Listed companies completely wiping out shareholders is something usually only associated with the very smallest companies. Yet I think the Cineworld (LSE: CINE) share price could be heading to oblivion.

A major tangle

The straw that breaks the camel’s back could be Cineworld’s legal battle with rival Cineplex. The crossing of swords has now been dragging on since an ill-timed acquisition attempt of the latter by the former, right as the pandemic obliterated much of the leisure industry. Cineworld may be required to pay C$1.2bn (£700m) in damages awarded to Cineplex for pulling out of the acquisition.

The flip side of this is if an appeal court rules in Cineworld’s favour and it avoids this huge penalty, it’s hard to see any scenario other than a massive – and possibly sustained – share price increase.

The other issues

There are three other major issues for me. One is shorting of the shares by professional investors. Another is Cineworld’s debt, and the third is the increased number of shares in issue.

Turning to the former, new research shows that Cineworld Group is currently the most shorted UK-listed company. The fact so many well-incentivised people are betting against the company worries me as a long-term investor. Of course, they could be wrong and get burnt – many of those that short stocks (ie, bet a share price will fall) have lost money shorting Tesla for instance. In this case, it could be just another red flag. 

Cineworld also has a massive debt pile that stood at $8.3bn, although the company should generate significant free cash flow to potentially help meet its debt servicing costs in future, now that we’re avoiding lockdowns. 

The number of shares in Cineworld has more than doubled since 2018. So to grow earnings per share is now much harder – simply because there are so many more shares, meaning all earnings are more diluted. Given there’s no dividend, investors need to see growth. The major problem is that there doesn’t appear to be any. Even if there hadn’t been a pandemic – was this a high-growth company?

Any silver linings? 

While a good slate of new films including Top Gun: Maverick set to come out, recovering cinema attendance, and the possibility of listing its Regal Cinemas division in the US markets to raise the much-needed cash to pay down its debt, all could help save Cineworld – and potentially make investors money after the shares have fallen so far – overall, I think the shares are a bad investment.

Beyond the reasons above, Cineworld bulls (those backing the shares to rise) can also point to positive cash flow in the fourth quarter of 2021. That could be a prelude to a strengthening of the currently very weak balance sheet.

That’s possible and I hope for holders that they’re right. However, I think with its weak finances, lenders would be unwilling to provide much-needed credit to Cineworld. Ultimately that’s another reason why the share price is so vulnerable to dropping. Clearly, a lot depends on the outcome of the Canadian court case.

A high risk punt

I honestly wouldn’t bet against the shares going to zero and for that reason, there’s no way I’d buy the shares. I can’t think many would argue that the shares are anything other than a high-risk punt.

Andy Ross owns no share 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.

Gas prices hit an all-time high in December 2021 and oil recently hit $90 a barrel, which is the highest level since 2014. Given both supply-side and demand-side factors, I believe that prices could rise further this year. If so, this exchange traded fund (ETF) might be a no-brainer buy for me in 2022. I’m looking at iShares S&P Commodity Producers Oil & Gas UCITS ETF (LSE: SPOG).

Backdrop

First, on the supply side, I see constraints. There are continuing Russia-Ukraine tensions and the fallout that could ensue from any escalation could be major. Russia is a huge oil exporter. If there’s any hindrance to supply, the global price of oil will rise. In terms of gas, Russia is also a major supplier of gas to central Europe and vast quantities are carried through Ukraine. Any kind of supply problem may now have a global rather than just a European impact. This is because the US is now talking about helping Europe with any shortages by exporting tankers of its own gas reserves.

Second, I expect increasing demand this year. I think world economies will move towards opening fully as we put the Omicron variant of Covid behind us. Hopefully, as we get back to normal, travel and tourism numbers will improve, commuting will increase and generally the demand for oil will rise.

The ETF

The ETF I’m looking at aims to track the S&P Commodity Producers Oil & Gas Exploration & Production Index. I think this fund offers me the best opportunity to take advantage of rising commodity prices.

