Market volatility has ramped up several levels this week and could continue rising as the Ukraine conflict escalates. Penny stocks have fared particularly badly as investors have sold smaller shares that might be vulnerable to a fresh geopolitical and macroeconomic crisis.

The tragic war in Ukraine isn’t the only danger to stock markets either. Rising inflation threatens to hit consumer spending hard and push up business costs. It is also likely to prompt sustained interest rate hikes which will increase the cost of borrowing and damage demand for assets like stocks. Finally, a fresh flare-up of the pandemic would also likely drive UK share prices much lower.

2 penny stocks I’d buy today

In times of war the onset of market volatility takes second fiddle on the scale of importance. Still, I’m aware that people are worried about how choppiness on share markets could affect their wealth.

I plan to continue investing in UK shares. I don’t think I can’t afford not to if I want to build a decent financial nest egg for retirement. Here are two top penny stocks I’m thinking of buying today. I believe they could be too cheap to miss after recent price falls.

Assura

Britain’s rapidly-ageing population is putting increasing pressure on the State Pension. And this is, in turn, making it more and more important for me to secure my financial independence with UK shares. On the hand however, Assura (LSE: AGR) is penny stock that actually stands to benefit from this demographic change.

Assura — which has fallen 22% over the past 12 months — develops and then lets out primary healthcare facilities like GP surgeries. Demand for these sorts of properties are only going to grow as the country’s need for medical care increases.

Though it could suffer if government health policy changes, I’d use its recent fall to three-year lows as an opportunity to load up. Recent share price weakness means Assura now carries a mighty 4.9% dividend yield for this financial year.

Topps Tiles

A strong housing market also makes Topps Tiles (LSE: TPT) an attractive penny stock for me to buy. Strong homes demand is prompting housebuilders to supercharge construction rates and, by extension, their demand for building products is soaring. Sales of some materials are also rising for existing homeowners as they embark on some DIY before they put their property on the market.

I expect these phenomena to remain in tact too. Interest rates should remain lower than historical norms, in my opinion, which should continue supporting the housing market. I don’t think Topps Tiles’ recent share price performance reflects this likelihood.  The retailer is down 6% in value over the past year and this week dropped to two-week lows.

Of course, Topps Tiles could come under pressure if rising inflation hits consumer confidence. But it’s my opinion that this threat is baked into the company’s share price. It trades on a forward P/E ratio of 10.5 times. It also carries a 4.7% dividend yield today.

Royston Wild 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.

February is the shortest month of the year. I have already been looking ahead and thinking about what UK shares to buy for my portfolio in March. Here are two that appeal to me.

Paper to pageviews

First is media group Reach (LSE: RCH). It is probably best known for its ownership of the tabloid Mirror newspaper. But it owns a range of media properties, including regional newspapers and websites.

Newspapers continue to fall in popularity. But Reach’s strategy to deal with that is to try and spread its journalistic expertise over both print and media assets. That way, it hopes to continue to make what profits it can from the once highly lucrative newspaper business, while also building revenue streams in digital areas.

I think that strategy makes a lot of sense and so far it seems to be working. The company continues to lose readers in its newspaper division. But double-digit percentage growth in digital mean that it is eking out modest revenue growth. In its most recent trading update, the company said that revenue in its financial year to date had grown 2% compared to the same period the year before, driven by a 29.2% increase in digital revenue.

Over time, as it becomes more focussed on digital channels, I think the company could improve its rates of revenue growth. One risk is profit margins, which tend to be lower in digital than the company has been used to in newspapers.

Ready for takeoff

Another share I am considering is aircraft engineer Rolls-Royce (LSE: RR). The fundamentals of its business are attractive to me. Engines have a high price tag. As reliability is crucial, customers are willing to pay for quality. Only a few companies have the engineering know how to compete in this area, which helps keep prices high. Once an airline buys an engine, it needs to maintain it. Commonly it pays the manufacturer to help do that.

That adds up to a strong business model over the long term. But as the pandemic saw civil aviation demand fall sharply, Rolls’ fortunes followed. It diluted shareholders to boost liquidity with a rights issue. The risk that it would do so again has kept me out of the shares, as it was bleeding cash. But it has now turned the corner and is generating free cash flow once more. I see that as a key step on the company’s road to revival, as it reduces liquidity risks. The company has also gone back into the black after some massive losses in the past couple of years.

