One FTSE 250 stock I’d happily add to my holdings at current levels is NCC Group (LSE:NCC). Here’s why.

Cyber security boom

NCC Group is an information assurance specialist, based in Manchester, UK. It helps ensure that businesses are compliant with their software licensing and assists with cyber security.

As I write, NCC shares are trading for 188p. At this time last year, the shares were trading for 265p, which is a 29% decrease over a 12-month period.

Macroeconomic issues have placed pressure on FTSE 250 stocks in recent times. Growth stocks in particular have experienced a huge sell-off. Investors have reverted to defensive options given current uncertainty. I believe this has caused issues for NCC’s share price in recent months.

FTSE 250 stocks have risks

One of NCC’s burgeoning divisions is its cyber security work. This is arguably what the business is best known for too. There is always the threat that NCC itself could come under threat from a cyber security attack. This could be catastrophic and cause irreparable damage to its reputation. This would, in turn, negatively affect performance, investment viability, and any returns.

Recent macroeconomic issues have caused many tech growth stocks to slump. No one can accurately predict how long these issues will last and how long tech stocks may be out of favour. Could this be a short-term or long-term issue? There is a very real risk that NCC shares could be suppressed for some time due to factors out of its control.

Why I like NCC shares

NCC has a good track record of performance. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see the FTSE 250 incumbents revenue and gross profit has increased year on year for the past four years.

Coming up to date, city analysts believe NCC’s earnings could rise as much as 25% in the financial year to May. This would leave NCC trading on a forward price-to-earnings growth ratio of 0.7. Any reading below 1 usually indicates a stock is undervalued. It is worth mentioning these are just forecasts and may not come to fruition.

NCC is a respected name in the cyber security market. Despite the current tech sell-off, evolving technology, the digital transformation, and the threat of cyber security that comes with all of this means NCC is operating in a potentially highly lucrative growth market in the years to come. I believe this will help boost performance growth and returns.

NCC shares would also make me a passive income from dividend payments. I do understand that dividends can be cancelled at any time, however. NCC’s current yield stands at 2.4%. The FTSE 250 average yield is just under 2%.

Overall, I believe NCC shares are cheap at current levels. With over three decades experience as well as a good track record of performance, I believe the coming years could be a lucrative time for it. The recent tech sell-off doesn’t concern me. I invest for the long term and I’d add cheap NCC shares to my holdings now and keep hold of them for a long time.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended NCC. 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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In early 2021, Tesla (NASDAQ: TSLA) CEO Elon Musk identified as “a supporter of Bitcoin”. A month later, Tesla announced it would accept the world’s largest cryptocurrency as a method of payment for its electric vehicles. By the end of the year, Tesla held approximately £1.5bn of the digital currency, according to its recent SEC filing. Cryptocurrencies are novel, volatile assets that have attracted both excitement and criticism. Indeed, Warren Buffett derided Bitcoin as a “delusion” that “attracts charlatans”. With these contrasting views in mind, let’s explore what having a Bitcoin bull as CEO means for the Tesla share price going forwards.

Tesla and Bitcoin: the good, the bad, and the uncertain

The 43,200 Bitcoins that Tesla holds, following a $1.5bn investment in Q1 2021, currently represents around 10% of the company’s liquid assets. Tesla recently championed “the long-term potential of digital assets”, stating Bitcoin offered the company “more flexibility to further diversify and maximise returns on [its] cash”. Tesla is now the second-largest owner of Bitcoin, second only to data analytics firm MicroStrategy and eclipsing the holdings of Block and Coinbase.

However, Elon Musk’s enthusiasm for cryptocurrency has not always been steadfast. Only a few months after announcing its acceptance of Bitcoin as a payment method, Tesla suspended this policy, citing environmental concerns associated with the carbon emissions generated by Bitcoin mining. Given the nature of its business, Tesla’s ESG credentials often come under scrutiny, which perhaps makes Musk’s decision unsurprising and Tesla’s relationship with Bitcoin potentially turbulent in the future. Holding Bitcoin has also hit Tesla’s balance sheet, with the company logging a $101m crypto-related impairment loss in 2021.

‘Big Short’ investor Michael Burry is not alone to point to a developing correlation between the value of Bitcoin and Tesla’s share price. One Bitcoin currently hovers at around £31,000, marking a decline of 11% over the past 12 months. Although early adopters and long-term holders can point to five-year returns in excess of 3,200%, the cryptocurrency has a history of violent crashes and extreme volatility. Tesla has stated it will adjust its digital currency holdings at any time, but if the stock’s fate is intertwined with the story of Bitcoin, only time will tell whether the Tesla share price will end up going to the Moon or come crashing back down to Earth.

Tesla: beyond Bitcoin

There is more to Tesla’s business than its cryptocurrency holdings. The company is the most valuable automotive company in the world with a market capitalisation of around £655bn. Electric vehicles and clean energy technologies remain at the heart of the corporation’s earnings. In this light, Elon Musk’s bullishness on Bitcoin may just constitute a clever marketing ploy to boost the popularity and reputation of Tesla products among crypto-enthusiasts; a theory supported by YouGov polling research.

