Warren Buffett has had a successful career as a stock picker – and I think I can benefit from his advice. Applying lessons from Buffett, here are two UK shares I would consider buying for my portfolio today.

Recurring profit potential

Buffett likes investing in utilities. Indeed, electricity distribution networks in Yorkshire, Lincolnshire, and North East England all contribute to profits at Buffett’s company, Berkshire Hathaway.

The financial appeal of electricity distribution is simple to understand. Demand is high and will likely remain that way for many years to come. But the cost and logistical challenges of building an electricity distribution network can be very high. That means that many such networks face little or no competition. This lack of competitors can help support a profitable business, although price regulation may keep profits beneath a certain cap. There is also a risk that costs could increase if a distributor needs to change its network to adapt to shifting patterns of electricity consumption. Despite the risks, electricity distribution can be very rewarding.

That is the business model at energy distributor National Grid. The company made profits of £1.6bn after tax last year. It is a consistently generous dividend payer and the shares currently yield 4.5%. I would be happy to tuck them away in my portfolio for their long-term income potential. Warren Buffett does not own National Grid shares, but I think it has many of the characteristics of the sort of business in which he invests. 

Long-term brand power

Buffett is a big fan of iconic brands. That is because they help a company achieve pricing power. As customers are loyal to a brand, they are willing to pay for it. That can help a business generate substantial profits.

In his portfolio, Buffett has shares in brand owners such as Coca-Cola and Kraft Heinz. Another company with a worldwide portfolio of premium consumer brands is UK giant Unilever. I reckon owning brands used daily by billions of consumers, including Knorr and Surf, gives Unilever substantial pricing power. That translates into profits, which last year came to around £5.6bn after tax.

Selling at a premium price can be profitable, but those profits may fall if costs increase. That is why price inflation of ingredients is a risk to a company like Unilever. Indeed, the company is grappling with inflationary pressures at the moment. In the long term, I expect cost pressures to ease. The pricing power of Unilever’s brand portfolio should stay strong, though. That is why I would happily add it to my portfolio at the current share price.

Following Warren Buffett

Something else about Warren Buffett’s investment strategy I find noteworthy is that he is a long-term investor, not a trader.

If I bought Unilever and National Grid for my portfolio, I would also be happy to take the long view and hold the shares. Both companies have solid businesses that I expect can stay profitable in the coming years. Putting them in my portfolio today could help me benefit from that profitability.

Christopher Ruane owns shares in Unilever. The Motley Fool UK has recommended Unilever. 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.

While the FTSE 100 index has had a good run over the last year, this doesn’t tell the full story when it comes to UK shares. Below the surface, there’s been a lot of carnage recently, with many stocks pulling back significantly.

Here, I’m going to highlight two beaten-down stocks that now have substantial upside, according to City analysts. I own both of these stocks, and I’d be very comfortable buying more shares at their current levels.

City analysts see massive share price upside here

Let’s start with Volex (LSE: VLX). This is an under-the-radar manufacturing company that specialises in power cords and cables. Last year, this stock was trading near 500p. However today, it can be snapped up for under 280p.

There are a number of things I like about Volex from an investment point of view. For starters, it operates in a number of high-growth markets including the electric vehicle (EV) and data centre industries. As a result, the company is growing at a prolific rate right now. For the 26 weeks to 3 October 2021, for example, revenue was up 45% year-on-year to $292.7m.

Secondly, management has ‘skin in the game’. At present, executive chairman Nat Rothschild owns around 39m Volex shares (worth over £100m). This means it’s very much in his interests to boost the share price.

Additionally, the valuation is very low. After the recent share price fall, the forward-looking price-to-earnings (P/E) ratio is less than 15. 

Of course, there’s a few risks to consider here. One is supply chain disruptions. Another is higher costs. 

All things considered, however, I’m very bullish here. It’s interesting to see that analysts at Canaccord Genuity Group have a price target of 510p for VLX. That’s more than 80% above the current share price.

Strong long-term growth potential

Another UK stock that has taken a big hit recently is Keywords Studios (LSE: KWS). It’s a leading provider of technical services to the video gaming industry. Last year, KWS shares were trading near 3,300p. Today however, they’re near 2,430p.