This index measures the performance of some of the largest publicly traded firms involved in oil and gas extraction and development around the world. The companies must also meet liquidity and market capitalisation requirements to be included.

Looking into some of the holdings reveals some heavyweight natural resources companies. The two biggest holdings are ConocoPhillips and EOG Resources. The former is Alaska’s largest crude oil exploration and production company. The latter is involved in oil discovery and processing.

One risk to be aware of for this ETF is that in 2021 we saw a push by governments around the world towards clean energy. It’s possible investors might continue to turn away from traditional energy companies and direct money towards the renewables sector. This would likely be negative for the fund.

Outlook

But overall, I’m optimistic. The profits of the companies in this ETF rely heavily on the price of oil and gas. As prices rose in 2021, the fund’s price increased by over 70% and year-to-date it’s already up 10%.

Though nothing is certain, I think the prices of natural resources will rise again this year. In fact, I think oil could hit $100 a barrel. Looking back at 2014 when oil prices were last at this level, the fund was trading at over 1,900p. If we get there again, this would mean an increase of over 30% from where we are today.

For that reason, I think that for my own portfolio, iShares S&P Commodity Producers Oil & Gas UCITS ETF could be a no-brainer buy for 2022.

Niki Jerath does not own 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.

Signs of economic turbulence in China suggest trouble could be coming for commodities producers like FTSE 100-quoted Antofagasta (LSE: ANTO). Critical data this week actually showed manufacturing PMI in the raw-materials-hungry nation fell to two-year lows of 49.1 last month. January’s reading came amidst a fresh spike in Covid-19 cases and was below the benchmark of 50 that shows sector contraction.

It’s possible that Antofagasta could see demand for its copper drop in the near term as the pandemic rolls on. After all China consumes around half of the world’s copper. However, I think the long-term benefits of owning this FTSE 100 stock could outweigh the near-term dangers. It’s my opinion that the firm’s profits could soar as global copper demand booms in the years ahead.

An electrifying stock to own

Thanks to its high conductivity, copper is a perfect material for use in consumer electronics, electric cars, wind turbines and a host of other fast-growing areas. This quality also makes it an essential commodity in modern infrastructure and so demand should also soar as urbanisation takes off in emerging markets.

Analysts at Citi have predicted that “decarbonisation-led consumption growth” in the copper market “is set to outpace mine supply growth over the next five to 10 years”. Indeed, the bank reckons red metal consumption will rise 24% between now and 2030.

Antofagasta’s shares currently trade on a forward price-to-earnings (P/E) ratio of 16.4 times. This is middling value to be honest, but this rating doesn’t reduce the company’s appeal to me. As one of the biggest copper miners, it’s well placed to capitalise on the copper boom with its portfolio of world-class mines. I think it could prove to be a lucrative buy for me.

Inflationary headaches

The markets have had to digest a further slew of scary inflationary data on Wednesday. But as a UK share investor I continue to sniff out an opportunity here.

In the UK, the British Retail Consortium advised that shop price inflation almost doubled month-on-month to 1.5% in January. A mix of rising energy costs, poor harvests and labour shortages all helped prices rise at their fastest pace for a decade.

Meanwhile consumer price inflation in the eurozone has soared to new record highs of 5.1%, data showed today. Price growth had been expected to slow to 4.4% and today’s news is particularly worrying given the European Central Bank’s reluctance to raise rates.

A FTSE 100 share for the gold rush!

So what does all this mean for share investors? Well I believe that buying precious metals stocks like Fresnillo remains a good idea. Prices of gold and silver rise when inflation balloons as investors seek out safe-haven investments. So in my opinion, things are looking good for this FTSE 100 mining business.

Digging metal from the earth is a complicated business. And investors in Fresnillo face the risk that problems could occur that might affect the company’s ability to capitalise on strong precious metals values. However, I think the potential rewards of owning the Mexican miner outweigh the risks.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Fresnillo. 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.

