New Year’s day feels like yesterday, but we are already one month into the year! For those of us who are just about beginning to wonder what stocks to buy now, there are a number of FTSE 100 stocks that look interesting to me in February. One big reason for this is the recent updates, which have increased their appeal. 

#1. Anglo American: positive production update

The first is the multi-commodity miner Anglo American, whose latest production update looks good. Its overall production is up 2% for the quarter ending 30 September 2021 compared to the same quarter last year. The company’s platinum metals and iron ore production rose appreciably, which is significant because they are the biggest contributors to its bottom line. 

Even otherwise, the stock’s financials are strong and its dividend yield is relatively high at 5.3%. I bought the stock on an expected dip last year, and I am glad because it has made gains since. I reckon it would continue to do so, though how much by remains to be seen considering the stock is already at multi-year highs. 

#2. Diageo: growth despite volatility

The next FTSE 100 stock I like is the alcohol manufacturer Diageo, which recently released a robust update. For the half-year ending 31 December 2021, the company saw sales growth of almost 16% compared to the same six months last year. Its reported operating profit rose by 23% as well. It is optimistic about the rest of the year too, what with greater business expected from commercial establishments this year. Besides this, I think a robust economy should also continue to give a boost to the stock. 

It does flag “near-term volatility” as a potential challenge. Think of supply chain disturbances, the continued impact of the pandemic, and of course, the problem of the season, high inflation. Still, I think Diageo is a resilient business, which would make a good buy for February. 

#3. Sage Group: FTSE 100 defensive to note

Finally, I like the FTSE 100 accounting software provider Sage Group. The stock looks interesting to me right now, because it just took a dip to levels not seen since (very briefly) in October last year, but basically since mid-2021. The decline coincides with the release of its trading update. On the face of it, there is really nothing not to like about it. Its revenue grew by 5% for the quarter ending 31 December 2021 compared to the same quarter last year. Importantly, its recurring revenue, which forms a bulk of the total, grew by 8% as well. 

The update does not provide much more detail, but does not give anything to justify the 28 times price-to-earnings (P/E) the stock is sitting at currently either. Also, while it is a good defensive stock, in a bullish market it can find itself out of favour. I think this is a good time for me to buy it, though, because in the long term it could offer solid gains. 

Manika Premsingh owns Anglo American. The Motley Fool UK has recommended Diageo and Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As equity markets worldwide have been falling, I have been looking for FTSE 250 growth shares to buy right now.

I am looking for companies that appear cheap compared to their potential. I am also looking for corporations with strong competitive advantages. In theory, I think these advantages should help the businesses pull through the current period of economic uncertainty. 

Here are three FTSE 250 growth shares that I would buy for my portfolio right now. 

Cheap growth 

The first company on my list is the financial services and trading group IG (LSE: IGG). Over the past couple of years, the corporation has been expanding its global footprint, buying up businesses in regions such as the US with its vast cash resources. It has also tried to entice new customers with a stockbroking offering here in the UK. 

If the company continues to pursue this growth, I think it could achieve steady earnings growth over the next few years. It certainly has the resources to do so. It has no debt and a net cash position of nearly £700m. Still, its growth is far from guaranteed. Competition in the financial services sector and regulatory headwinds could hit IG’s expansion plans. These are the top risks facing the FTSE 250 enterprise. 

The stock is trading at a forward price-to-earnings (P/E) multiple of 11.5, which looks cheap in my eyes. It also offers a dividend yield of 5.3%. 

FTSE 250 value

My second growth investment could be a bit controversial. British Gas owner Centrica (LSE: CNA) has always attracted criticism for increasing customer prices. It is likely to face even more pressure later this year when the energy price cap is expected to jump to nearly £2,000 for an average household. 

However, from an investor’s point of view, this price hike will be good news. It will help the company cover the cost of supplying electricity and gas. At the same time, Centrica’s oil and gas production arm may reap a windfall from high energy prices. 

The one risk that could spoil the party is further government regulation. More regulations or a windfall tax could force the company to give up any excess profits. 

Despite this potential headwind, I would buy shares in the FTSE 250 firm as it currently trades at a relatively attractive forward P/E of just 10. 