Today, Tesla’s share price is up 8% over the past 12 months after recently coming down sharply from its 52-week high of $1243.39 per share. Tesla’s five-year return of just under 1,500% is certainly impressive. Is Bitcoin part of the answer to ensuring the next five years are equally profitable for Tesla? Elon Musk seems to think so.

Charlie Carman has no position in any of the shares mentioned. The Motley Fool UK has recommended Block, Inc., Coinbase Global, Inc., and 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.

The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

One of the best penny stocks to buy now for my portfolio is Staffline Group (LSE:STAF). Here’s why I’d add the shares to my holdings.

Staffing and recruitment

Staffline is one of the largest recruitment and training providers in the UK. It operates via multiple divisions. One of these is recruitment, through which it provides flexible workers, approximately 40,000 staff per day on average, to around 450 client sites. This is to a wide range of industries. It also has a training division where it helps people gain new skills and qualifications in order to obtain employment at different levels.

Penny stocks are those that trade for less than £1. As I write, Staffline shares are trading for 54p. At this time last year, the shares were trading for 51p, which is a 5% return over a 12-month period.

Why I like Staffline shares

The pandemic has led to many workers either reconsidering their career options, or looking to retrain. Also, recent statistics compiled by the government show that employment numbers in recent months have surpassed pre-Covid levels. I believe that firms like Staffline, with dedicated resources towards putting workers in jobs, could be very busy.

It seems the pandemic has resulted in a shift whereby people are looking to re-enter the labour force. Training and recruitment will be essential to this. Staffline could see its performance increase based on this data and paradigm shift.

Prior to the pandemic, Staffline had a consistent track record of performance. I do understand that past performance is not a guarantee of the future, however. Many penny stocks do lack a track record of performance. Looking back, it reported revenues of over £1bn between 2017 and 2019. Its revenue levesl in 2021 were slightly less, due to the pandemic and restrictions.

Coming up to date, Staffline reported a post-close update at the end of last month for the year ending 31 December 2021. It reported revenue and profit had increased compared to 2020 levels. A previous position of debt has now been leveraged into a position of net cash to support a robust balance sheet. Full detailed results are due in the coming months. It seems to me Staffline is benefitting from the current rising demand for workers here in the UK.

Penny stocks have risks

The labour market is cyclical, which means there is a higher element of risk. For example, Staffline could see trends change once more and workers choosing to stay put in their current roles. For example, macroeconomic uncertainty often leads to workers looking for stability. This could result in less people looking to make changes to their employment. This could affect Staffline’s performance and any growth ahead.

Overall, I like Staffline shares for my portfolio. I believe its profile, presence, and diversified business model should support growth ahead. The pandemic has changed the way many people look at employment and career prospects, according to data published. I believe Staffline will return to pre-pandemic performance levels, and eventually surpass these too. It looks like a good penny stock option for my holdings at current levels.

Jabran Khan 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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I believe some UK shares are primed for growth ahead and look cheap right now. One example I currently like for my holdings is Learning Technologies Group (LSE:LTG).

E-learning and training

Learning Technologies Group is a market leader in the fast-growing e-learning and training marketplace. Since forming in 2013, the company has grown into a worldwide business with 5,000 employees and operations in over 30 countries across Europe, the US, Asia-Pacific, and South America.

As I write, LTG shares are trading for 166p. At this time last year, the shares were trading for 177p, which is a 6% decrease over a 12-month period. More tellingly, the shares have dropped nearly 30% from 235p per share in September, to current levels. Recent macroeconomic pressures have resulted in a sell-off in growth stocks, which as placed pressure on shares like LTG.

UK shares have risks

Learning Technologies has seen demand increase due to the Covid-19 pandemic and new ways of enabling workforces throughout the world. As pandemic restrictions ease, there is a chance this demand could dwindle unless working habits are set to change forever as a result of the pandemic. Any drop in demand could affect performance and any returns.

The company also has a track record of acquisitions to enhance its offering and boost growth. I usually like firms that complete acquisitions for this purpose but there is always a risk that this strategy doesn’t work out. There are many examples of this among other UK shares when firms over-pay or are unable to amalgamate the new firm into the existing business. This can be costly.

Why I like LTG shares

Despite the recent drop in the Learning Technologies share price, I do believe it operates in a growth market and is well-placed to benefit in the coming years. I believe that the pandemic has changed working habits and how some businesses operate. The rise of hybrid and home working has increased and many firms have vowed to remain the same for the future. Learning Technologies’ market position and presence in many territories throughout the world should see its performance grow, in turn, offering me a lucrative return over time.

Learning Technologies has a good track record of performance. I do understand past performance is not a guarantee of the future, however. Looking back, I can see revenue has increased for the past four years in a row. Coming up to date, it released a full-year post-close update at the end of last month. It revealed revenues “not to be less than £254 million (2020: £132.3 million)”. This represents excellent growth, in my eyes. Detailed full-year results are expected in April.

I like UK shares that make me a passive income through dividend payments. Learning Technologies shares currently sport a dividend yield of under 1%. I expect this to grow when full-year results are announced in a few months and the coming years as I expect growth to continue. I do understand that dividends can be cancelled, however.

