-price spiral kept pushing inflation ever higher. As a result, the 1970s are remembered as the age of stagflation, combining slow economic growth and high unemployment with rising prices. Now fears are rising that we might endure similar economic conditions due to Russia’s invasion of Ukraine. I sincerely hope not, because the 1970s stock market crashes were really fierce.

4. Stock market crash: could Chinese assets be next?

With Russia being almost completely unplugged from the global financial system, Russian stocks and bonds have plummeted in value. As I wrote on Monday, Russian assets are all but worthless today. What if investors decide that investing in, say, Chinese assets is too risky in this unstable geopolitical climate? The Chinese SSE Composite Index has already fallen 11.5% since 13 December. I suspect it has further to go.

Meanwhile, I’m building a cash pile to invest in cheap UK shares paying high dividends. Right now, my mantra for investing is boring, but safe. It helps me to sleep easier at nights!

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 Evraz (LSE: EVR) share price has sunk in recent weeks, due to the tragic conflict between Russia and Ukraine. As most of the company’s operations take place in Russia, this has led to fears of significant consequences. Further, a lot of the shares are owned by Russian oligarchs, and the largest shareholder is Roman Abramovich, who is believed to be close friends with Vladimir Putin. Accordingly, there has also been the risk that Evraz would be hit by Western sanctions. Despite this, the Evraz share price has recently returned to over 100p, after hitting lows of 50p last week. This is still a year-on-year decrease of over 80%.

Recent updates

There was an encouraging update for Evraz today. In fact, the group confirmed that the current conflict had had “no material direct impact on day-to-day operations”. This was even though the sanctions were creating certain frictions across its supply chains, logistical operations, and flow of money. Considering the fact that the Evraz share price has sunk around 75% over the past month, this shows that the disruption may not have been as severe as initially feared. The group also believes that it is not an entity owned by, or acting on behalf or at the direction of, any persons connected with Russia, and this may enable it to avoid sanctions.

Further, the recent results were also extremely impressive. For example, FY2021 revenues were over $14bn and net profits increased to over $3bn, in comparison to just $858m the previous year. This also allowed a dividend of 50 cents to be announced, which is expected to go ex tomorrow. The interim dividend alone means that Evraz shares have a dividend yield of around 40%, clearly far higher than any other UK share.

However, this recent update did not consider the effects of the war. As such, although the effects of the conflict are extremely hard to judge, I highly doubt that profits will remain at these levels. This is a key risk to point out.

Is the Evraz share price set to soar?

Clearly, there may have been a slight overreaction over the past couple of weeks regarding Evraz shares, especially as many investment funds vowed to dump all their Russian stocks. From a valuation perspective, this has left the Evraz share price looking extremely cheap.

But although I believe that the Evraz share price has the potential to soar, I’m still not buying. Firstly, I’m not buying shares in any companies that are directly impacted from the dreadful conflict in Ukraine. This is due to the risks of significant volatility over the next few months. Secondly, due to the large number of Russian shareholders, I also have ESG concerns. This is a factor I believe could also depress the shares further.

Stuart Blair 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 recent stock market crash has been devastating, especially to growth investors. In recent weeks, the FTSE 100 has shed nearly 10% of its value. And across the pond, the S&P 500 hasn’t fared better, with a near 15% decline since the start of 2022.

But as unpleasant as it is to watch my portfolio suffer, I’m not worried. Why? Because I’m following a tried and tested strategy that, over the long-term, transforms these periods of increased volatility into potential gold mines. Let’s explore.

The key to beating a stock market crash

Buying shares is not a risk-free endeavour. Even some of the most mature businesses considered ‘safe’ can be vulnerable to external factors. Investors in travel stocks know this all too well after the pandemic decimated even the strongest firms in this industry.

But if I thoroughly research a business before buying any shares, finding weaknesses is pretty straightforward. And this is the strategy to beat a stock market crash. By knowing the weak points of the companies in my portfolio, I can make smarter decisions when a downturn inevitably rears its ugly head.

The current situation is undoubtedly being fuelled by multiple factors. But the three biggest ones that I can see are inflation, rising interest rates, and the tragic geopolitical crisis in Ukraine. The latter took many investors by surprise. So, I’m not shocked to see the knee jerk reaction of a market-wide sell-off.

But while the world panics, the trick is to remain calm. Looking at the companies in my portfolio, despite several suffering pretty impressive drops, none appear to be directly affected by the catalysts of the ongoing stock market crash. And that’s a buying opportunity in my opinion. Let’s take a look at an example.