Spending splurge

A combination of lockdown savings and rising home prices have inspired UK homeowners to spend significant sums on home improvements over the past two years. 

This spending splurge has generated a windfall for window and door producer Tyman (LSE: TYMN). Profits have more than doubled since 2019. 

And the City expects growth to continue as the company works through its order backlog. The business is also spending some of its windfall to expand production and enter new regional markets. One challenge the group will have to overcome is rising costs. These could raise the cost of goods for consumers, potentially putting some buyers off. 

Even after taking this challenge into account, I think the stock looks cheap right now. It is trading at a forward P/E of 12.2, while the shares offer a dividend yield of 3.3%. With further growth on the horizon, I would acquire the FTSE 250 stock from my portfolio today. 

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.

I think Centamin (LSE: CEY) could prove to be a great penny stock to buy following recent share price weakness. The gold miner has lost 8% of its value in just over a week. This makes an already-cheap UK share look even better value in my opinion.

At a current price of 88.3p per share, Centamin trades on a forward price-to-earnings ratio of just 15 times. I think this is pretty cheap considering the company’s solid profits outlook as it ramps up gold production.

The company is making plans to supercharge annual output at its Sukari mine to 500,000 ounces by 2024. Centamin pulled 415,370 ounces of the yellow metal from Egyptian ground last year, around the mid-point of guidance. It’s looking to produce between 430,000 and 460,000 ounces of gold in 2022 too as it moves towards that half-million target.

Gold demand is bouncing back

So Centamin’s share price has slumped in recent sessions on hawkish comments from the US Federal Reserve on interest rates. The central bank signalled that rate hikes could be more severe than the market had been expecting, causing gold values to reverse. But I think it’s too early to claim that gold’s race is run. And at current prices I think Centamin could be a great buy to prepare for a fresh bounceback in bullion values.

The World Gold Council recently announced that metal demand reached 1,147 tonnes in the final quarter of 2021. This was the highest level for 10 quarters and was driven by an range of factors. Jewellery demand was strong and, at 713 tonnes, was the highest three-month figure since mid-2013.

Solid investment demand for gold also delivered that strong quarterly figure. Bar and coin investment of 318 tonnes represented the highest fourth-quarter total for five years, the World Gold Council said. Moreover, outflows in gold-backed exchange-traded funds (or ETFs) also slowed markedly at the end of 2021.

I’m not surprised that investor demand for gold has increased. Speculation that policy makers continue to underestimate the inflationary threat remains high. The ongoing Covid-19 crisis and its enduring threat to the global economy remains a huge danger. And more recently the threat of military action in Eastern Europe has fuelled demand for safe-haven assets, too. All of these factors remain very much in play at the start of 2022.

5% dividend yields!

Of course, there’s a chance that gold prices could continue backpeddling instead (they recently touched six-week troughs around $1,800 per ounce). Buying mining shares like Centamin is also risky because commodity production is highly risky and profits-sapping problems can be common. 

Still, at current prices below £1 I still think Centamin looks highly attractive from a risk-to-reward angle. I’d also prefer to buy this gold share instead of the metal itself (or a bullion-backed financial instrument) as it gives me the chance to receive dividends. And at 5%, Centamin’s yield for 2022 is pretty fat. This is a penny stock I’d be happy to buy today and hold for the long haul.

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.

When it comes to investing in penny stocks, I usually employ a diversified approach. Indeed, investing in these smaller businesses can be quite risky. Therefore, I do not think it is wise to allocate a large percentage of my net wealth to just one or two stocks. I would rather spread my money around. 

However, there is one stock I am so excited about, I would be happy to invest £10k in the business right now. 

A leading penny stock 

Lamprell (LSE: LAM) is a leading provider of services to the international energy sector. This is a volatile, cyclical business. Spending in the oil and gas industry tends to rise and fall with energy prices, which means it can be challenging to predict the future for firms like Lamprell. 

This is not a great quality for any business, but Lamprell is changing. It is using its experience to expand into the renewable energy sector, and this is why I am so excited about its potential. 

The renewable and green energy sector is booming. With cash flooding into the industry, spending is on track to overtake investment in traditional energy industries in the near future. 

Lamprell’s renewables business is roaring. At the end of June 2021, the company’s bid pipeline totalled $6.9bn. This had increased to $7.9bn at the end of October. 

