The Metro Bank (LSE: MTRO) share price has really struggled over the past year. Over the past 12 months, shares in the challenger bank have declined by around a third. By comparison, shares in some of the company’s larger competitors, such as Lloyds Bank, have produced a positive return.

Shares in Lloyds have produced a 2% return excluding dividends over the past year.

Even after the recent market volatility, shares in many financial institutions have outperformed over the past 12 months as interest rates have started to move higher. Higher interest rates will allow these companies to charge more to borrowers, boosting their bottom lines.

After more than a decade of ultra-low interest rates, this could bring some much-needed interest rate relief to the sector. 

Unfortunately, it looks as if the Metro Bank share price has missed out on most of this performance. The question is, why? 

Metro Bank share price challenges 

Ever since the company’s accounting scandal several years ago, the bank has struggled to regain investor confidence. In 2019 the group announced that it had misreported the value of its commercial loan portfolio. The corporation lost a number of senior managers as a result of this error and had to raise additional cash. The lender’s reputation also took a significant hit. 

Soon after this accounting error was announced, the coronavirus crisis began. The crisis had a significant impact on the company’s growth plans. 

And it looks as if the crisis has left scars on the group. 

According to the company’s 2021 financial update, while revenue increased by 17% in the year, overall operating costs only declined by 1%. As a result, the enterprise reported a statutory loss before tax of £245m. It is also expecting further fines from regulators over its accounting error. 

Metro Bank’s growth has also taken a hit after the business disposed of its mortgage arm. This was part of its plan to recover from the accounting error. By shifting away from mortgages, the company would be able to target higher-margin personal loans. That was the theory anyway. 

This means the company missed out on last year’s housing market boom, and it has its work cut out to restore lending margins and profits. 

Missing out

Considering all of the above, it is clear to me why the Metro Bank share price has underperformed over the past 12 months. The company has made a series of strategic missteps. It is going to be some time before it regains the market’s confidence. 

Still, rising interest rates could act as a significant tailwind for the business. If management is able to navigate the current economic turbulence and capitalise on higher rates, the company’s sales and profits could recover. This is something I will be keeping an eye on over the next few years. 

However, for the time being, considering the company’s troubles, I am not going to add the stock to my portfolio anytime soon. I would like to see further progress on the turnaround before buying in. 

Rupert Hargreaves 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.

It’s always hard to know when we’ve reached the bottom of a general stock market correction. It’s much easier to identify the low point in hindsight. But the process of investing requires us to look ahead.

And the problem is made even more difficult by the way the market tends to move before events and news are well known. Stocks and the market indices tend to be leading indicators. And news flowing from companies, the economy and world events tend to lag. That’s the main reason for the old stock market saying that news follows price and not the other way around.

Following company news

It’s natural for investors to fear that stocks will fall further when the news is all doom and gloom. But during past corrections, stocks have stopped falling and turned upwards while the news flow was at its darkest. And that’s the process of stocks leading and looking ahead while news lags.

But it takes courage, conviction and an iron constitution to buy cheap stocks when prices have been plunging and the news is grim. However, it’s precisely under such conditions that it’s possible to make some of our most lucrative long-term stock purchases. So what’s the best way to solve the conundrum?

It’s easy to freeze like a rabbit caught in the headlights and end up allowing great stock opportunities to pass by. But one way of snapping out of the trance is to focus on individual companies and their stocks rather than on the entire market.

In the current sad and terrible situation, the first thing I’d do is aim to understand how the war in Ukraine and its ripples may affect the operations within each of the businesses that interest me. And I’d tune in to the news coming from each company and what the directors are saying.

There are some general risks that may affect businesses, such as the way the war is pushing up general price inflation. And the sanctions against Russia will affect trading for some companies as well. Also, for many businesses, Ukraine itself is an important market and many have operations in the region. For example, smoking products manufacturer Imperial Brands has a facility in Ukraine. And premium alcoholic drinks maker Diageo has suspended exports to Russia. So, it’s worth digging in with my research to find out as much as I can about a business, its markets and where its operations are located.

Building a watch list of stock candidates

I’m working hard on my watch list of potential candidate stocks for my portfolio. And that means digging in to analyse the strength of the economics of each business, including its opportunities and threats. On top of that, I want to see a strong balance sheet with net cash or perhaps modest debts. A company with strong finances has a better chance of riding through any temporary or permanent disruptions to its business caused by the crisis.