While this stock has lost its upward momentum recently, I remain very bullish on the outlook here. That’s because the video game industry is absolutely booming right now, and looks set to get much bigger in the years ahead.

Indeed, according to Mordor Intelligence, the global gaming industry – which is now bigger than the film and music industries combined – is expected to grow by around 10% per year over the next five years. This industry growth should provide huge tailwinds for Keywords Studios, which is essentially a ‘picks and shovels’ play on the industry.

After the recent share pullback, KWS now has an attractive valuation, in my view. At present, the forward-looking P/E ratio is about 32, which I think is very reasonable given the growth the company is generating at present (19% organic revenue growth in 2021).

One risk to consider is that the company has just appointed a new CEO who doesn’t appear to have much gaming experience. Acquisition setbacks are another risk to consider as Keywords is a frequent acquirer.

I’m comfortable with these risks however. It’s worth pointing out that analysts at Berenberg have a price target of 3,450p for KWS. That’s about 40% higher than the current share price.

Edward Sheldon owns Keywords Studios and Volex. The Motley Fool UK has recommended Keywords Studios. 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’m searching for the best stocks to buy to help me make excellent investor returns by 2030. Here are two penny stocks on my radar today.

An exciting electric car stock to buy

The Bradda Head Lithium (LSE: BHL) share price has more than tripled in value over the past year. Strong drilling results at the firm’s lithium projects in Arizona, and signs of growing demand for electric vehicles (EVs), have helped power the business higher. To illustrate the point, Bradda Head’s latest exploration update in January suggested that confirmed resources at the Basin East project will be “significantly larger” than previous forecasts. Fresh news on drilling work is being released in the current quarter.

Lithium is a key component in helping EVs to move around. And Bradda Head’s assets — it also owns a couple of lithium brine assets in Nevada — are located very close to EV car-building country. Tesla’s Fremont facility is in California and its under-construction Nevada gigafactory is just up the road too. There are also many battery manufacturers located around the West Coast to which Bradda can sell its lithium as well.

EV sales look set to soar

Of course Bradda Head has a long way to go before it can start pulling its lithium out of the ground. And any setbacks on this front could have a significant impact on the company’s share price. That being said, I think the quality of the firm’s assets and bright forecasts for EV demand in the years ahead still make the stock a top buy today. The International Energy Agency (IEA) said annual EV sales will reach 25.8m a year by 2030 (based on green policies in mid-2021).

That being said, recent news flow suggests that actual sales could actually exceed even the IEA’s super-bright forecasts. Just last week US President Biden announced plans to boost EV sales by investing $5bn in the country’s charging network. I’m expecting new ambitious plans from across the globe to follow as nations strive to achieve their emissions targets.

Another green penny stock I like

Sticking with the green theme, I think US Solar Fund (LSE: USFP) could also be a great share to buy as demand for renewable energy soars. As the name suggests, this London-listed penny stock specialises in generating energy from photovoltaic panels in the US. More specifically its assets can be found in California, North Carolina, Utah and Oregon.

I like US Solar Fund because it operates in a country where legislation is particularly encouraging for renewable energy stocks like this. I’m also a fan of the fund because it continues to make progress in building its portfolio. Earlier this month it acquired an extra 25% stake in the 200 MW DC Mount Signal 2 solar plant in Southern California. This takes its total holding to 50%.

US Solar Fund could suffer temporary profits trouble if the sun fails to shine. The company doesn’t make any money if it isn’t making energy! But from a long-term view, I still think this penny stock could deliver excellent returns if I buy.

Royston Wild 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.

According to trading platforms provider IG, the FTSE 100, the index of the UK’s largest public companies, delivered an annualised total return of 7.75% between 1984 and 2019. That figure includes the gains from dividends as well as from movements in share prices.

And I’d target future gains from the FTSE 100 when aiming to build a retirement pot of money to supplement my State Pension.

How I’d aim to double the State Pension

The full new State Pension is worth £179.60 per week. And that means to double that amount of retirement income, I’d need to build a fund capable of paying me an income of £9,339.20 a year.

