BT Group (LSE: BT-A) shareholders endured a rocky time in 2021. They saw the value of their holdings climb in the first half of the year, but then turn tail and collapse again by mid-October. Since then though, the BT share price has been on the rise again, and the momentum has continued into 2022.

In January, BT shares climbed a further 15%. That takes them back to pre-pandemic levels. But though we saw a gain of more than 50% in the 12 months to the end of January, the longer-term trend is less impressive. Over the past five years, BT shares are still down around 35%. So what’s behind the early 2022 uptick?

The return of BT’s dividend will surely have boosted optimism a little. Prior to the pandemic, BT had been paying big dividends while reporting steadily falling earnings. The yield reached nearly 7% for the year to March 2019, but I doubted that could be sustained for long.

It suspended payments when the pandemic hit. But it reinstated them at the halfway stage reported in November. The 2.31p per share, if doubled for the full year, would yield approximately 2.4% on the current BT share price. The final instalment is likely to be a bit bigger though, so I wouldn’t be surprised to see a total yield of around 3.5%. That’s just guesswork on my part, and I do wonder if it’s a smart move for a company carrying such huge debts.

Biggest BT share price driver?

There’s more than just the dividend behind the latest BT share price gains. It comes from the direction of Altice UK, a company owned by French telecommunications billionaire Patrick Drahi. Mr Drahi has been buying into BT, upping his stake from 12.1% to 18% as of December. That spurred takeover rumours, which gave BT shares a boost.

Under UK stock market rules, the move can’t progress to a takeover attempt before June. And Altice UK said in December that it “does not intend to make an offer for BT“. At the time, Mr Drahi said of the BT board and management that “we continue to hold them in high regard and remain fully supportive of their strategy“.

What happens now?

But you can never say never when it comes to takeover possibilities. And things can change in the future. Meanwhile, a lot of investors are expecting a strategy of creeping influence. Whatever Mr Drahi’s long-term plan, one thing is certain. When a major investor takes an increasing stake in a company, people sit up and take notice. And they typically expect something to change going forward.

It’s happened recently with Unilever, as it’s become clear that activist investor Nelson Peltz has been building up a stake. Investors there appear to be expecting some shake-ups as a result. Could the same happen at BT? I certainly think there are things that could be improved at BT. And I suspect the Drahi influence on the BT share price will continue.

Alan Oscroft owns 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.

Following the recent bout of stock market volatility, I have been looking for cheap UK shares to add to my portfolio. As the UK economy begins to recover from the pandemic, I think these shares have the potential to benefit from both a valuation and growth uplift in the years ahead.

With that in mind, I would acquire all three of the stocks outlined below for my portfolio today with an investment of £1,000. 

UK shares with growth potential

The first company on my list is the technology retailer Currys (LSE: CURY). I have been watching this business for some time, as the group has been undergoing a significant restructuring over the past couple of years.

It looks as if these restructuring efforts are now beginning to pay off. According to the latest projections from the company and City analysts, the group’s net income will hit £133m in 2022 and £179m in 2023. This puts the stock on a 2023 forward price-to-earnings (P/E) multiple of 6.7. 

Unfortunately, due to the uncertainties of the retail industry, this growth is not guaranteed. Any number of factors could cause the enterprise to miss these projections, including inflation pressures and a deterioration in consumer confidence. 

Still, considering the company’s growth potential and cheap valuation, I think this is one of the best UK shares to buy with £1,000 today. 

Market expansion

I do not think any article on cheap UK shares would be complete without mentioning a homebuilder. Shares in Bellway (LSE: BWY) are currently selling at a forward P/E multiple of just 7. Despite the booming UK housing market, the stock is trading at this depressed level. 

Investors have been selling the shares as they are concerned about its exposure to the cladding scandal. All builders face significant financial penalties due to the sector’s involvement in the scandal. This could be a considerable risk to the company, and it is something I will be keeping in mind. 

However, considering the state of the UK housing market and the fact that demand is outpacing supply, I think the corporation should be able to overcome any short-term headwinds with long-term growth. 

As well as the company’s cheap valuation and growth potential, the stock also offers a dividend yield of 4.5%.