My assumption is the war will end at some point and the world, its economies and businesses will adjust to the new realities in Eastern Europe and globally. My view is businesses can be very adaptive. And although a positive investment outcome isn’t guaranteed, I think buying the stocks of businesses when valuations are depressed could lead to long-term gains.

Kevin Godbold owns shares in Imperial Brands. The Motley Fool UK has recommended Diageo and Imperial Brands. 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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As the tragic Russia-Ukraine conflict continues to intensify, markets around the world have registered huge losses. The FTSE 100 is no exception, and it has recently dropped below 7,000 points. This means the FTSE 100 is now at its lowest level since September 2021. But this does lead me to several opportunities to buy UK shares on the cheap. Here are two that I think are no-brainer buys.

A great FTSE 100 stock for passive income

Legal & General (LSE: LGEN) has established itself as a top dividend payer. Indeed, last year, it paid out a record 17.57p per share, and further dividend growth is expected this year. Such a large dividend equates to a yield of around 7%, cementing the insurance company as one of the top income-focused UK shares.

After excellent first-half results, I’m also confident that the dividend is sustainable. For example, in the first half of the financial year, operating profits were able to rise 14% year on year to reach £1.1bn. This was higher than its pre-pandemic levels. The Solvency Coverage Ratio, which is a key measure of financial stability for insurance companies, also reached 183%, up from 173%. As such, considering that the full-year dividend only cost the company around £1bn, there is no indication that it will be cut.

I also feel L&G will be able to avoid significant disruption from the conflict in Ukraine. For instance, its exposure to Russian securities equals just 0.1% of its assets under management. This means that the effect of the war should be limited for L&G.

There are a couple of risks, however. For instance, the company is heavily linked to the UK economy, and is likely to move in the direction of the general market. This may cause significant amounts of short-term volatility. Second, there is rising competition in the group’s various sectors, and this may strain profits.

Despite this, I think a current price of around 240p is far too cheap, and the risks are already priced in. I’ll continue to add L&G shares to my portfolio on any further weakness.

Another struggling UK share

Although National Express (LSE: NEX) is not part of the FTSE 100, instead being a constituent of the FTSE 250, it has certainly not been immune to the current bear market. Indeed, the shares are currently priced at under 200p, for the first time since September 2020. This is partly due to the rising price of oil, which is soaring due to the conflict. Along with wages, oil is the main cost for the company, and it has the potential to strain profit margins considerably.

Despite this being a risk, I also feel it has been overstated. In fact, National Express has hedged oil from 2022 to 2023, meaning that the rising oil price should not directly affect the company over the next two years. In the long term, I’m also hoping that oil will decrease in price and get closer to ‘normality’.

Further, it seems that the recovery from the pandemic has been extremely strong. For example, in the third quarter, revenue managed to reach 83% of the same period in 2019. I hope for further improvement when the full-year results are released soon. Therefore, this is a UK share that I will continue to add to my portfolio on the dip.

Stuart Blair owns shares in Legal & General and National Express. 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 International Consolidated Airlines (LSE:IAG) share price has plummeted by 40% over the past year in what has been a difficult period for the airline industry. Should I buy the shares now? That’s the question I’m looking to answer today.

Summer holidays

The pandemic created so much disruption to travel, and airlines are still trying to manage their way through the uncertain environment. As countries reopen borders to travellers and restrictions are gradually reduced, many might think that the future is bright.

Holiday bookings for the summer are looking promising. There seems to be plenty of pent-up demand from holidaymakers looking to get away this year.

IAG recently said that it expects to return to profitability in the second quarter and that passenger capacity is expected to reach 85% of pre-pandemic levels this year. That all sounds encouraging, but recent tragic events in Ukraine could make IAG’s plans much more uncertain.

Risks to the IAG share price

With much of the world putting restrictions on Russian oil, the price of crude oil has surged this year by over 50%. It’s a key cost in the aviation sector and an important element of profitability. Like many airlines, IAG hedges much of its oil price exposure.

On 25 February, CEO Luis Gallego said that the British Airways owner is hedged for two years with the first year around 60% hedged. That should help if oil prices are elevated only temporarily.

However, there are certainly some risks to be aware of. Oil prices could stay higher for longer. So much depends on the geopolitical risks in Russia.

There’s also another potentially larger risk that I’m concerned about. If oil, gas and electricity prices continue to rise over the coming months, it could raise households’ costs. Spending double on the annual gas bill could cause many to rethink their holiday plans.

Could IAG soar?