I am hopeful that the worst days for Rolls-Royce are behind it and would consider adding it to my portfolio in March.

UK shares to buy in March

Both of these companies sell into large markets. Both have established businesses and brands that help set them apart from competition. That could help build revenues and profits in the years to come. I would consider adding them both to my holdings in the coming month.

Christopher Ruane 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.

When it comes to stock market bull runs, the FTSE 250 has often outrun the FTSE 100. And sometimes it can be quite spectacular. Why is that, and does it make sense for me to focus on the smaller index now that we’re heading out of the pandemic slump?

Well, firstly, the FTSE 250 is home to a lot of smaller companies. And it tends to house more shares with growth potential. After all, many of the giants of the FTSE 100 have have reached maturity and stopped growing. And they’re now in a (hopefully) long period of throwing off dividend cash.

Smaller firms grow, and many keep on going until they’re big enough to enter the top index. So it’s perhaps not surprising that the mid-cap FTSE 250 index shows stronger growth, while the FTSE 100 is favoured by income investors. But at the same time, companies drop out of the larger index and fall back into the smaller one, and that must surely offset the growth advantage to some extent. Let’s look at how the two indexes have performed over the past few years.

In the 10 years up to the middle of February 2020, the FTSE 250 soared by 132% compared to just 38% for the FTSE 100. Superior dividends would have added to the latter’s overall result, but I reckon that’s still an impressive outperformance.

Resilient performance

When the 2020 stock market crash hit, the mid-cap index fell harder than its bigger sibling. We did see something of a recovery in the latter part of 2021. But 2022 fears seem to have headed off the 250’s resurgence. Since mid-February 2020, we’re looking at an overall 7% decline for the FTSE 250, while the FTSE 100 is almost bang on zero overall change.

So the smaller index has suffered a bit more during hard times, but really not by much. And that has surprised me. I’ve long been aware of the FTSE 250’s relative strength during upbeat times. But I had expected to see considerably more pain when the next market fall came along. The FTSE 250, then, seems to be more resilient than I thought — judging by the recent crash, at least.

So is my portfolio allocation poor, and could it be improved? I think it could be. On current valuations, my stock market investments (ISA and SIPP) are 49% weighted to the FTSE 100. Only 24% of my invested cash is in the FTSE 250, and the remaining 27% is elsewhere.

Buy more FTSE 250 shares?

I rarely think about such allocation, preferring to focus on individual shares that I like regardless of what index they’re in. And I do still have a few FTSE 100 companies on the list of stocks I’d like to buy. But what FTSE 250 shares are there out there that might help balance my investments better, and that I like the look of on their own merits?

Howden Joinery (LSE: HWDN) is one. I missed the soaring shares during lockdown. But the price has gone off the boil a bit in 2022. I would consider buying on further weakness. And despite the risks, I really am tempted to put a small amount into the very volatile cybersecurity specialist Darktrace (LSE: DARK).

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

Key Points

• Oil prices hit fresh highs not seen for eight years, driven by concerns around Russia/Ukraine
• I can benefit from high prices by considering both share price gains and dividend payments from top oil stocks
• I need to be aware of the volatility that exists when buying stocks linked to commodities

This week, Brent Crude oil prices rose above $100 per bbl, the highest level since 2014. Although this captured a lot of attention, oil prices have been moving higher for the past few months. Even if I go back to Christmas Eve last year, prices were only around $75 per bbl. 2022’s gains have helped to drive top oil stocks higher, boosting profitability. Given the current momentum, here are a few ways I’m thinking of taking advantage.

Aiming for share price gains

The first way is to try to benefit from further share price appreciation. Historically, the shares of top oil stocks have been well correlated to movement in the underlying commodity. Therefore, it’s not that surprising that some of the best performing stocks over the past few months have been in the oil sector. 

For example, the Shell share price is up 18% over the past three months, and almost 32% in the past year. Glencore shares are also up 13% in the past three months and 39% in one year.

Looking to the future, I can consider buying these oil stocks with the thinking that if the oil price continues to rise, I should profit from the share price moving higher as well. Some analysts are calling for Brent to return to as high as $125 this year, which would put it back to levels last seen a decade ago.