One way of getting that sum every year could be to put some money in an index tracker fund and collect the dividends. And right now, the FTSE 100 is yielding about 3.2%. So if I put £291,850 in a FTSE 100 tracker it would provide me with a dividend income of around £9,339.20 each year.

Of course, dividend rates will likely vary from year to year, but I reckon the sum of £291,850 is a decent sum to aim for if I want to double my State Pension.

One way of building up the money over a working lifetime could be to save regularly into a FTSE 100 index tracker. And by making sure all dividends were automatically reinvested, I could compound my gains while building up the investment pot.

Using the 7.75% total return figure as my expectation, an online compound interest calculator tells me I’d end up with enough money after about 43 years. That’s if I keep investing £2.50 every day into the tracker.

Variations and seeking higher returns

In reality, I’d invest the money monthly when my wages arrive. So every month, I’d send around £76 to my FTSE 100 tracker investment. And I’d need to increase that amount every time my income increases. And that way, my eventual pot of money will likely keep ahead of the eroding effects of inflation over the years.

In practice, my illustration is too simplistic. The outcome will likely vary from what the figures suggest. For example, dividends can change over the years and so can the total returns from the index. But I do think the illustration is useful because it shows what can be possible from investing a small amount of money and compounding gains over a long period of time.

My investment strategy follows the principles of this illustration but with some enhancements. For example, I don’t invest only in the FTSE 100 index. I’m also following foreign indices, such as America’s S&P 500 in the pursuit of higher annualised returns.

And on top of that, I invest regularly in the shares of individual businesses after carrying out thorough research. But there are no certainties or guaranties that my returns will be positive. And it’s worth me bearing in mind that all shares carry risks. Nevertheless, I’m looking forward to a wealthier retirement than I might otherwise have endured with just the State Pension.

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.

Growth stocks are facing significant amounts of turbulence at the moment. This is due to the soaring rates of inflation, which reached 7.5% in the US during January. Such a figure has not been reached for 40 years. High inflation is bad for growth stocks for two reasons. Firstly, it lowers the value of future cash flows, which is where these growing companies obtain large amounts of value. Secondly, it increases the likelihood of large interest rate rises in the future, which makes it far more expensive to borrow. These risks make it very important to be discerning when picking stocks. Here’s one I think is far too oversold and one which I believe remains too expensive.

A Latin American e-commerce giant

MercadoLibre (NASDAQ: MELI) has achieved significant growth over the past few years. Indeed, in 2020, the company recorded revenues of $3.97bn, which was a 73% increase from the previous year. It also expects revenues of over $7bn in 2021, which is similar growth to last year. This places the firm on a price-to-sales ratio of around eight, which is far lower than it has been in the past.

The company’s growth prospects are also strong. This is because MercadoLibre is expanding in both its e-commerce and fintech sectors. Both these sectors are unpenetrated in Latin America, and therefore there is certainly room to grow, especially as MercadoLibre is a market leader.

There are some risks though. For example, many of the jurisdictions where MercadoLibre operate in are seeing political instability. Argentina is one example, as the country has experienced mass hyperinflation over the past few years. This could potentially disrupt MercadoLibre’s business plan. Further, a significant amount of recent growth may have been due to the pandemic. As such, once consumers go back to physical stores, growth may slow.

But while these are risks, the recent dip in the MercadoLibre share price seems too good an opportunity to miss. Therefore, this is a growth stock I’ll continue to add to my portfolio.

A growth stock I’m avoiding

The recent dip in many growth stocks doesn’t mean that they are all bargains. In my opinion, Palantir (NYSE: PLTR), which makes software and analytics tools for the government and other companies, is one example.

But firstly, there are several positives with the company. For example, over the past year, it has managed to see strong revenue growth of around 40%, rising to around $1.5bn for 2021. It has also managed to add many new customers. For instance, in the third quarter, it added 32 new customers. This demonstrates that Palantir’s business plan is working.

But I’m concerned about the valuation of the company. In fact, even after the recent dip in the Palantir share price, it still has a price-to-sales ratio of 18. This is twice the P/S ratio of MercadoLibre, even though Palantir is seeing slower growth. It is also deeply unprofitable, meaning that high inflation is likely to have an ever more profound effect. Therefore, this is a stock I’m leaving on the sidelines.