Trading giant

The buying and selling of UK shares can be a lucrative business, especially during periods of market volatility and uncertainty. This is why I would buy CMC Markets (LSE: CMCX).

The financial trading firm allows investors to bet on the direction of markets using derivatives and other products. It takes a tiny slice of profit from each trade. All of these little transactions add up to big profits. 

The biggest challenges the company faces are regulation and competition. Dealing with regulatory and competitive forces could significantly impact profit margins and growth.

Despite these risks, the stock sells at a forward P/E of 9.3 and offers a dividend yield of 4.2%. With a cash-rich balance sheet and further growth projected, I think the stock has huge potential over the next few years. 

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

When I am searching for dividend stocks to add to my portfolio, I am looking for companies that not only have high yields, but offer sustainable dividends as well. 

There is no point in me buying shares in a company with a dividend yield of 10%, only for the corporation to go ahead and cut the payout in a couple of months. This would be a colossal waste of time and energy on my part. 

With that in mind, here are two dividend stocks yielding 7%, or more, that I would buy for my portfolio today, considering their long term potential. 

Long-term dividend stocks

The first enterprise on my list is the energy group Diversified Energy (LSE: DEC). I think this is a fascinating business with outstanding income credentials. It is predominantly a natural gas producer and has hedged most of its future output. This provides the company with visibility over future cash flows. 

As such, I believe the enterprise has some desirable income credentials. Indeed, at the time of writing, the stock supports a dividend yield of 11%. This appears sustainable, thanks to the company’s hedging programme and plans to grow production with low-cost, low-risk assets. 

That said, one risk I will be keeping an eye on is the company’s exposure to hydrocarbon liabilities. The costs of operating in carbon-intensive sectors are rising, which could impact Diversified’s cash flows. These challenges are something I have to keep in mind when analysing any oil and gas enterprise. 

Still, despite this risk, I believe the gas business is a well-managed entity with some of the best income credentials on the market today. 

Golden income 

It seems as if the resource sector is currently out of favour with the market. This could present an opportunity for long-term investors. 

For example, shares in gold miner Centamin (LSE: CEY) are trading around 10% lower than 2019 levels. Even though its net profit is expected to hit $125m in its current financial year, up from $88m for fiscal 2019. 

The unpredictable gold price is the biggest challenge the company has to deal with. The group’s hedging programme is less extensive than Diversified’s, so gold price volatility can significantly impact the bottom line. 

Nevertheless, what the corporation lacks in stability, it makes up for in income. Analysts believe the stock will yield 7.2% this year. Although the payout is set to decline to 5.7% next year, I think the company has room to increase the dividend in the near future. The firm has no debt and a net cash balance of $274m.

Thanks to these qualities, the company makes it onto my list of top-quality dividend stocks. What’s more, the price of gold has been on the up recently, which could generate a windfall for the enterprise. 

Rupert Hargreaves 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 a lot of options available for building a passive income. But most require quite considerable time and dedication to achieve, especially for those who decide to start their own business. I prefer the far less time-consuming investing route using a Stocks and Shares ISA.

By buying established, high-quality, and large-payout dividend stocks, I can quickly put together a diversified portfolio generating passive income. And, best of all, I’d only have to do about five minutes of reading each week to keep track of things. Of course, this isn’t risk-free and can end up going sideways. So let’s explore the dos and don’ts of this approach.

I’d only buy mature industry leaders

Since my goal is passive income, I’m only really interested in buying shares that pay dividends. While it’s less common, there are young businesses out there that do this. But, personally, I’m avoiding these types of companies for my passive income portfolio. Let me explain why.

Dividends should only be paid to shareholders out of the excess capital of a business. In other words, only return money to investors if there is no better use for it internally. Young companies are typically in high-growth mode and can have unstable income.

In my experience, that’s not the hallmark of an investment capable of paying a consistent and growing dividend. This is why I prefer mature businesses for a passive income strategy. The growth rate might be slow, but it does come with consistency.

Note that I emphasised the word ‘should’ earlier. That’s because even a mature business may suffer through a down period. And every once in a while, there have been cases where a bad management team decides to take on debt to maintain dividends.