Enjoying passive income from top oil stocks

The second way I can aim to profit from top oil stocks is via dividend payments. The higher oil price helps to boost revenues for producers, as the end product is worth more. In this way, higher profits allow the business to allocate some to be paid to shareholders via a dividend. 

For example, in the latest results from Shell earlier this month, adjusted earnings for Q4 swelled to $6.4bn. This was up from $4.1bn in Q3. It noted that this was largely down to higher commodity prices, citing oil and gas movements. As part of this, the business announced an increase in the dividend per share and a large share buyback scheme.

Therefore, if I buy selective top oil stocks that have a generous dividend yield, I can enjoy this money going forward. It’s also a good way of making passive income. Once I’ve made my investment choice, I don’t have to apply much effort to benefit from the dividend stream going forward.

In terms of risk, any stock that’s tied to the fate of a commodity could cause concern. A top oil stock could be run very efficiently, but if the oil price plummets then it ultimately will struggle. Further, some could argue that the oil price is overvalued. If this proves to be the case, then I could be buying at the top of the market.

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

With the pandemic appearing to be almost coming to an end — assuming no new variant comes up — the FTSE 100 stocks that have been lagging behind so far may well begin to catch up. Two such caught my attention recently after they released updates. I liked them even before Covid-19, to be sure. But the last couple of years have made them questionable investments at a time when many others looked like sure-shot bets.

Smith & Nephew: Improving financials

The first of these is the healthcare stock Smith & Nephew (LSE: SN). The stock was put in a unique position despite being a classic defensive during the latest slowdown. Typically, as an investor I would expect its share price to appreciate during a slow down. But since the last economic slump was also associated with lockdowns and the health hazard associated with stepping out of the house, the company took a hit. That is because its big revenues come from supplying parts required for hip and knee replacement surgeries. And these are non-essential medical procedures in many cases. 

As a result, demand for its products fell, which showed up in its results too. It has, however, managed to bounce back up in the past year to pre-pandemic revenues now. Its profits have also risen from the year before, as per the latest numbers released this week. It also expects to continue to improve its earnings next year, all of which are encouraging signs for the stock. However, the one drawback for the stock is its valuation, as measured by the price-to-earnings (P/E) ratio, which is already a bit high. At almost 30 times, I believe that Smith & Nephew could do with a share price dip. I like the stock and I want to buy it in 2022, but I’ll wait for the right time.

InterContinental Hotels Group: FTSE 100 recovery stock

InterContinental Hotels Group (LSE: IHG) is another recovery stock I like. Hospitality has been one of the worst hit industries during the pandemic, and that shows in the state of this FTSE 100 stock. It has fluctuated a lot around a flat trend line over the past year. Still, I think the stock could be in for better times. As per its full-year results for 2021, it has swung back into profits again after showing a loss in 2020. It has also decided to reinstate its dividend. 

But the challenge with this stock is similar to that for Smith & Nephew. Probably in anticipation of better performance, its share price has already run up a lot and it now has a P/E of almost 50 times. Unless there is a really big improvement in its earnings in the next update, I think this is a bit too high. Still, I think that as a cyclical stock its financials are likely to improve and its share price is more likely to rise than not. In this case too, for that reason, I would buy it in 2022 but on any dip that makes it more attractive from a valuation perspective. In the meantime I will focus on cheaper stocks.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended InterContinental Hotels Group and Smith & Nephew. 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.

To answer the question asked in the title right off the bat, the answer is yes. We saw a mini-meltdown just on Thursday, when the stock markets reacted badly to the Russian invasion of Ukraine. The FTSE 100 index closed more than 3% down at sub-7,300 levels. The good news is that as on Friday, much of the losses have already been recovered. As I write, the index is trading closer to 7,500 levels. Heartening as it is, it does not rule out a potential stock market crash. 

Energy prices could go through the roof

And that is because prices could rise significantly. We have already seen an increase in crude oil prices to over $100 a barrel as the news of the war broke. Russia is also the biggest supplier of natural gas to Europe, prices of which could rise as well. Increased fuel costs are bad news at a time when inflation is already high, which has already been seen to create stock market uncertainty in the recent past. 

In the UK, the latest inflation figure is at an elevated 5.5%, which is a 30-year high. The fact that is 3.5 percentage points higher than the Bank of England’s target rate of 2% puts the heating up of prices into perspective. If we pencil in even higher fuel prices, we are also looking at its second-round effects on inflation. This is because fuel is a cost that is factored into all goods and services’ prices, either as heating costs for offices, the costs of transportation, or for that of travel, as examples. This would show up in FTSE 100 companies’ costs and potentially squeeze their margins as well. 