Stuart Blair owns shares in MercadoLibre. The Motley Fool UK has recommended MercadoLibre. 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 I wrote yesterday, I’m increasingly concerned about the growing risks of a stock market crash. Indeed, after three years of strongly rising global share prices, such a setback wouldn’t come as any surprise to me. As asset prices inflate, markets become less stable, which usually leads to heightened volatility. That’s something we’ve definitely seen since the end of 2021, especially among US stocks. However, each stock market crash is unique, so here are five lessons to take away from previous UK bear (falling) markets.

1. Some stock market crashes last years

The broad-based FTSE All-Share index has been around since 1962. According to investment platform A J Bell, this UK index has undergone 11 bear markets in 59 years. Some of these lasted several years. For example, from 31 January 1969 to 27 May 1970, the FTSE All-Share lost 37% of its value in a 481-day bear market. Even worse, from 15 August 1972 to 6 January 1975, the index collapsed by 72.6% over 874 days. But the longest post-1962 bear market lasted 1,167 days from 31 December 1999 to 12 March 2003. During this time, the FTSE All-Share more than halved, losing 50.9% of its value. I remember this long, drawn-out stock market crash almost as though it were yesterday.

2. And some are over in months

Not all UK stock market crashes are multi-year meltdowns. Thankfully, some are mercifully brief. For instance, the bear market from 17 August to 28 September 1981 lasted just 42 days, when the index dropped by 21.5%. Likewise, the 63-day bear market of 6 June to 8 August 1975 left the index 20.8% lower. And most recently, the ‘2020 flash crash’ lasted 62 days from 17 January to 19 March, plunging 37.2% before rebounding. I expect you remember this latest, brief bear market?

3. Some stock market crashes are brutal

Here in the UK, we endured two terrible stock market crashes in this millennium. From 31 December 1999 to 12 March 2003, the FTSE All-Share index collapsed by 50.9% during the ‘dotcom bust’. During the global financial crisis, the index crashed by 48.6% from 25 June 2007 to 3 March 2009. But the big daddy of all UK bear markets lasted from 15 August 1972 to 6 January 1975. With the oil price quintupling and UK inflation (consumer prices) exploding, this index imploded, losing almost three-quarters (-72.6%) of its value. Yikes.

4. Share prices sometimes take years to recover

After stock market crashes, it usually takes prices longer to recover than they did to fall. On eight out of 10 occasions (excluding the 2020 crash), the FTSE All-Share took longer to make up lost ground than it did to lose it. The average market downturn lasted 385 days, versus an average of 648 days to recover from bear-market losses. The longest recovery lasted 1,529 days from 3 March 2009 to 10 May 2013. Nasty.

5. Shares eventually bounce back

Based on the FTSE All-Share index, the average UK stock market crash since 1962 has lasted just over a year. Meanwhile, the average fall has been 36%. But on every occasion (including January 2020 to now), the index has eventually bounced back to reach higher highs. This tells me that buying quality stocks during bear markets tends to pay off handsomely in the long run. For example, in 2002, the UK stock market crashed by roughly a quarter. But by buying cheap, bombed-out shares, I almost tripled my money in that terrible year.

Finally, until I can see a good reason to stop, my family portfolio will keep buying cheap UK shares with high earnings yields and fat dividends!

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Morrisons and Ocado 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.

My best share to buy right now, and a company that already occupies a commanding position in my portfolio, is broadcaster ITV (LSE: ITV).

I think the market has unfairly punished this business over the past couple of years. Even though the firm faces significant pressure from international streaming giants, which are chipping away at its market share, the enterprise is fighting its corner.

Revenues from advertising are set to hit a record for 2021, and the business is investing heavily in its ITV Studios division. I think these qualities should underpin the company’s growth in the years ahead. On top of these tailwinds, the business is also trading as a relatively undemanding evaluation.

These are the primary reasons I think the organisation has fantastic potential over the next five to 10 years. 