Contracts for renewable energy infrastructure made up just over 50% of the order backlog for the first time. Management expects the share of renewables to continue to grow, with the total potential order backlog hitting $6bn this year. The group has continued to make progress with new contracts. 

Major headwinds 

That said, the penny stock does have some significant challenges to overcome before it can capitalise on this growth. The most important of these is funding. Towards the end of last year, the firm raised £30m from investors for working capital.

The company is dependent on investors and other creditors to fund working capital obligations as it expands its footprint and capitalises on the growing demand for renewable energy infrastructure assets. If funding dries up, the business could hit some significant issues. 

Still, what is exciting about this shift is the fact that renewable energy is far more stable than oil and gas. The industry is not susceptible to volatile energy prices, which can significantly impact corporate capital spending plans. 

There has always been a certain level of unpredictability in Lamprell’s business model for this reason. But with its exposure to renewable energy increasing, I think the company is going to become far more predictable.

This is the primary reason I am willing to invest £10,000 in the business today. I believe the market is underappreciating its growth potential over the next few years and exposure to the renewable energy sector. 

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.

After decades spent investing in the stock market, Warren Buffett has certainly learnt a few things. Fortunately for me and many other private investors, he is generous with his wisdom.

In fact, it is Buffett’s wisdom I have been following in my approach to buying cheap UK shares for my portfolio. Let me explain.

Warren Buffett on price and value

Like a lot of people, Buffett started out as a “value investor”. Value investors look at a company’s earnings or assets and compare them to the share price. If they see that a company trades at a cheap-looking valuation – for example, the share price is just a few times its earnings per share – they may buy it as a potential bargain.

That approach can work very well. In some ways I still think like a value investor myself. But the approach has problems too. Companies that trade on very low price-to-earnings ratios may do so because the City does not expect them to maintain those earnings in future. For example, a company may have sold assets that mean its future profits will fall.

Buffett left behind pure value investing and instead started looking for deep value, not just focussing on share price. Deep value in this context is about how much profit a company can generate in future. If that number is big enough, the shares can still represent good value even though their price is high.

Looking for a business moat

To understand how a company might do in future, Buffett considers what they have that could set them apart from competitors when it comes to sustainable, substantial earnings streams. This type of competitive advantage is what Buffett calls a business “moat”.

Such a moat could come from a strong brand, for example. That is a key differentiator possessed by two of Buffett’s holdings, Coca-Cola and Apple. A moat could also come from an entrenched user network, as at Buffett holding American Express.

Whatever the source, such moats help companies grow their earnings over the long term. They can create enough value that a share seems like good value to Buffett even if its price is high.

Cheap UK shares

I am applying the Buffett method when it comes to hunting for cheap UK shares for my portfolio.

For example, I reckon Smith & Nephew has a wide business moat because many of its proprietary medical technologies have no immediate competition. Although the pandemic delaying elective medical procedures has hurt sales and profits, I think that will be a temporary blip. The long-term business moat of its technologies should help Smith & Nephew produce strong earnings for years to come.

I think the same is true of publisher Bloomsbury. Books in its Harry Potter series are the golden goose that keeps laying. A unique franchise like that provides a strong business moat, which could help Bloomsbury earnings for many years to come. Indeed, this week the company upgraded both revenue and profit expectations for the year. Potter’s appeal could peter out in future, hurting revenues and profits. But meanwhile Bloomsbury is growing its digital asset base and trying to fortify its business moat. Like Smith & Nephew, I would consider it for my portfolio.

Christopher Ruane has no position in any of the shares mentioned. American Express is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool UK has recommended Apple, Bloomsbury Publishing, and Smith & Nephew. 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.

Dividend aristocrat is the name given to a US share that have increased their shareholder payout each year for at least 25 years. Dividends are never guaranteed, so a company being able to raise its dividend each year for a quarter of a century is seen as an encouraging sign. It suggests a strong business, and a strong committment to paying dividends. Among shares that would qualify as UK dividend aristocrats, here are two that I would consider buying for my portfolio.