Russian miners could drag the FTSE 100 down

FTSE 100 companies based in Russia could be impacted too. Consider miners like Evraz and Polymetal international, which were the biggest losers in Thursday’s trading. This is bad news for the stock markets in general but particularly bad news for dividend investors. Evraz is a generous dividend payer, accounting for around 15% yields before its share prices plummeted recently. Polymetal International too had a pretty decent dividend profile till recently. Ironically, I had bought the precious metals miner as a hedge against total disaster. But to put it in the words of British pop singer Robbie Williams “I sit and talk to god and he just laughs at my plans”!

So what happens if there’s a stock market crash?

And these are just two reasons that could drag the stock markets down. There are more that I will not get into here. Because I now want to focus on what could go right. There are already signs that the stock market rout has been contained for now. This is not the first time that we have been through a market shock. Remember March 23, 2020, when the FTSE 100 index fell to 4,993? What a long way we have come since. And I do not think that the situation is so bad (at least not yet) to engulf the world and for me to make a run for a nuclear bunker. On the contrary, many of my investments are showing gains today. So instead of focusing on a stock market crash, I will keep calm and carry on investing!

Manika Premsingh owns Evraz and Polymetal International. 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 been a turbulent week for FTSE 100 shares as military action in Ukraine shakes market confidence. Britain’s flagship share index posted its biggest one-day fall since the middle of the Covid-19 crisis on Thursday. More market volatility could be around the corner too as the geopolitical fallout of the conflict spreads and concerns about inflation grow.

That said, there are plenty of FTSE 100 shares out there that I consider to be too cheap to miss after last week’s mini stock market crash. That’s even after share prices rallied at the end of the week.

These FTSE 100 shares both look brilliantly cheap on paper. Here’s why I’d buy them for my stocks portfolio today.

10.3% dividend yields

I think Persimmon (LSE: PSN) offers the sort of all-round value that’s hard to ignore. Concerns that housebuilders might have to pay massive compensation for the cladding crisis have hit investor appetite for these businesses of late. So has the prospect of slowing homes demand as interest rates rise.

This all means that Persimmon’s share price just touched its cheapest since mid-2020. It’s also down 11% over the past 12 months. Still, as a lover of value shares, I think the company’s worth a close look at current prices. Not only does it trade on a dirt-cheap price-to-earnings ratio of nine times, its dividend yield sits at a monster 10.3% too.

I’d buy the housebuilder because I think interest rates will remain well below their historical average, meaning that homebuyer interest should remain strong. I also believe that Persimmon’s own building product manufacturing operations leaves it better protected than its rivals to shelter the problem of rising costs. I therefore expect profits here to continue rising strongly.

Another FTSE 100 bargain to buy

Now B&M European Value Retail’s (LSE: BME) shares don’t trade as cheaply as Persimmon’s. But I think its P/E ratio of around 14 times for the next two financial years still offers decent value when one considers the prospect of solid upgrades to earnings forecasts over the next couple of years.

The value end of the retail industry has been growing strongly for more than a decade now. It was tipped for further solid expansion even before inflationary pressures put British consumer spending power under the cosh. A survey by Kantar Public last week showed that 52% of households are finding it harder to pay their bills. This is up sharply from the 44% reported in January.  I don’t think it’s a coincidence that data like this comes around the same time that B&M is reporting better-than-expected sales.

As a long-term investor I’m concerned about B&M’s lack of an online shopping channel. This could see it lose out to the competition as the popularity of e-commerce grows. Still, it’s my opinion that B&M’s robust position in the fast-growing value retail segment — helped by its ongoing store expansion programme — makes the FTSE 100 firm a great buy for my portfolio today.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value. 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 investor Warren Buffett is in his nineties and started buying shares while he was a schoolboy. That gives him a huge advantage over many other investors – he has vast, deep experience of the stock market both at its highs and lows.

That is why Buffett has been able to navigate market volatility many times in his long career while still achieving outstanding long-term performance in his portfolio.

At a time of heightened market volatility, here are three of Warren Buffett’s classic moves I am applying to my own portfolio.