One of the best shares to buy now 

Whenever I start looking at a potential investment, I always try to understand its negatives. To put it another way, I want to understand any risks the company faces and why investors may be selling the stock. 

When it comes to ITV, it seems as if there are a couple of reasons why investors might be avoiding this stock. First of all, the company is fighting for market share with the likes of Netflix, Disney and Amazon. These organisations are significantly bigger than the domestic business, with much deeper pockets. They can afford to spend more on content and marketing their services to new consumers.

They also do not rely on advertising spending to generate income. ITV’s second-largest income stream is advertising income, which can be cyclical. Indeed, in 2020, advertisers pulled their spending to preserve cash during the pandemic, which sent revenues at the group plunging.

They have since recovered, but there will always be a risk that impulsive advertising spending could hit the group’s top and bottom line. By comparison, the streaming giants do not have to worry about flighty cyclical advertising revenues. 

Digital media 

As well as having to compete with these media giants, ITV has also been struggling to develop its digital strategy. While the company is heavily reliant on its traditional media business, it has been boosting investment in the online business to try and improve awareness and customer engagement. This strategy is working, but the enterprise is still predominantly a terrestrial broadcaster. 

ITV faces some challenges. However, I believe it is the best share to buy right now because it looks as if the market undervalues its potential. 

The ITV Studios business now generates more than half of its revenue. This division gives the company a toehold in the international content production market, which is booming.

It also means the corporation has exposure to the vast marketing budgets of its competitors. As such, the American giants’ attack on the firm’s market share is not a disaster for the business. It should benefit from some of the additional production spending.

Advertising 

Traditional media channels such as TV still feature prominently in advertisers spending plans. Despite warnings that the sector would suffer as the world moves online, spending on traditional media channels has only continued to increase.

Television advertising works, and media agencies are well aware of the power of this medium. The very fact that ITV’s ad revenues rebounded so quickly after the pandemic and are on track to reach an all-time high last year is an excellent example of the robustness of this market. 

Further, the group is making significant progress in expanding its online business. According to the company’s third-quarter trading update, online viewing was up 39% in the third quarter of last year.

The corporation is capitalising on this growth by developing its own digital media strategy. It has rolled out an initiative to help advertisers launch on its online platforms through a media buying venue called Planet V. This will help the business reduce its dependence on outside agencies, hopefully improving profit margins. 

The business has also agreed on partnerships with other media companies, including Virgin Media, to roll out its digital ITV hub platform on set-top boxes. This should increase consumers’ visibility and give the group more sway with advertisers. 

Best share to buy right now for value and growth 

ITV will never be able to take on the likes of Netflix. The firm is just far too small, and it is miles behind in its online streaming efforts. 

Nevertheless, it is making headway with its own strategy. The company’s digital presence is expanding rapidly, which will help it reduce its exposure to traditional media channels.

At the same time, the company is doubling down on its production business. This could be a real area for growth over the next couple of years. International media organisations are pumping billions into the UK economy’s media sector, and ITV stands to grab a significant share of this spending, thanks to its experience and brand visibility. 

Considering all of the above, I think the market is spending too much time focusing on ITV’s challenges rather than its potential. This presents an opportunity for long-term investors like myself.

Undervalued

At the time of writing, shares in the enterprise are trading at a forward price-to-earnings (P/E) multiple of just 8.3. That appears outstandingly cheap. Many of the company’s international peers are trading at P/E ratios of 20 or more. 

Based on the valuation discrepancy, and the company’s potential over the next few years, I think this is the best share to buy right now. 

That is why I already own the stock and would be happy to buy more for my portfolio today. As the business returns to growth, I believe there is a high chance the market could re-rate the stock to a higher valuation. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Rupert Hargreaves owns ITV. The Motley Fool UK has recommended Amazon and ITV. 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 hold most of my investments in a Stocks and Shares ISA. With an allowance of £20,000 a year and substantial tax benefits, these accounts are the perfect vehicle to hold equities, in my opinion. 

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

And there is one company in my ISA with a higher allocation than any other, reflecting my belief in the business and its prospects. 

Stocks and Shares ISA champion

The top holding in my ISA is the insurance giant Admiral (LSE: ADM). 