In my eyes, this is a giant red flag. Yes, it keeps my passive income flowing in the short term, but in the long run, it’s not sustainable and damages the business’s financial health.

Needless to say, that’s not a desirable trait for a portfolio built to generate sustainable passive income for years, or even decades, to come.

Which passive income stock should I buy?

In my opinion, boring is always best. A simple boring consumer goods business like Unilever (LSE:ULVR), the group behind the Ben & Jerry’s ice cream and Dove shampoo, isn’t going to be a source of explosive growth. But its vast amount of brand loyalty keeps its customer coming back for more. And that generates significant pricing power against the margin pressure of inflation.

Today, I could buy shares and enjoy a 3.9% dividend yield that has been steadily climbing over the last 10 years, even during the pandemic. Of course, past performance is a pretty poor indicator of what could happen in the future. And suppose the company isn’t able to produce premium products that are superior to cheaper alternatives. In that case, brand loyalty may start to waver over time.

It’s a risk to consider. But one worth taking, in my opinion. That’s why I think Unilever could be one of the best passive income stocks to get started with when building my dividend portfolio.

Zaven Boyrazian has no position in any of the shares mentioned. 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.

In addition to growth stocks, my Stocks and Shares ISA includes several dividend shares. I really like the regular income that they provide. Every few months, I’ll receive a share of their profits in the form of a dividend payment. And it’s quite nice to see that money flowing into my account.

Searching for the best

I’m always on the lookout for opportunities and right now, I can see several dirt-cheap dividend shares offering an above-average yield. Currently the average FTSE 100 yield is 3.3%. But with some homework, I reckon it’s possible to find some quality shares that offer around 6%. To illustrate that, on a £1,000 investment, that’s £60 in dividend payments.

In addition to the dividend yield, there are several other factors that I look for when tracking down the best dividend shares. Just as with a buy-to-let property, as an investor, I’d like my rental income and the value of my property to rise. Similarly with dividend shares, I’d like both my dividend income and the value of my shares to increase. So overall, I prefer to find companies that have the potential to grow both dividends and their share prices.

Reliable dividend shares

Next, I’d want to see if the expected dividends are reliable. For instance, can a company afford to consistently pay them, and what is its track record? There are no guarantees and it’s possible a company could suspend payments for a number of reasons. This happened to many businesses during the March 2020 Covid crash when plenty of companies were faced with uncertainty regarding their earnings.

That being said, I reckon it’s possible to reduce the risks and raise the chances of reliable dividends. To do so, I’d look for dividends that are covered by a company’s earnings. This is known as the dividend cover, and it measures the number of times a company can pay dividends to its shareholders. At the very least, I’d look for a reading above one.

In my opinion, a business that has paid dividends for 30 years is far more of a reliable prospect than one that has just started this year. That’s why I like my dividend shares to have some form of track record and history in paying dividends.

Dirt-cheap top picks

There seem to be dozens of stocks that meet my criteria at the moment. Three that have caught my eye in particular are Rio Tinto, Legal & General, and Vodafone. On average, the three companies have a dividend yield of 6.2%, a dividend cover ratio of 1.4, and 23 years of back-to-back payment history.

In addition, together they have a price-to-earnings ratio of just 10x. I reckon that’s ‘dirt-cheap’ for established shares with upwardly trending earnings. 

If I had invested in all three picks one year ago, I’d be a happy chap right now. On average, they’ve gained 13% including dividends. I reckon that’s pretty good. So what might I expect for the year ahead? Well, I’d like to see more of the same. Although not guaranteed, it’s encouraging that city analysts expect all three to grow their earnings over the coming year. I’ll have to report back in one year to see what happened.

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

For much of the past decade, the Lloyds (LSE: LLOY) share price has been a perennial underperformer. However, I think that could be about to change.

As the Bank of England embarks on a tightening cycle, which could see the interest base rate rise significantly from current levels, I believe there is a growing chance the stock could rise 100%, or more, from current levels. And that means investor sentiment towards the business could change significantly. 

Lloyds share price outlook 

It is almost impossible to say when this will happen, but I can point to some indicators that I believe will drive a re-rating of the share price. A combination of factors will help improve investor sentiment towards the business, ultimately leading to a higher valuation and share price. 