With so much uncertainty around, I’m not surprised that the IAG share price has fallen so far. Investors tend to hate uncertainty. If there’s any sign of a resolution in the conflict (which we all desperately hope for regardless of anything else), the IAG share price could soar. It could be worth me buying, but I reckon it would be a high-risk investment.

There are several other factors that could help the IAG share price. And I’m sure that management is considering all of its options to maximise shareholder value. For instance, IAG may consider asset sales. They could be used to reduce some of its £9.6bn of debt. Consolidation in the industry is a common occurrence and I wouldn’t be surprised to see IAG partner with another airline to maximise efficiencies.

Overall, although the share price could bounce in the short term, there’s far too much uncertainty around. For me, the risks are currently too great to buy the shares today, but I will put it on my watchlist. There are many other British shares that offer a much more appealing risk-to-reward ratio, in my opinion. I’m focusing on those first.

Harshil Patel 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.

As oil prices increase, shares in Hurricane Energy  (LSE:HUN) have been climbing rapidly of late. At the time of writing, the shares are up just under 70% in the last month (and almost 200% in a year). In a market that has generally been moving downwards on fears of inflation and the Russian invasion of Ukraine, the stock has been a standout performer. So what’s going on with the Hurricane Energy share price? And is the company one that I should be looking at today for my investment portfolio?

[fool_stock-chart ticker=LSE:HUR]

Oil prices

Hurricane Energy is a UK-based oil and gas exploration company. Both the EU and the UK import oil and gas from Russia. Concerns over supply following the dreadful Russian invasion of Ukraine has pushed up the price of oil significantly. It has also caused the UK government to assert the need to increase domestic oil production. As a result, the Hurricane Energy share price has shot upwards.

According to the company’s interim filing, Hurricane produced just over two million barrels of oil in the first half of 2021. It did so at a rate of around 11,000 barrels per day. It cost the company around $25 per barrel to produce and it sold the oil it produced at an average cost of $62 per barrel.

As I write, the price of oil is just over double the price the level at which Hurricane was selling it last year. Obviously, the immediate future looks bright for the company. Moreover, news that Warren Buffett has been buying shares in an oil company emerged earlier this week. There’s clearly a lot going for investors in oil businesses at the moment.

Investing in oil

Despite this, I don’t anticipate adding shares in Hurricane Energy to my portfolio any time soon. According to Buffett, an investment in an oil company is a bet on the price of oil over the long term. And I personally don’t have a clear view on the price of oil in the years and decades ahead. 

Until recently, I thought the market was undervaluing the prospects for oil companies going forward. Renewable energy companies seemed to me to be in fashion, oil companies were out. Against this backdrop, I took the view that fossil fuel companies generally had better prospects than the market was anticipating. 

Now, however, sentiment seems to have shifted. Oil companies seem to be back in fashion, but in my view, the pendulum has swung too far. The Hurricane Energy share price is reflecting a price for oil that’s unlikely to be sustainable over time. That’s why I don’t see it as an investment opportunity for me at the moment.

I share Buffett’s view that the future prospects of oil companies are tied directly to the price of oil. If the price of oil comes down and brings Hurricane’s share price down with it, then I might well be interested in buying shares for my portfolio. But I’ll wait until I think that the market is undervaluing the company’s prospects before making an investment. At the moment, I think that there are better undervalued opportunities elsewhere.

Stephen Wright 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.

It was only last November that we saw the Tesla (NASDAQ: TSLA) share price hit an all-time high of $1,243. However, since then investors have witnessed a reversal of its fine form. This year alone Tesla is down over 30%. And the stock is currently trading for $812.

So, will the electric vehicle (EV) manufacturer recover? And should I be buying some shares today? Let’s take a look.

Tesla share price history

Before looking at whether I would buy Tesla stock today, let’s start by looking at the recent history of the share price. At the outbreak of the Covid-19 pandemic, Tesla was changing hands for around $70. Yet by the end of the year, the shares had accelerated, rising an astronomical 725%, to nearly $720.

While this performance was not reciprocated in 2021, the tail end of the year saw the Tesla share price peak to its all-time high due to an agreement struck with rental company Hertz. The price then dipped again, however, closing the year at $1,056.

Should I buy?

So, does this present a buying opportunity for me? Well, there are a few factors I must consider before buying Tesla.

The main stumbling block for me is its high valuation. Tesla share currently trade on a price-to-earnings (P/E) ratio of around 165. Considering a good value P/E is deemed to be around or under 10, this shows just how overvalued the business currently is. A market correction could lead to a drop in the Tesla share price.