Electric vehicle (EV) maker NIO (NYSE: NIO) saw its stock soar in 2020, and then peak in February 2021 at $64.60. But since that high point, the NIO share price slumped to just $24.51 by the end of January 2022. That’s a 12-month fall of 57%, with a drop of 22.6% in January alone. To put it into perspective, though, we are still looking at a gain of 150% since IPO.

NIO isn’t the only company in the EV market to suffer in 2022. No, it’s better known sector fellow Tesla Motors has been tumbling too. From a 52-week high of $1,243 in November, Tesla stock fell around 25% by the end of January. Part of that must be down to a slowing of Tesla’s rollout of new models, and a cooling of Nasdaq stocks in general.

One thing does make NIO rather tricky for investors to put a valuation on. And that is its lack of profits. Sales forecasts look impressive though, with some analysts suggesting the firm’s sales could reach close to $10bn in 2022. Is that realistic, and what will sustainable profit figures look like? Not knowing the answers to those makes NIO look like a risky investment to me at the moment.

Still, it’s building a new manufacturing facility, so we’re going to see capacity growth. And those sales predictions might well come good.

NIO share price valuation

We can get a better idea of valuation in the sector by examining Tesla. That firm is in profit, and that means it has a meaningful P/E ratio to go on. Right now, on today’s Tesla share price, we’re looking at a hefty multiple of 190 on a trailing 12-months basis. And that’s after the shares have fallen back from their peak. Had they remained up there, we’d be looking at a trailing P/E of over 250.

A part of the NIO share price fall, then, looks like it might simply be a bit of valuation reassessment. It happens a lot with growth stocks, particularly high tech ones. And bearish spells can be triggered by early investors deciding to pocket a bit of their profits.

Price-to-sales comparison

How do the valuations of these two EV manufacturers compare? Though we don’t have profits at NIO to examine, we can look at sales-based valuations. My colleague Rupert Hargreaves at The Motley Fool has calculated an estimated price-to-sales ratio of around 3.3 for NIO. That’s based on a market cap of $33bn at the end of January, and $10bn of sales in 2023. Tesla’s comparative measure stands close to 16.

Why is NIO valued apparently so lowly compared to Tesla? Part of the reason must surely be the company’s Chinese base. Investors, particularly Western ones, tend to see a lot more safety in companies based in the US. The greater trust in US regulators does seem justified to me. We’ve already seen Chinese regulators squeezing US-listed stocks, and that must surely have hurt the NIO share price.

The risks put me off buying NIO shares, even though I suspect they might turn out to be good value now. But I’ll definitely keep watching.

Alan Oscroft 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.

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Investing in penny stocks can be a hair-raising endeavour for some. Low-cost shares like these can be prone to bouts of extreme share price movement. The majority of penny stocks also tend to have weaker balance sheets than other larger-cap companies. This can hamper their growth potential and put them in danger when trading conditions worsen.

I’m confident that buying penny stocks could be a good idea for me, however. I always do a lot of research before buying UK shares so I can root out the weaker bargain shares and find the unloved gems. As a long-term investor I’m also not put off my the prospect of some temporary share price volatility. I’m confident the stocks I buy will rise strongly in value over a period of years.

With this in mind here’s a dirt-cheap penny stock I think could help me make lots of cash.

A top retail penny stock

Shopper spending power is coming under increasing pressure. Bank of England data shows that Britons saved less and borrowed more in December as they battled the problem of rising inflation. There’s only so far this strategy can go, however, as the inflationary bubble expands and many people will have to shop more cleverly if they wish to maintain their standard of living.

TheWorks.co.uk (LSE: WRKS) is a penny stock that could benefit in this environment. The value retailer sells everyday items like books, craft items, board games and toys, demand for which is exceeding even the company’s lofty expectations. Like-for-like sales rose 14.5% (on a two-year basis) between May and October. And demand has remained strong since then, the penny stock says, up 9% in the following 11 weeks.