Buying when others are selling

One stock from my portfolio that recently got caught in the crossfire is Anglo Pacific Group (LSE:APF). I’ve explored this business before. But as a quick summary, this is a royalties company. It provides mining firms like Rio Tinto and BHP the necessary funding to establish drilling sites in exchange for a portion of the materials dug up from the ground throughout the life of the mine.

The stock market crash intensified when the Russian invasion began, and shares tumbled as much as 10% within a few days. But here’s the thing. Anglo Pacific doesn’t have any operations in Eastern Europe. What about rising interest rates and inflation?

There’s currently around $124m (£94m) of debt on the balance sheet that’s getting more expensive because of higher interest charges. However, with substantial cash flows, Anglo Pacific should have no trouble paying a higher rate. Meanwhile, inflation is actually pushing up commodity prices, which is beneficial to the group’s bottom line.

In other words, the main factors pushing the market down are either irrelevant or beneficial to this business. So, when the stock started tumbling, that looked like a buying opportunity in my eyes. And it seems others agree because the shares have since surged 18% despite no official announcements from management.

The bottom line

Finding buying opportunities in high-quality businesses that are seemingly unaffected by the catalysts behind a stock market crash is the best way to beat it, in my opinion. And while it does involve taking risks, the potential returns for my portfolio are well worth it.

Zaven Boyrazian owns Anglo Pacific. The Motley Fool UK has recommended Anglo Pacific. 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 painful to see infrastructure and construction contractor Kier Group (LSE: KIE) still down 90% over the past five years. Even the 2021 recovery has gone off the boil, and the Kier share price has been sliding again in 2022. But I believe I’m seeing signs of renewed strength, and I think Kier shares could be undervalued now.

Kier has been through a few troubled years, with the civil infrastructure sector under severe competitive cost pressures. Then the Covid-19 pandemic didn’t help. From 2018 to 2020, earnings per share slumped by 90%, leading to the share price collapse. But then profits started growing again.

For the year to June 2021, Kier saw EPS more than double from the previous year. Granted, the 25p per share was still way below 2018’s figure of 125p. But any return to growth has to start somewhere. So does that start look like it’s continuing in the current year?

H1 results

Well, we had first-half results Wednesday. The Kier share price dropped a few percent in response, but I suspect that’s because there were no surprises. I see it very much as steady progress, and I like that.

There’s no dramatic growth. In fact, revenue actually dipped a little, to £1.54bn from £1.62bn at the same stage the previous year. But operating margins are improving, up to 3.5% from 2.9%. And that boosted pre-tax profit very nicely, to £43m from £27.8m.

Bottom-line adjusted earnings per share came in at 7.8p. That’s down from 10.4p at December 2020, due to the dilution that came from Kier’s recapitalising. What does that mean on the valuation front? If we double the interim EPS figure as a rough guess at what the full year might look like, we’d get 15.6p.

Kier share price valuation

On the current share price, that suggests a price-to-earnings of only 5.4. That can be misleading for a company carrying debt, however. And because of that, I like to work out an enterprise value P/E. That covers what you’d have to stump up to buy the entire company and pay off its debt.

On the debt front, Kier has been making solid progress. Net debt at 31 December 2021 stood at £131m, down from £354m at December 2020. Due to the nature of the business, debt can vary month to month. But during the period, month-end debt averaged £191m (from £436m).

On the December debt level and today’s Kier share price, I calculate an enterprise value P/E of 7.1. And using the average month-end debt instead, it still only reaches 7.9. That looks like undervaluation to me, but what’s the downside?

Risky sector outlook

For one thing, companies heavily engaged in infrastructure engineering tend to carry relatively modest valuations. The highly competitive nature of the business, with its tight operating margins, means it often doesn’t take too much to plunge a project into loss. It’s a risky business to be in.

On top of that, the outlook for UK infrastructure projects is far from rosy. With the effects of the pandemic, escalating fuel costs, and economic fallout from the Russian war in Ukraine, civil engineering budgets might be a bit squeezed for some time.

So yes, there are clearly risks in investing at the moment. But I still think the Kier share price is too low. Kier is on my list of buy candidates.

Alan Oscroft 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.

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Luxury giants Burberry (LSE: BRBY) and Supreme recently announced a collaboration to launch a new Spring 2022 collection on 10 March. With Supreme carrying huge sales momentum and a large following behind its brand, I will assess whether the partnership between the two brands will bring an uptake in sales for Burberry, and whether the share price will rebound from a 10% drop (YTD).