As well as this, the global rise in interest rates is having an adverse impact on growth stocks. Higher interest rates mean people can receive greater returns on their savings — and therefore, they are less likely to invest. In times like these, growth stocks are hit the hardest. This means if interest rates remain at their current level, or even rise further, we could see a continuation in the Tesla share price fall.

However, we will undoubtedly see a rise in demand for EVs in the future as more people make the transition to electric. And Tesla is in a strong position to capitalise on this given its major market share. This is seen through the demand for Tesla vehicles, which doesn’t seem to be slowing down. As my colleague Dan Appleby highlighted, the firm increased its deliveries of vehicles in 2021 to 936,172, representing an increase of 87% over 2020. Further, revenue grew 71% year on year. And it’s expected to grow by over 50% in 2022. From this, it’s clear to see how investors could be excited about Tesla.

Overall, as impressive as the figures posted by Tesla are, I find it hard to ignore the challenges the business faces. I think rising interest rates and the current economic uncertainty could lead to investors pulling money from volatile stocks. And I think the Tesla share price could take a hit. While the business also enjoys a large market share in the EV space, I deem its current valuation a big risk. Therefore, I’m not convinced it can recover quickly and I won’t be buying Tesla stock for now.

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesla. 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.

Stock markets are down around the world. And they might be about to go lower. So is it a good time to invest in stocks? I think it is and I’ve been adding to the investments in my portfolio recently. Here’s why.

Buying more shares

Quite simply, lower share prices give me an opportunity to own more of the companies that I’ve already invested in at more attractive prices. From an investment perspective, if I buy shares in a company for less than I previously paid for them, then my return over time should be better. 

I own shares in Amazon. The company’s shares currently trade for less than I originally paid for them. That can be hard to take. But it actually means I can make a further investment today and the return on the investment should be greater than the return on my initial investment. In the case of Amazon, I do think it’s a good time to buy more for my portfolio.

New opportunities

Declining share prices can also provide new opportunities for investors like me. An example of this is Meta Platforms. I’ve long thought that it’s a wonderful business. Until recently, however, I felt its shares traded at prices too high for me. 

Lately, however, the price has fallen quite significantly. I now think the price is quite attractive based on the amount of cash I anticipate the business generating in the future. Accordingly, I’ve used the falling share price to make an investment in the business. Again, I really do feel it’s a good time to invest in the stock for my portfolio .

Be careful

Of course, the fact that a stock has fallen a lot does not automatically mean it’s a good investment. An example of this is TUI. The stock has fallen sharply, but I don’t think that that it’s the right time to dive in and buy TUI stock for my portfolio. This is because I anticipate the company’s future earnings being hindered by its debt. So even though TUI’s share price has fallen substantially, I’ll pass on that one.

TUI’s shares have fallen further than Meta shares have in the last month — 20% compared to Meta’s 15%. This highlights the point that it doesn’t matter to me what price a company’s shares used to trade at. What matters to me is the price that they trade at now.

The stock market might fall more, or it might rebound from these levels. As an investor, however, what matters to me is where the price of stocks are now and is the price right for me, not where they might be next week or next month. Since my intention is to hold the investments that I make for a long time, I’m not concerned about where the share price goes in the short term, as long as I’m happy with the levels that I’m buying at. Since the stock market decline is giving me prices that I find attractive, I think now is the time for me to buy those shares I really believe in.

Stephen Wright owns shares in Amazon and Meta Platforms. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Glaxo (LSE: GSK) share price has underperformed for years, but I have always admired the FTSE 100 stock for its dividend. Now both are going south.

The Glaxo share price has gone nowhere in the last 10 years. It traded at 1,412p this day in March 2012, and trades at 1,485p today. That’s an increase of just 0.5%. In a decade. Just saying.

Glaxo share price disappoints

That wouldn’t normally worry me, because the main reason I’d buy GlaxoSmithKline is for its dividend. The £75bn pharmaceutical giant has a reputation for being one of the most reliable and rewarding income stocks on the FTSE 100.

At first glance, it still looks like it’s doing the business. The current yield is 5.39%, or roughly 10 times what I would get on instant access. The problem is that the actual dividend payment has not increased in years. Instead, it has been held at 8op a year throughout chief executive Emma Walmsley’s tenure, which began in 2017. In fact, it hasn’t increased since 2014.