The most important factor is rising interest rates. As these increase, Lloyds will be able to lift the amount of interest it charges to borrowers. As one of the largest mortgage lenders in the country, this should significantly impact overall group profitability. 

At the same time, the improving economic outlook should stimulate demand from borrowers. As Lloyds’ bottom line improves, it should have more capital to lend to individuals and businesses. This combination of factors could form a dual tailwind of both more lending and lending at higher rates of interest. 

And on top of these factors, I also need to consider the bank’s other growth initiatives. These include its expansion into the credit card business, build-to-rent property and wealth management.

All of these businesses have higher returns than the traditional lending arm. As such, they could all have a significant positive impact on group return on equity (a key measure of banking profitability) and, as a result, the Lloyds share price. 

Unfortunately, the group’s growth cannot be taken for granted. It is facing multiple challenges as well as the tailwinds outlined above. These include inflation pressures and competition in the banking sector. And if there is a sudden economic downturn, banks are usually the first to feel the pain. I will be keeping a close eye on these factors as we advance. 

Nevertheless, the fact remains that the company’s outlook is significantly improving, which could have a transformative impact on investor sentiment. 

Improving market sentiment 

As mentioned above, the stock has been a relatively lousy investment to own since the financial crisis. A lack of growth has put investors off, and this sentiment has weighed on the share price. A negative circle has formed whereby investors avoid the Lloyds share price because its performance has been so poor, putting off new investors and holding back the stock. 

However, as growth returns, I think sentiment will change. What’s more, I think the stock looks dirt-cheap. The shares are currently selling at a price-to-book (P/B) multiple of 0.7. International peers, reporting earnings and book value growth, are trading at P/B multiples of around 1.5. 

These figures suggest that as the company returns to growth and investor sentiment improves, the stock could double in value. That is why I would buy the shares for my portfolio today as a growth and recovery play. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking 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.

I like to set myself targets. Recently, I thought about how much passive income I could feasibly earn each month. It can’t be so high that I’d have to take excessive risks to try and achieve my goal. But too little, and it wouldn’t really be worth it. This made me settle on £500 per month. But can I really generate this much in passive income? After all, this is £6,000 per year.

But, with a little planning, here’s how I’d aim to achieve this through long-term investing.

Assessing my options

The first thing I need to do is buy cash-producing assets. There are many to consider, and each has its own balance of risks and rewards. Generally speaking, the higher the risk, the higher the reward (or cash flow) I may receive.

I view risk as the likelihood of not receiving cash from my assets. The higher this risk is, the greater the chance I won’t receive my passive income. Then again, I should receive higher returns to compensate for this increased risk.

To start, I could buy at a 10-year UK government bond. It pays 1.29% in interest each year right now. This is low, but I’m almost guaranteed to receive my interest from the government. 

Buy-to-lets can also be a great way of generating cash flow from assets. The risk is higher because tenants may not pay rent, or the apartment might stay unoccupied for a period of time. My main issue with buy-to-lets, though, is it’s not truly a passive option. I’d have to manage repairs, bills, and any tenants. So I’m going to look elsewhere.

My favoured place to generate passive income is the stock market. I can buy shares of cash-producing companies and earn a cut of the profits. If I receive dividends, then I’m generating truly passive income.

For example, the current dividend yield of the FTSE 100 is 4%. I could buy the iShares Core FTSE 100 ETF today so I’d gain exposure to this stock index. A 4% yield is higher than the interest rate of a 10-year government bond. However, the risks are higher because dividends are certainly not guaranteed.

Based on a 4% dividend yield, I’d need a portfolio value of £150,000 to achieve my £500 per month passive income target. This may seem high, but by taking a long-term view and investing small amounts each month, I think I could achieve this.

Investments I’d make for passive income

I think I can stretch higher than a 4% dividend yield though. To do this, I’d look to buy shares of companies in my portfolio. Were I was able to, say, achieve a 5% dividend yield with my investments, I’d only need a portfolio value of £120,000.

