I’m searching for the best cheap stocks to buy for my shares portfolio in 2022. There are many top low-cost British stocks for me to choose from but this one has really caught my eye. I think it could deliver striking profits and dividend growth over the medium-to-long term.

Earnings are tipped to soar

Commercial transport business Wincanton faces some significant headwinds in the near term as fuel costs rise. Petrol and diesel prices in the UK have just hit record highs and they could keep soaring too as oil supply shortages could persist for some time.

As a long-term investor I’m still thinking of buying Wincanton today however. City analysts believe the business should grow earnings 18% in this fiscal year (to March) and by mid-to-high single digits in the following two years too. These predictions reflect expectations of rising demand for logistics services as the economy bounces back and the continued support led by e-commerce growth.

A cheap stock for the e-commerce boom

In fact, it’s my opinion that the threat posed by increasing fuel costs are baked into Wincanton’s low share price. At 385p per share, the transport titan trades on a forward P/E ratio of just 9.4 times.

I’m actually encouraged by the small-cap’s ability to thrive despite the sharp rise in fuel prices that dates back to last summer. Indeed, Wincanton actually raised its full-year profit forecasts last month, thanks to strong trading across all of its divisions.

I’m particularly impressed by Wincanton’s ability to exploit the online shopping boom. And I think this could be the catalyst for strong long-term sales growth. Revenues at its Digital and eFulfilment division leapt 51% in the three months to December, latest financials showed.

Wincanton bought supply chain business Cygnia last autumn for £23.9m to boost its exposure to the e-commerce revolution. But even without the contribution of the new unit, group sales still soared in the third quarter (rising 22% year-on-year).

Rapid dividend growth

Wincanton’s not just a great buy from a growth perspective, however. I’m also thinking of buying the logistics business because of the bright outlook for its dividends. City forecasters think last year’s total payout will rise 16% to 12.03p per share in the current period. This creates a handy 3% dividend yield.

Dividends are tipped to continue rising strongly in the medium term as well. Full-year dividends of 13.57p and 14.3p per share are predicted for financial 2023 and 2024 respectively. Consequently, the yield rises to 3.4% and 3.6% for these years.

Finally, I also like Wincanton as an income share because current dividend projections seem pretty secure, based on expected profits. Those dividends the City anticipates are covered around 3 times by anticipated earnings. This figure is well above the widely-regarded security benchmark of 2 times.

I believe Wincanton offers brilliant growth and income potential right now. And at current prices I think it could be too cheap for me to miss.

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.

BT (LSE: BT.A) shares have been steadily rising since the start of the year, granting investors 16% year-to-date returns. What’s more, they’re risen over 10% in the past 30 days and over 50% in a year. This progress has solidified the telecommunications firm as one of the FTSE 100’s standout performers of 2022 so far.

With the shares climbing above 200p yesterday, could now be the perfect time to buy the stock for my portfolio? Let’s take a closer look.

Reasons to be excited

Earlier this month, BT announced it’s in the process of selling its Premier League rights to US streaming giant DAZN. Valued around the $800m mark, this deal could be great news for BT’s cash flows and investment prospects. These funds will likely be used to aid its fibre-optic broadband rollout, which BT has committed £15bn to over the next five years.

In addition to this, takeover rumours have been floating around for months now. The primary reason for this is the actions of billionaire Patrick Drahi. In June 2021, Drahi bought an unexpected £2.2bn worth of shares, taking a 12.1% stake in BT. He has since increased this stake to 18%, attracting significant takeover speculation. A successful takeover would likely boost BT shares, although as long-term investor, I would never buy purely on takeover speculation.

US private equity firm KKR has also shown interest in the European telecoms sector. Back in November 2021, it put in a €33bn offer for Telecom Italia. If US private equity attention is heating up, then it could trigger a bidding war over BT, which would massively drive up BT shares. This is a phenomenon we saw in mid-2021 with the CD&R takeover of Morrisons.

A final reason for excitement comes from bullish City analyst estimates, which predict that BT could generate £1.8bn in earnings for the fiscal year 2022. This shows an encouraging step forward from the £1.5bn generated in 2021. If such results do come to fruition, I would expect BT shares to keep rising.

Risks for BT shares

One large risk I see for BT shares is the high debt levels the firm operates with. Its commitment to rolling out fibre-optics could be a great long-term investment. However at present, it restricts BT from tending to its debt pile. Debts increased by a whopping £447m for the nine months to December, currently sitting at almost £13bn.

What’s more, with inflation rising, interest rates are also beginning to creep up. Rising borrowing rates are very bad news for a firm with such high debt.

Should I buy now?

Although rates are a risk for BT, inflation has been an issue for some time now, and the shares have continued to creep up. After all, trading at a P/E ratio of 10.5, the stock doesn’t seem expensive. Considering the encouraging share price growth and low valuation, I’d be happy to add BT shares to my portfolio today.  

Dylan Hood 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.