Walmsley has justified this by saying the money would be better off invested in replenishing the company’s drugs pipeline. For a while, I agreed. Now I’m not so sure.

I’m beginning to wonder how well that money is being invested, if the company still cannot find some extra cash to reward loyal income-seeking shareholders. The only reason today’s yield looks good is that the Glaxo share price has done so poorly.

One thing I really like about investing in top FTSE 100 dividend stocks is my income should increase year after year as management hikes shareholder payouts. That’s particularly valuable today, as inflation skyrockets and we all struggle to keep up with the cost of living. Yet the Glaxo share price doesn’t offer me that prospect.

I don’t call that progressive

Glaxo’s yield is forecast to FALL to just 3.5% in 2023, when what management calls “the new GSK progressive dividend policy” begins. That exciting-sounding project will see the dividend rebased at just 45p per share. Thanks.

That’s a little over half what it paid eight years ago. This follows the move to hive off the New Consumer Healthcare business, which is likely to pay a further 10p per share, lifting the total payout to 55p. It could be even lower than that. The ailing Glaxo share price isn’t the only issue here.

So investors who get 80p today will get just 55p tomorrow. Management calls this progressive, but it seems to be going a long way backwards to go forwards.

Zero share price growth AND a falling dividend? That’s not for me. GlaxoSmithKline remains a great British company, but I’m not buying it today. Perhaps I’m being short-sighted. The Glaxo share price does look a bargain trading at a valuation of just 12.4 times forecast earnings.

There are positives. Last month, Glaxo posted better-than-expected Q4 earnings, as Covid-related sales hit £1.4bn. Adjusted operating profit fell, but was still a healthy £8.82bn. Management expects to generate more than £10bn worth of cash from operations by 2026, which will hopefully filter through to shareholders. However, I’ve been patient with Glaxo share price underperformance for long enough. Time for me to look elsewhere.

Harvey Jones doesn’t hold any of the shares mentioned in this article. The Motley Fool UK has recommended GlaxoSmithKline. 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.

I’ve been seeing more ‘red’ days than ‘blue’ days in my portfolio of late. So I’m tuning in to billionaire investor Warren Buffett’s advice for guidance.

A changing geopolitical landscape

Sadly, the troubles in Ukraine and tensions in wider Eastern Europe have the potential to change the geopolitical landscape for a generation or more.

But could the current bear run extend to major big-caps and other stocks retracing by as much as 50% or more? Maybe. But Buffett said years ago: “Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.”

And he revisited the theme in his 2019 letter to the shareholders of his conglomerate and stock-holding vehicle Berkshire Hathaway. The letter was published early in 2020 — immediately before the huge plunge in stock prices that year caused by the arrival of the coronavirus pandemic. Perhaps he saw that one coming. But he’s been saying the same thing for decades regardless.

The main thrust of his advice is that investors with a 10- to 20-year investment horizon “will fare well in stocks.” But that’s only if we focus on the earning power of companies. He reckons well-chosen stocks will likely “always” do better than assets such as bonds over the long haul.

But the caveat to that prediction is “anything can happen to stock prices tomorrow.” And, occasionally, there will be major drops in the market, “perhaps of 50% magnitude or even greater.” 

Warren Buffett’s faith in compounding

How can Buffett be so sure that stocks backed by quality and growing businesses will deliver a positive investment outcome despite declines of as much as 50% along the way? I think the answer to that question is in the way growing businesses compound their own earnings.

Buffett tends to buy stocks and hold them while the businesses behind them do the heavy lifting to power his portfolio. And if a business reinvests its growing stream of earnings to produce even more growth, the progress will likely show up in a rising share price in the end.

Back in 2020, when Covid-19 hit the markets and caused stocks to plunge, Buffett said the pandemic had not changed his long-term outlook. And his advice at the time was: “I don’t think it should affect what you do in stocks.” 

So I reckon the current situation is similar. Even war in Eastern Europe will pass. And stock markets will probably recover.

In 2020 as the markets plunged, Buffett said he was more inclined to buy stocks than he was previously. And the main reason for that stance was that valuations had become fairer for many great businesses. Meanwhile, we have a similar situation today. Indeed, not all businesses will be irreparably damaged by the situation in Eastern Europe. Some may not be affected much at all.

So I’m working hard on my watchlist, tuning into the markets and doing my own research. And the goal for me is to buy stocks at opportune moments when the valuation makes sense of a long-term investment in good and growing businesses.

Kevin Godbold 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.