To do this, I’d buy stocks such as Legal & General and Aviva, which both operate in the financial sector. I also own shares of Rio Tinto, Somero Enterprises and British American Tobacco so my portfolio is more diversified. It’s certainly riskier owning single stocks, but each of these companies offers at least a 5% dividend yield to compensate for this risk.

The key thing for me would be to stay consistent with my investment process and gradually build my portfolio value. Then, over time, I could hopefully achieve my £500 per month passive income target.

Dan Appleby owns shares of Aviva, British American Tobacco, Legal & General, Rio Tinto and Somero Enterprises. The Motley Fool UK has recommended British American Tobacco and Somero Enterprises, Inc. 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 think these UK and US shares could be among the best growth stocks to buy this decade. Here’s why I’d snap them up for my own shares portfolio.

Forget about Lloyds!

I’m happy to ignore UK-centric banks like Lloyds and Natwest. To my mind, the prospect of weak GDP growth in Britain over the next several years makes them unattractive stocks to buy today. I could be wrong, of course, but I’d much rather invest in banks that offer their services in fast-growing emerging economies. One such stock I’d happily load up on today is Banco Santander (LSE: BNC).

Let me put in an early disclaimer here. Like Lloyds and other domestic operators, Santander faces significant danger in the near term as Covid-19 drags on and inflation soars. The company has an extensive footprint in Latin America where economic conditions are deteriorating sharply.

In Mexico, for example, the economy has just moved into a technical recession, partly due to ongoing supply chain issues. Meanwhile in Brazil — a market from where Santander generates around 28% of underlying profit — is already in recession.

Conditions there are tipped to worsen before they improve too, as political uncertainty rises ahead of October’s presidential election and inflation rockets.

One of the best banking stocks to buy?

As a long-term investor I’m still considering buying Santander shares however. That’s because I expect demand for its banking products to recover strongly as the decade progresses. I certainly believe sales growth will be more impressive than at Lloyds, for example.

Financial services penetration in Latin America remains extremely low versus developed markets. This gives the likes of Santander plenty of business to win as wealth levels in the region balloon.

Analysts at McKinsey & Company have said that “the Latin American banking market is among the fastest growing in the world”. This gives Santander enormous opportunity, given its high profile in these fast-growing territories. The bank sits in the top three banks by market share in key Latin American economies Brazil, Mexico, Chile and Argentina.

A top electric vehicle stock

Therefore I think Santander could enjoy excellent earnings growth in the next 10 years. And I believe the same could be said for Chargepoint (NYSE: CHPT) too. Why? This US share provides charging points that keep electric cars running. It operates this infrastructure in North America and Europe as so is well-placed to exploit the global EV boom.

On Monday, luxury car builder Aston Martin announced it will only sell battery-powered and hybrid vehicles from 2026. It’s one of many major manufacturers who are stepping up investment in EVs and illustrates the bright sales outlook for low-carbon vehicles. Analysts at BloombergNEF think they could command a 24% market share of all vehicles in the US by 2026, moving to 50% by 2030.

But Chargepoint could suffer some near-term trouble if supply chain issues continue to hit EV production. This problem would affect the use of its charging points by drivers. However, as someone who looks at investing from a long-term perspective, I’m still considering buying the business right now.

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

Warren Buffett is considered to be the greatest investor of all time. Over the past seven decades, he has built a vast fortune using a relatively straightforward strategy for selecting stocks and shares.

Buffet, or the Oracle of Omaha as he is sometimes known, only buys equities that he believes look cheap compared to their potential. He is also looking for businesses with a solid competitive advantage, which will help them outperform the competition.

I have been using the same approach to find cheap FTSE 250 shares to add to my portfolio. 

FTSE 250 value stock 

The first company on my list is retailer Marks and Spencer (LSE: MKS). After a couple of years of struggling for direction, it now looks like this business is back on track.

The firm has been investing heavily in its food division and rejigging its clothing offering. The reopening of the UK economy after the pandemic has been a significant tailwind for the company.

It now expects to report a 380% increase in net profit for its current financial year. City analysts forecast earnings of 21.5p for the year, putting the stock on a forward price-to-earnings (P/E) multiple of just 10. 