I recently wrote about some of the potential triggers of a stock market crash, with inflation being one of the big concerns. I concluded that “the best move I can make during a crash is to update my watchlist of the shares I like, set price targets for them and be ready to buy more at a lower price when markets settle down.” This remains the case. With that in mind, these are the three UK shares I’d buy after any crash.

Warren Buffett’s view

In a stock market crash nearly everything goes down indiscriminately as investors panic. So it can create an opportunity to pick up high-quality companies at a cheaper price. As Warren Buffett said: “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” This is exactly what occurs when there’s a stock market crash. For long-term investors, a crash is ideal. It’s not necessary to time a share buy perfectly, it’s enough just to get a hopefully great, well researched company at a lower price and better valuation. 

The UK shares I’d snap up

Two of the three UK shares I’d buy I already hold, Legal & General and Diageo. The former as a financial stock would likely fall more heavily than average in any stock market crash. That would in turn push up the already very high dividend yield. The combination of high yield and recovery potential – on top of it being a great business – would make it a compelling long-term buy for me. Of course, Legal & General’s dividend could be cut if times got very hard for a prolonged period, but most crashes are swift and hopefully the next one will be.

I also rate Diageo very highly for its portfolio of power brands. This is despite the fact that it has relatively high debts. Its big upside is that, in my opinion, it’s a high-quality business, given its high margins and returns on capital.

Strong brands

My third purchase would be Norcros. It’s a construction products company selling showers and other items to housebuilders and retailers in the UK and South Africa. It has strong brands including Triton Showers and a strong distribution network selling its wares to customers. This supports growing revenue and profits, as well as an increasing dividend to investors. This combination of growth and income is appealing.

The shares are already on a P/E of only nine. So if they got cheaper, they’d potentially be too cheap for me to ignore. The thing that might hold back strong share price growth is any hiccups in its turnaround of the South African business. That’s the big thing to watch out for. Also, there could be more competition or an increase in the pension deficit.

A stock market crash could be an opportunity to pick up shares in quality companies like Legal & General, Diageo and Norcros. I’d certainly buy any of them, especially the former and latter as they are already quite cheap.

Andy Ross owns shares in Legal & General, Diageo and Norcros. The Motley Fool UK has recommended Diageo and Norcros. 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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I believe renewable energy is the next great growth sector and early investors still have a chance to get in on the ground floor. It can be hard to know which companies will perform well in the future, but I believe AFC Energy (LSE: AFC), based in the UK, has what it takes to become the cornerstone of a new hydrogen economy.

Challenges in renewable energy

Renewable energy is a functional technology, but it is still in need of some development. If we are to achieve a sustainable net-zero goal, we must overcome several obstacles.

Intermittency and energy loss are the two most significant of those obstacles. Wind and solar energy are plentiful and clean, but they are intermittent. We can’t rely on them to provide all of our electricity 24 hours a day, seven days a week. Electricity also loses energy as it travels further, which is why solar panels in the Sahara can’t easily power homes in London.

AFC’s competitive edge

What we need, in my opinion, is a fuel that is energy-dense, transportable, and created from renewable resources. That fuel, I believe, is hydrogen. I also think that AFC Energy could pave the way for its adoption.

AFC specialises in building the fuel cells required to make hydrogen fuel work.

Its competitive edge comes from a patent it has on ‘alkaline fuel cells.’ These fuel cells operate with lower purity hydrogen fuel. Producing hydrogen fuel is currently costly and complex, especially at the purity levels necessary for fuel cell operation. Vehicles that employ alkaline fuel cells will be able to be run at a much lower cost, making them a no-brainer purchase for consumers and businesses alike.

Company fundamentals

2021 was an eventful year for the business. AFC Energy raised income, boosted orders, and produced several new products in 2021. The stock trades at 33.30p, which is a decent price given the company’s size.

However, throughout 2021, the value of the stock dropped 60%, which perplexed me at first. AFC is currently debt-free, and revenues are expected to increase by 100% this year.

In November 2020, the share price soared £350% when AFC announced it had shared its alkaline technology with its research partners. I believe that this vote of confidence in the technology generated a lot of investor excitement, which pushed the share price far beyond its fair value. The slow bleed over last year was just a market correction.

My main concerns

I have some reservations regarding AFC. While revenues are up, profits are down. The firm is growing its operations and reinvesting in itself, but profits still aren’t expected for several years. It’s a high-risk bet predicated on whether hydrogen fuel becomes widely adopted.

But progress is being made in this regard. AFC recently inked a £4m contract with ABB, a Swiss electrical business, for a high-power electric car-charging application, while JCB just made a £1 billion order for hydrogen from Australia.

Every day, the number of applications for hydrogen fuel expands, from industrial machines to high-energy production to something as basic as bringing energy to the developing world. In the next years, any of these markets have the potential for tremendous growth. Alkaline fuel cells from AFC have the potential to reduce expenses for anybody who uses them. It offers a significant competitive edge, making it a worthwhile inclusion to my portfolio.

James Reynolds 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.