I initially bought this company as an income investment. At the time of my initial acquisition, the stock offered a dividend yield of around 7%.

However, since my first purchase, I have been able to get to know the business a lot better. As my understanding of the enterprise has developed, I have started to view it not only as an income investment but also as a growth play. 

Admiral is one of the largest car insurance providers in the UK. This is a very competitive market, which is already pretty saturated. 

To help drive growth, the enterprise has been investing heavily in its overseas divisions. It has also been expanding into new markets here in the UK. This changing growth outlook is the reason why I have been adding to the holding in my Stocks and Shares ISA. 

Growth potential

After several years of losses, these initiatives are now starting to yield results. The international businesses have started to break even. And the company’s relatively new loan business in the UK is tantalisingly close to earning a profit. 

The group is also making headway in expanding into other insurance markets in the UK, such as pet and home insurance. It is using its existing presence in the market to entice customers to the brand by offering discounts on different products.

Unfortunately, the factors that drove the company to look for other growth avenues in the first place still exist. The UK insurance market is incredibly competitive. Admiral cannot take its position in the market for granted.

What’s more, the cost of repairing vehicles is increasing at a faster rate than insurance prices. This could become a headache for the company if the trend persists. 

Ticks all the boxes

Still, despite these challenges, I think Admiral has fantastic potential over the next couple of years as its growth initiatives start to pay off. At the same time, the company remains an income champion.

At the time of writing, analysts have pencilled in a prospective dividend yield of 5.8% for 2022. This income potential remains the primary reason I hold it in my Stocks and Shares ISA and would be happy to buy more of the stock. 

Rupert Hargreaves owns Admiral Group. The Motley Fool UK has recommended Admiral 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.

Plenty of FTSE 100 stocks could make great buys for my portfolio right now. But one has stood out for me for some time now. I am talking about the packaging provider Smurfit Kappa (LSE: SKG), which caught my attention once again when it released its full-year results for 2021 earlier this week. Both its revenue and earnings showed robust growth of 18% and 16% respectively. And it also has a positive outlook for 2022. 

Relatively cheap FTSE 100 stock

This only adds to its good financial performance in the past. It is little wonder then that in the past five years, the stock has almost doubled. And going by its relative price, I reckon it could rise even further. It has a price-to-earnings (P/E) ratio of 19 times, which is just north of the FTSE 100 P/E of 17 times. I expect that this gap could widen over time though, going by Smurfit Kappa’s prospects. 

Structural shifts in its favour

As an e-commerce stock, it might have been helped by the recent spurt in online shopping. But I do not believe that it was a one-off increase, but has in fact accelerated a structural shift in its favour. Moreover, as the economy continues to recover, consumer spending is quite likely to keep rising. Just today, numbers for the UK economy were encouraging. Growth for 2021 came in at 7.5%, a bounce back after the slump we saw in 2020. 

Inflation is a stumbling block

Of course inflation could play spoil sport, holding back consumers’ ability to buy more as everything becomes more expensive. The company has also mentioned “unprecedented cost inflation” in its update, which reflects that high prices could hurt int two ways. But over the long term, say 10 years, inflationary trends are likely to even out. And that is the kind of holding period I have in mind for buying the stock.

As I see it, the e-commerce sector can show a whole lot of growth in the next few year and stocks like this one will only gain because of a boom in online spending. This is especially so because it is geographically diversified. This means that even if some of the more developed markets become saturated over time, it can potentially continue to find new pockets of growth. 

Analysts are bullish

Interestingly, just to see if my opinion is shared by others, I checked on the forecasts for the stock. Turns out that all five analysts whose share price targets have been compiled by the Financial Times expect its price to rise in the next 12 months. The rise isn’t expected to be anything spectacular. The most optimistic see it at 13%, but that is not too bad, I believe. And if continued, could result in some pretty decent gains over the years. 

These forecasts could change if the circumstances change, of course. But for now, I see a very good chance that Smurfit Kappa’s stock will continue to do well. I have already waited for too long to buy it, and now I think it is finally time to do so. 

Manika Premsingh 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.