Focus on the investment case

Buffett owns shares that have seen big price swings in stormy markets. Take Coca-Cola as an example. Between February and March 2020, as the pandemic took centre stage, the drink maker lost 36% of its value.

In other words, if Buffett had sold the shares, held the money for a month, and then reinvested in the same company, he could have increased the size of his stake by over a third. Instead, he did nothing with his Coke shares that month. In fact, he has done nothing with them for decades except hold them.

That is because when Buffett buys shares, he is investing in what he sees as a compelling investment case for the long-term. Once he owns them, he tends to keep them for as long as he believes in that underlying investment case. He does not try to time the market, or focus on short-term price swings even if they could make him a big profit. Buffett is not a trader, but a long-term investor.

Warren Buffett spreads risk

Buffett is recognised as one of the great stock pickers of his and perhaps any generation.

So, why does he end up owning some stocks that perform poorly? When he dumped his Tesco position in 2014, for example, he lost almost half a billion dollars. The reason Buffett owns some shares that perform poorly is the same reason he does not put all his money in one share that has performed very well for him, like Apple. It is because Buffett never knows what will happen to a share in future. Neither does anyone else.

Of course, Buffett has theories about what he thinks should happen to a share. He also has thoughts about what he hopes will happen. But unexpected events can change the fortunes of even the best-run companies. That is why Buffett diversifies his portfolio across different shares and business sectors. If market volatility pummels a share he owns, the overall impact is reduced by having a diversified portfolio. The same is true for me — and any other investor.

Keeping calm

Finances can be a big source of worry for people. Many investors have sleepless nights fretting about the impact market volatility may have on their portfolio.

Not Warren Buffett. For him, the chance of bigger gains is not worth even one night’s interrupted sleep. As he says, “When forced to choose, I will not trade even a night’s sleep for the chance of extra profits”.

Keeping calm during market volatility is about one’s state of mind. But, like Buffett, I can build my portfolio to help me achieve the state of mind I desire.

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

Passive income is a regular income stream that requires very little effort, such as dividend payments from shares. Although, there are some fantastic high dividend-paying stocks in the FTSE 100, I’m a fan of exchange-traded funds (ETFs). In particular, a passive income ETF is one of my favourite long-term investments for hands-off returns.  

There are three benefits to this kind of investment. First, an ETF allows me to invest in multiple companies by just holding one share. Second, it pays me a regular dividend at certain intervals throughout the year. Third, there’s also the potential for price appreciation of the fund.

My passive income ETF pick

The dividend-paying ETF I’m looking at is one I’ve studied before, iShares FTSE UK Dividend GBP UCTIS ETF (LSE: IUKD). This fund aims to replicate the return of the FTSE UK Dividend + Index by investing in the 50 firms with the highest dividend yields in the FTSE 350.

It has a low expense ratio of 0.4%, good trading volume, and is large. Looking at the firms included shows just how well it’s diversified across industry sectors. For example, established well-known companies like Rio Tinto, National Grid, and Vodafone are just a few of the largest holdings.

One of the main risks in a high-yield fund like this is the dividend trap. Some of these high-paying companies will be mature businesses that are great at generating free cash flows. However, some will feel they have to maintain high dividends to keep their investors happy when the company itself is not growing. In the long run, such companies could falter.

That said, there’s a 5% cap on any individual holding in the fund, which should provide resilience in case any individual company significantly underperforms. 

Long-term income stream

This ETF’s performance has been good, gaining around 20% over the last 12 months and around 5% year-to-date. Despite recent market wobbles, I’m still optimistic about the 2022 outlook for the UK stock market and it wouldn’t surprise me if this fund continues to gain.

The current dividend yield is 5.78%, which is paid quarterly. Though it’s less than some of the best dividend payers in the FTSE 100, it’s good enough for my own portfolio. The trade-off is that I’m giving up the chance of higher returns from individual stocks for the benefit of owning multiple companies through a single share.

No investment is guaranteed, but I’m looking for a simple, long-term, passive income stream. I think buying and holding this fund might be easier for me over the long run than hunting for individual dividend-paying shares. This ETF rebalances each year as the index updates. This means that companies move in and out of the fund automatically, without any input from me.

Therefore, on balance, this passive income ETF is an investment I’d be comfortable keeping for years. I would be happy to consider this for my own holdings as part of a balanced portfolio.

Niki Jerath has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone. 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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