Inflation is becoming a bigger challenge every day. Take a look at the latest numbers, for instance. Prices rose by a huge 5.5% in January on a year-on-year basis. It is up from the already high 5.4% number we saw last month and significantly higher than the Bank of England’s target rate of 2%. This poses a challenge to my FTSE 100 investments without a shadow of a doubt. Higher prices hit companies in two ways. One, their costs rise, and two, their revenues could decline as consumers’ costs of living rise.

This hurts right now, because such high inflation numbers have not been seen in a very long time. Thirty years, to be exact. It makes the future of my investments less predictable. But where there are challenges, there are opportunities in macro investing right now. There are a number of ways to look at these opportunities. Here I contextualise them in terms of holding period. If I want to make an investment based on inflation for the short to medium time frame of two to three years, for example, I would focus on oil stocks. 

Oil stocks are a good bet as inflation soars

FTSE 100 oil biggies BP and Royal Dutch Shell have made gains over the past year. But they are still cheap in terms of market valuations. BP has a price-to-earnings (P/E) ratio of 14 times while Shell is just north of 10 times. This is less than the average FTSE 100 ratio of around 16 times. This in itself is reason to believe that there is upside to these stocks. Moreover, the fact that they are still trading below their pre-pandemic levels convinces me even more that they are cheap. Especially now, when oil prices are on a tear. It is quite likely that their profits will continue to rise and so will their dividends.

Of course in the long term, we do not know what happens to big oil. If these companies successfully transition into clean energy producers, they might just be good long-term plays, but we do not know that yet. However, for the foreseeable future, they are likely to be very lucrative stocks to hold. I am planning to increase my positions in both stocks. 

Long-term FTSE 100 play

Next, consider a longer time frame, say the next five years or so. If high inflation persists, what is the eventual outcome? Lower growth, that is what. In any case, we should always be prepared for slowdowns that occur in the course of the business cycle. And there is one set of stocks that is always a good go-to during such times. Defensives, or companies whose products and services’ demand is predictable even during tough times. The one defensive I like for the long-term from among my investments is the utility company SSE, which is also a big clean energy producer. 

The stock has a really low P/E of 6.2 times and a pretty decent dividend yield of 5.3%. This is just slightly smaller than the current inflation level. In its trading statement earlier this month, the company upgraded its earnings guidance, which bodes well for its share price in the future. Its share price has underwhelmed recently, but over the long term, I reckon it will come out ahead.  

Manika Premsingh owns BP, Royal Dutch Shell and SSE. 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.

I have a list of UK shares I’d look to buy cheap for my holdings if a stock market crash were to occur. One pick is Sage Group (LSE:SGE).

Accounting and payroll

Sage Group specialises in accounting and payroll software for small to medium-sized businesses. It recently shifted to a software-as-a-service (SaaS) subscription model to keep up with evolving technology and digital transformation.

As I write, Sage shares are trading for 681p. At this time last year, the shares were trading for 592p, which is a 15% return over a 12-month period. The shares are down almost 20% in 2022. I believe this is because many stocks in growth sectors like Sage, have experienced an investor sell-off. This has been caused by economic uncertainty, and led to investors looking at more defensive options. 

A UK share I like

In the event of a stock market crash, I’d add Sage shares to my holdings. Here’s why.

Firstly, Sage has a good track of performance, although I do understand past performance is not a guarantee of the future. Looking back, I can see it has recorded revenue of over £1.85bn for the past four years in a row. Coming up to date, a Q1 trading update released at the end of last month mentioned recurring revenue was up 8% compared to the same period last year. Furthermore, software subscription was up by 13% and new customer wins were also up.

Sage pays a dividend that could make me a passive income. At current levels, it sports a yield of over 2%. I do understand dividends could be cancelled in the event of a market crash. In Sage’s case, I’d expect the dividend to be reinstated over time.

Sage has a robust balance sheet that should see it through any downturn. When the last crash occurred, many UK shares had to borrow money to keep the lights on. Those with healthy balance sheets were able to weather the storm.

I believe the biggest risk to any stock market crash recovery and general growth for Sage is that of competition. In its respective sector, there are many players. One that springs to mind is tech giant Xero, which recently created its own payroll and accounting offering. This could hinder Sage and eat into its market share.

What could cause a market crash?

In 2020, it was a global pandemic the likes of which this generation has never seen. Other causes can be struggling world economies as well as surging inflation or major wars.

At this moment, it seems struggling world economies and surging inflation could cause a market crash. Inflation in the US is a concern. The last time inflation reached levels such as now was in 1982 and a crash occurred. In addition to this, another of the world’s largest economies, China, has seen its growth slow to levels not seen in approximately two years and is in the midst of a real estate crisis.

Finally, geopolitical tensions between Russia and Ukraine, including the mobilisation of troops, has led many to fear a war could break out. This could also lead to a stock market crash.

It is worth noting no one can accurately predict if a crash will occur. If it does, I have a list of UK shares I’d add to my holdings, including Sage Group.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Sage 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.