Overall, I think Learning Technologies is primed for growth due to digital transformation and I expect the shares to eventually recover. The current share price drop has created a buying opportunity. The post-close update fills me with confidence of growth in the future, and a dividend for a passive income is a bonus. I’d add Learning Technologies shares to my holdings.

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

Warren Buffett is arguably the world’s most renowned investor and with good reason. From 1965 to 2020, Buffett’s holding company, Berkshire Hathaway, has achieved a compounded annual return of 20.0%. In the same period, the S&P 500 gained 10.2%. It comes as no surprise that Buffett’s stock picks are watched keenly by all sorts of investors, including me. While there are many great companies Berkshire has endorsed through investment, I have my eye on one in particular that it has a relatively small position in. 

Hidden in plain sight

Sometimes there is nothing either mysterious or hidden about true value. Like many other people, I am a holder of just one of 1.7bn Visa (NYSE: V) cards in circulation worldwide. A simple look into my wallet reveals the iconic logo that has become synonymous with payments the world over. With 188bn transactions processed in 2020, Visa outstripped its nearest competitor (Chinese giant, UnionPay) by almost 40bn transactions. This makes it the largest payment card network processor in the world.

Buffett’s Berkshire Hathaway currently has just 0.5% of its portfolio in this stock. Visa is therefore one of its smallest holdings. I won’t go into why I think this may be the case. I will say though, that Visa’s numbers suggest a very strong competitive advantage.

Processing payments and profits

By just looking at the profit margins on this business, I can see why Buffett picked it. Over the past 10 years, Visa has consistently grossed 80%. In turn, net profits consistently come in between 40% and 50% of total revenues of $24bn. There are simply not a lot of businesses of Visa’s size that can achieve this – almost none in fact. For investors, the beauty is that Visa is expected to rake in revenues of $28bn in 2022. In 2021, the company generated $15bn in free cash flow. Free cash flow is a metric beloved by value investors as it is a strong indicator of the ability of the business to pay its debts, reinvest in the business, and pay dividends to its investors. 

Visa, Mastercard, American Express, and Paypal have literally been locked in a contest for global dominance since as early as the 1960s. However, as recently as 2013 a threat has arisen in the East in the form of UnionPay. The Chinese-owned giant has 70% market share in Asia-Pacific. Despite having been around for less than a decade, it is already the second-largest processor worldwide by purchase transactions. The advent of more and more new technologies has expanded an already growing research and development budget for Visa and its competitors. It’s also worth noting that Buffett trimmed his position in Visa by 4.3% as recently as November 2021.

Looking into the future 

While the industry continues to grow, it’s clear that Visa’s dominance will mean it can grow to keep up. This was shown by how quickly it pivoted its systems to accommodate cryptocurrencies. Visa has a truly rare competitive edge that I think will last well into the future. Buffett recognised this and I’m betting he was right.

Stephen Bhasera 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.

Having fallen over 40% since its IPO, Trustpilot (LSE: TRST) shares could face headwinds in the near to medium term. This article will list out two reasons as to why I think this stock may have a tough year ahead, and won’t be buying it for my portfolio any time soon.

Reason #1 – the US market is competitive

As Trustpilot continues to expand within Europe, CEO Peter Muhlmann also recognises that the bulk of earnings potential comes from the US, which it has been trying to penetrate with the abundance of merchants available on the other side of the pond. However, the company has had trouble growing its market share due to Yelp’s and Google Reviews’ heavy dominance in the country.

The reviews space is one that has low barriers to entry. As such, first movers’ advantage is paramount in order for successful penetration to occur, as seen with Trustpilot’s success in Europe, and more specifically in the UK. Trustpilot still has not got a unique enough selling proposition to convince retailers in the US to pay the premium on using their services. Therefore, until Trustpilot develops a groundbreaking feature, I am expecting its influence to be minimal and growth to be slower than expected.

Reason #2 – the economic landscape

With inflation at highs not seen in decades on both sides of the Atlantic, Trustpilot will struggle to get more merchants on board as increasing labour costs have forced the hand of many businesses to cut costs. In the UK alone, inflation is expected to peak at 7.3% in April, with interest rates expected to rise to at least 1% by the end of the year. This is accompanied by the US market pricing in as many as seven rate hikes as inflation hit 7.5% in January, a high not seen in four decades.

All this data certainly does not bode well for SMEs, which is the majority of Trustpilot’s customer base, and could possibly hinder further growth. As a result, I will be paying close attention to the firm’s earnings report that is scheduled to be released on the 22nd of March along with its guidance, which will paint a more accurate picture of the company’s future outlook.

The silver lining

With all of that being said, however, there could still be a potential upside to Trustpilot’s shares. Given that the stock is currently trading at close to its all time low at 159p, buying in at this price could end up being a bargain. In a year where the macroeconomic landscape is constantly changing with an extremely volatile equities market, a positive earnings report in late March along with positive guidance and a surprise decline in inflation could send the shares into recovery mode. I will be assessing the earnings report next month, which could possibly change my position of the stock.

John Choong 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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