Strong online trading has helped turbocharge demand for TheWorks’ goods too. And I’m confident that continued investment in its e-commerce channel will provide a cornerstone for long-term profits growth. I think the low-cost retailer’s a great buy despite the threat from supply chain problems that could result in stock shortages and higher costs. The Works also faces competition from other retailers operating in the fast-growing value retail sector.

Too cheap to miss?

The Works, at current prices of 63p, trades on a forward price-to-earnings (P/E) ratio of 6.8 times. This is well below the widely-accepted value watermark of 10 times and in my opinion fails to reflect its proven resilience in difficult conditions.

What’s more, City analysts think the company will begin paying dividends soon after axing them at the height of the pandemic. This follows its pledge “to bring forward its review regarding dividends” at last month’s half-year results announcement. This is thanks in large part to the company’s rapidly-improving balance sheet (net cash soared 90% year-on-year to £17.8m as of October).

A total payout of 2p per share is predicted by City forecasters for this financial year (to April 2022). This results in a juicy 3.2% dividend yield. And things get even better for financial 2023. Analysts are predicting a full-year payout of 3.1p. This nudges the yield to an even-better 4.9%. I think The Works is a brilliant penny stock for me to buy 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.

There are not many FTSE 250 companies that can boast an 18-year unbroken run of dividend increases.

Clarkson (LSE: CKN), a worldwide leader in shipping services, has quietly gone about its business of keeping world trade moving for the last 170 years, but until recently it was a business that I knew little about.

A Christmas conversation with a friend, whose son had recently started work in London as a trainee shipbroker, was my entrée to Clarkson. Before looking at the inner workings of this company, though, I thought it best to understand a bit more about the notable current challenges facing the shipping sector.

Why is there a supply chain crisis?

Prior to the Covid-19 pandemic, the spat over tariffs between the Trump administration and the Chinese government had already caused significant volatility in worldwide trade. The subsequent impact of Covid-19 was immediate and hard hitting.

Overnight, the demand for fossil fuels collapsed, leading to the incredible short-term reality of negative oil prices. Tanker ship contents were unsaleable and market players rushed to offload these cost-sapping cargos.

Surprisingly, though, as the full effect of the pandemic began to bite, there was a sudden increase in demand for consumer products worldwide, as locked-down populations changed their behavioural patterns.

Spending on services — such as travel, hotels and restaurants — obviously collapsed, but home-based consumers soon ramped up demand for hard goods, such as electrical products and homeware materials.

A fall in manufacturing capacity and the available resourcing of ports and shipping led to the perfect storm – resulting in the lengthy delays we now face in securing that new car or television.

With all this volatility, is it therefore a good time for me to invest in the shipping sector?

My immediate thought is that such volatility means that it is an area surely best avoided at this time. Some further research of Clarkson, though, demonstrated just what a robust operator this company is and piqued my interest further.

The company generates around 75% of its total revenue from shipbroking services and has been able to maintain consistent performance throughout the pandemic. It is also no slouch in embracing new sectors, such as the supply and development of the offshore renewables business, which bodes well for the future.

Clarkson looks after both its staff and its shareholders. Bonus payments are high and dividend payouts over the years have typically ranged from 65% to 75% of its total available earnings. The company does, however, retain a substantial cash buffer, allowing it to maintain its commitment to increased dividends in leaner years.

A short trading update issued in January mentioned that the company expected its underlying profits for 2021 to exceed £69m (50% higher than comparable 2020 numbers). On that basis I expect that its earnings per share will exceed pre-pandemic levels, and that the dividend payment will be comfortably increased for another year.

Going forward, I believe that Clarkson will continue to be a market leader in the shipping services sector. However, with an estimated price-to-earnings (P/E) ratio in the 20s and a dividend yield of around 3%, it’s not cheap at 3,260p.

Whilst I trust in management’s ability to maintain dividend payouts for the foreseeable future, I think I will wait a while longer before looking at this stock again.

Fergus Mackintosh 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.