Diageo

The owner of premium brands from Guinness to Talisker, Diageo (LSE: DGE) has the perfect drinks cabinet for a good party. Its shareholders have lots to celebrate too. The company has increased its dividend annually for over three decades. This week it increased its interim dividend yet again, on this occasion by 5%.

The economics of its business lend themselves well to healthy dividends. Demand for drinks tends to stay fairly high. The premium nature of the company’s brands means that it has pricing power. It can use that to offset the risk of ingredient inflation hurting profit margins.

An increasing number of abstainers could hurt revenues and profits in future. Diageo is trying to combat that risk, for example through the launch of alcohol-free Guinness in the UK and buying the non-alcoholic Seedlip brand. It revealed this week that sales in its first half exceeded pre-pandemic levels. While dividends are never assured, I see a strong future for the business and would happily hold it in my portfolio.

DCC

Another company that has raised dividends annually for over 25 years is DCC (LSE: DCC). The energy, healthcare, and technology conglomerate has now raised its payout each year for 27 years in a row.

Like Diageo, business is buoyant. In its first half, DCC revenue grew 26.8% and adjusted earnings per share were up 13.8%. That enabled the company to raise its interim dividend by 7.5%.

DCC’s business may not seem that exciting but its consistently dynamic performance suggests that the business model is finely tuned. The company is a leading supplier of bottled gas in many markets. As demand is resilient and competition is limited, that could remain a highly profitable business for many years. The rise of alternative energy may harm revenues, but that is where DCC’s internal diversification works well in my view. Its businesses do not move in lockstep. So if one underperforms, strong results elsewhere in the company can mean the overall company still grows.

My next move on these UK dividend aristocrats

I would be happy buying both Diageo and DCC for my portfolio. I hope their strong, proven business models can keep generating enough profits to continue their long history of dividend increases. But even if they do not, I feel they are both high-quality businesses with well-identified target markets that look resilient to me. They are the sort of companies I would be content to own in my portfolio for many years to come.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. 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.

By owning a stock, I become a shareholder in the company. This entitles me to a share of the dividend if the business decides to pay one out. Although I need to be active in deciding when to buy and sell the shares, the dividends are passive income. As long as I am entitled to the dividend, it’ll simply be paid out on the marked date. As a target, I can set myself a goal of making £1,000 in passive dividend income this year. Here are a few ways I can best achieve this.

Investing in a company I believe in

The first way is to find a single income stock that offers me a dividend yield high enough to generate me £1,000. For example, let’s say that I have £10,000 ready to invest. I’d therefore need to find a stock that offered me a yield of 10% in order to satisfy my passive dividend income requirements. 

Within the FTSE 100 and FTSE 250, there are half a dozen stocks that offer a yield of 10% or greater. These include the likes of CMC Markets and Ferrexpo. 

The risk with this first idea is that even though it ticks my box of potentially making £1,000 this year, it’s concentrated on just one company. If something goes wrong or the business underperforms, the dividend might be cut. As I’ll only own this stock, I take the full negative impact on my future income.

Having a portfolio of dividend stocks

The second way is to look at building a portfolio of stocks for passive dividend income. In much the same way as before, my first angle is to assess how much I need to invest upfront to make the £1,000. For the purpose of the second example, let’s assume I now have £20,000 to invest, so can target an average yield of 5%.

With this aim, I can look to invest around £2,000 in a selection of 10 stocks. I don’t have to pick all of the yields at 5%, but rather mix it up. I can include some of the high yielders that might be high risk. To compensate, I can include stable dividend payers, even if the yield is only 2-3%. The point of all this is that it diversifies my portfolio, reducing the negative impact of any bad news. This should help me to be more likely to achieve the goal of making £1,000 in income this year.

Building up passive dividend income over months

The final way is handy if I don’t have a lump sum ready to go right now. Instead, I can invest smaller amounts over the next few months. However, I need to be aware that this will make things more complicated as I could miss some dividend payments if I’m not a shareholder by a certain date.

The premise here is that I could invest £3,333 now, and then the same amount for the next two months. By the end of the quarter, I’d have the £10,000 in the pot, putting me in the same position as scenario one. The benefit is that it gives me a few months to build up the capital. Personally, I’d also blend in this idea with scenario two via a mix of stocks, not just one.

Jon Smith and The Motley Fool UK have 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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