Supreme-acy

Supreme has a history of collaborating with luxury brands such as LVMH and Tiffany & Co. The former highlighted the collaboration as one of the core reasons behind its sales growth and recovery from slow tourism after the Paris attacks in 2017, showing the positive impact Supreme has on sales. Burberry had initially laid out a plan in its half-year report to stimulate recovery in sales growth post-Covid by capturing a bigger portion of the younger target market, and this alliance is definitely steering the company in the right direction, in my opinion. Given that Burberry’s largest target market is in China, it is facing similar conditions to that of its competitors at LVMH in 2017 as it grows out of a Covid environment. Therefore, I am expecting the Supreme collaboration to do the Burberry sales figures wonders. Moreover, Burberry’s Winter 2022 fashion show will debut the line on 11 March, which will no doubt leave Burberry shareholders excited.

The future is Burberry

In Burberry’s attempts to capture a younger target market, further investments were made in digital innovations. The latest trading update showed that the London-based luxury brand achieved its highest levels of reach on Instagram and TikTok in the most recent quarter. Additionally, it managed to stimulate more engagement through new store concepts that had immersive brand experiences. This was specifically seen in its new flagship store in Shanghai, which is supporting sales recovery and revenue growth in its main target market. The firm quoted, “Digital innovation remains a key driver of growth for the business with digital full-price sales up high double digits.”

All about the guidance

Although the news gets me excited, I am wary that even a sales beat in Q4 will not be enough to propel the Burberry share price back into recovery mode if it offers poor guidance for the financial year ahead, as evident with many other stocks that have reported earnings recently. Although the latest trading update stated that, “Despite the ongoing challenges of the external environment, we are confident of finishing the year strongly”, a lot has happened since mid-January: oil prices have hit new highs, sanctions put into place, and inflation getting hotter. As such, initial guidance of high single-digit top line growth and meaningful margin accretion might have shifted since then . Nevertheless, I am confident that luxury brands such as Burberry have the ability to pass costs on to consumers due to their strong pricing power as a renowned brand. Moreover, Burberry shares are currently trading at a reasonable price-to-earnings ratio of 13.97, which is also why I am interested in buy some shares for my portfolio.

John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry. 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 Tullow Oil (LSE: TLW) share price is falling today and is down by 15% as I write. This slump seems to have been triggered by the Africa-focused oil producer’s annual results. These showed that sales fell last year and that Tullow generated an $81m loss in 2021.

Oil prices are soaring and most of the big oil producers on the London market have reported bumper numbers for 2021. I’d guess that investors might have been expecting a stronger result from Tullow. In this article, I’ll explain what’s happened, and why I’m not buying Tullow shares.

Here’s the story

Tullow’s revenue fell by 9% to $1,273m in 2021. Although the company’s average oil sale price rose from $51 to almost $63 per barrel last year, Tullow’s production fell sharply due to technical issues on the TEN and Espoir projects.

These problems combined with the write-off of some past exploration costs to generate an after-tax loss of $81m for the year.

However, oil producers’ reported profits can be very different to their cash flows. For this reason, I prefer to focus on Tullow’s cash generation and debt repayments. The company continued to make good progress in these areas last year. Free cash flow of $245m was used to repay borrowings, cutting the group’s net debt from $2,376m to $2,131m.

Will profits fly in 2022?

The price of oil has risen by more than 50% to around $125 per barrel so far this year. Should we expect Tullow’s profits to soar if prices stay high? Will shareholders get a dividend?

I think the group’s accounting profits could rise, but a dividend is very unlikely. To understand Tullow’s position today, it’s important to remember that the company ran into big problems with debt a few years ago.

CEO Rahul Dhir has stabilised the business and debt is now falling. However, to provide more predictable cash flows, Tullow has hedged 75% of its production until May 2023, and 50% to May 2024.

This means the company has entered into contracts that provide guaranteed minimum and maximum sale prices for most of its oil.

Hedging protected Tullow from a cash crunch in 2020. But it also means that the firm isn’t getting the full benefit of high prices today. As a result, management guidance for 2022 is based on an average oil price of $75 per barrel, 40% below the current Brent Crude price.

Tullow Oil share price: cheap at 55p?

Broker forecasts for 2022 suggest that Tullow will generate earnings of $0.16 per share this year. That puts the stock on a modest five times forecast earnings.

However, while profits are expected to rise, management expects Tullow’s free cash flow to fall from $245m to $100m in 2022. This is due to a 35% increase in planned spending on projects and decommissioning.

This guidance prices Tullow shares on around 10 times forecast free cash flow. That seems high enough to me. Although I don’t expect Tullow to face any serious problems this year, I’d prefer to invest in a company with a stronger financial position.

I don’t think Tullow Oil shares are as cheap as they might seem. For this reason, I won’t be adding this stock to my portfolio at the current price.

Roland Head 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.