As the fashion and retail industry is highly unpredictable, there is no guarantee this growth is sustainable. This is probably the biggest challenge the group faces right now. Rising prices could also become a headwind for company growth. 

Still, I would buy the shares for my FTSE 250 portfolio as I believe they exhibit the qualities Warren Buffett looks for in an investment. Not only is the stock cheap, but the company also has a strong brand. Consumers across the country know the company manufactures its food and clothing products to the highest quality for its price. 

This competitive advantage should help the group continue capitalising on the economic recovery during the next few years. 

Warren Buffett qualities

International estate agent Savills (LSE: SVS) is the second FTSE 250 stock exhibiting Warren Buffett qualities that I would buy for my portfolio today.

At the time of writing, shares in this organisation are selling at a forward P/E multiple of 14.9. This is not particularly inexpensive, but I also need to factor in the firm’s brand value. As an internationally recognised estate agent, I think the brand value alone is worth a premium. 

Savills’ primary market is the high-end property market. This is still subject to the cyclical nature of the global property market. This cyclicality is the most considerable risk to the company’s growth in the long run, and it is something I will be keeping an eye on as we advance. 

Despite this headwind, I think the company has all of the qualities of a Warren Buffett-style investment. Not only is the FTSE 250 stock cheap compared to its potential, but it also has a globally recognisable brand. With a dividend yield of 2.5% on offer, I think the enterprise could make a great addition to my portfolio. 

Rupert Hargreaves 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.

Making a million pounds in the stock market with UK shares is tough. After all, chasing short-term gains with penny stocks is arguably one of the riskiest strategies an investor can pursue. But by extending my time horizon, this challenge becomes more achievable. Let’s explore two UK shares I’d buy now that I believe have the potential to help get my portfolio into the seven-digit range over the next 10+ years.

The best UK robotics share to buy now?

Ocado (LSE:OCDO) is best known for being an online grocery business. Yet management has begun switching strategies, investing heavily in its robotics division. The company has developed a proprietary warehouse automation system, where a fleet of robots autonomously prepares online orders for delivery.

The bulk of its revenue is still generated through selling groceries via its website. But given time, the robotics division could quickly become the dominant income stream. After all, current forecasts predict the warehouse automation industry will be worth around $30bn (£22bn) by 2026! That’s nearly double today’s market size. And Ocado has so far only captured around 3% of this.

To me, this looks like an exceptional growth opportunity. But there are considerable risks. Other players within this place, such as AutoStore, offer a similar warehouse automation solution. This rising level of competition could undercut the UK share’s growth capabilities, especially if Ocado is unable to keep up with technological innovation.

Nevertheless, I remain cautiously optimistic about Ocado’s future potential, given the success seen so far. And that’s why it’s on my best shares to buy now list.

Making millions from semiconductors

According to Fortune Business Insights, the semiconductor industry is expected to reach a staggering market size of $803bn (£598bn) by 2028. It’s hardly surprising given the explosive demand originating from the automotive and technology industries.

But while there are many ways to invest in this space, XP Power (LSE:XPP) looks like the most promising, in my opinion. The company is a leading provider of electrical components for equipment throughout the industrial engineering, healthcare, and, more excitingly, semiconductor industry. 

As it stands, it has captured around 0.1% of this potential market. Yet looking at the latest annual report, that may soon change because revenue from this division alone has grown by an average of 46% annually over the last five years. And comparing this momentum to more recent performance, it seems this growth rate is accelerating because, in 2020, it jumped to a staggering 86%!

Despite this impressive display, these UK shares only trade at a P/E ratio of 24. To me, that looks cheap.

There are some caveats to be aware of. As with Ocado, the market opportunity hasn’t gone unnoticed. As XP Power ramps up its expansion into China, it’s having to contend with numerous local competitors. Suppose the competition can outmanoeuvre XP Power with their superior knowledge of the culture. In that case, the UK company and its share price could struggle to climb. But, I feel this is a risk worth taking.

Final thoughts

Reaching a million-pound portfolio through these investments will take time, especially if I’m starting from scratch. Many things have to go right for this strategy to work, and therefore success is far from guaranteed. But in my opinion, these two UK shares are the best option for me to achieve this goal.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado Group and XP Power. 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.