As 2021 went on, I became increasingly concerned about the potential for a full-blown stock market crash. With global stocks soaring in 2019, 2020, and 2021, I was sceptical that this bull (rising) market could keep going in 2022. Like all winning streaks, it must eventually come to an end. Hence, in the final quarter of 2021 and repeatedly in December, I warned about the growing risks of another market meltdown.

A stock market crash has been a long time coming

It’s tough to be a rational investor in a world of irrational exuberance fuelled by near-zero interest rates. Younger investors largely choose to ignore my warnings about speculative investments. In my experience, they want to talk about only two things: cryptocurrencies (especially Bitcoin) and Tesla. Hardly anyone under 30 wants to discuss ‘boring’ investing: buying shares in quality businesses for the long term. And when high spirits, speculation, and excessive risk-taking drive prices, the risk of a stock market crash multiplies.

Some bubbles have already burst

In financial jargon, a 10% decline from peak prices is deemed a ‘correction’. A ‘bear market’ — or stock market crash — begins when prices dive by 20% or more. And that just hasn’t happened in most major markets. For the record, the US S&P 500 index hit a record high of 4,818.62 points on 4 January. It now stands at 4,363.61 — losing 455.01 points and down nearly 9.5%. On Monday, the index entered correction territory, but has since gained ground. Meanwhile, the tech-heavy Nasdaq Composite index peaked at 16,212.23 points on 22 November. It now stands at 13,559.89, diving almost a sixth (-16.4%) in two months. Thus, the Nasdaq is in correction territory and closing in on a bear market.

That said, there has definitely been a stock market crash in what I call ‘spec tech’ — speculative technology stocks. Tesla has collapsed 34% from its all-time high and is now up a mere 1.6% over 12 months. Meanwhile, the price of Bitcoin has collapsed from its peak of nearly $69,000 in early November to $37,217.70 as I write. That’s a collapse of almost half (-46.1%). Ouch.

UK stocks are holding up well

Generally speaking, the riskier an asset, the more its price has fallen in 2022 (and since November for tech stocks). What’s more, even low-risk government bonds have lost significant value in January, on fears of multiple rate hikes by the US Federal Reserve. But here in the UK, there are no signs of a stock market crash. In fact, London shares have held up pretty well so far in January.

On Friday, the FTSE 100 index closed at 7,466.07 points. That’s just 152.94 points below its 52-week high of 7,619.01 — a modest decline of just 2%. In 2021, I repeatedly argued that UK stocks were too cheap in historical and global terms. Now, as high-priced assets dive, the UK stock market is holding up nicely. In London at least, the stock market crash is happening elsewhere.

To sum up, after a year of excessive risk-taking, January is set to be the worst start to a year for US stocks in history. Even so, I still view the US market as largely overvalued. And with lower liquidity and rising interest rates on the horizon, I’m braced for higher volatility in 2022. But I’m still going to keep investing, buying cheap UK shares on low ratings and high earnings yields — and paying juicy cash dividends!

Cliffdarcy 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.

Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

According to the work of Fama and French, small-cap stocks generate higher returns than their large-cap counterparts. Now, Fama and French compared entire portfolios, so picking any old small-cap stock will not necessarily work. However, if I can pick quality small-cap stocks favoured by the market, I might be able to boost the returns in my Stocks and Shares ISA.

I think £586.85m market cap Robert Walters (LSE:RWA) and Somero Enterprises (LSE:SOM), which has a market cap of £308.22m, are two UK small-cap stocks that could give me good returns on my money in the long run.

UK small-cap stock #1

Robert Walters is a specialist professional recruitment consultancy with a global presence. It focuses on finding and placing permanent and shorter contract staff for clients in the finance, technical, legal, sales marketing, and supply chain industries. It does this on request from firms, but also companies have outsourced their human resource department to Robert Waters, including payroll services.

The global pandemic was complex for Rober Walters. Jobs were lost during the pandemic and new hires dried up in all but a few industries. This explains the drop in 2020 revenues. However, revenues for the 2019 fiscal year also fell. But, I do note that the job market was tight in 2019; unemployment had fallen to its lowest levels since 1969 in the US.

Nonetheless, 2020 was not as bad as it could have been for Robert Waters. It pivoted to bio-sciences, logistics, gaming, and fintech recruitment, which was a more buoyant market. A new NHS contract was won in 2020, which should provide good recurring revenues. Despite the turmoil of the pandemic, Robert Waters has survived relatively unscathed and is well-positioned to participate in the next hiring cycle.

I think Robert Walters is a quality company. It has consistent operating margins and generates good amounts of free cash flow. The company has been consistently profitable since 2015, although profits dropped sharply in 2020. The market seems to agree, as it has bid up its price from 237p at the depths of the 2020 crash to 762p now.

It’s worth pointing out that the Robert Walters share price has recently set a new all-time high. Further outperformance does depend on the jobs market being ready for lots of movement and new hires. I think it is, so I am considering adding Robert Walters to my portfolio.

UK small-cap stock #2

Somero provides equipment to install high-quality concrete floors “faster, flatter, and with fewer people” to customers in over 90 countries. It also provides training, education, and support to its customers. It has several innovative product lines dealing with different cement applications.

Similar to Robert Walters, the Somero share price is close to its all-time high of 579p. This stock is in favour with the markets at the moment. And it is a quality company with solid and high margins for its industry, good free cash flow and earnings growth, and a track history of organic growth in revenues.

I think we are at the start of an upcycle in the contraction industry. This will benefit Somero. However, it’s worth noting that, like Robert Waters, Somero is a cyclical company. If the cycle does not turn up like I think it will, the market will notice and punish the Somero share price.

James J. McCombie has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.

Mitie Group (LSE: MTO) was the biggest FTSE 250 riser yesterday. It rose by 7.2% following its latest trading update. It is not hard to see why. The company has upgraded its profit expectations for the year ending 31 March 2022, on better-than-expected revenues so far in the year. 

Robust update

Let me share the details. For the third quarter of the current financial year, which is the three months ending 31 December 2021, the company saw a solid 51% increase in revenues compared to the same time last year. A little over 10% of this was from Covid-19-related contracts, which was higher than expected. The company, which provides facilities management services, and that includes cleaning services, saw increased demand in these during the pandemic. 

In light of this, the company now expects operating profit of £160m-£165m, up from £145m-£155m earlier. This is the second time in the past year that the company has upgraded its profit forecast! If that is not a reason for the stock to rally, I do not know what is. 

Stumbling blocks for the penny stock

On the other hand, I do see two stumbling blocks to further increases in the stock’s price. The first is that the increase due to Covid-19 contracts was a one-time bump up. This might not be present next year, which in turn could reduce the company’s growth. Of course, it is possible that as the recovery gathers pace, the company’s fortunes could stay resilient. But I am not holding my breath. This is especially so considering that the company has run-up losses a couple of times in the past five years.

Next, its share price has already risen quite a bit. The stock is presently trading at a price-to-earnings (P/E) ratio of 34 times, which is fairly high if you ask me. Some of the most robust FTSE 100 stocks are trading at lower P/Es right now. Basically this says to me that the company’s profit increase is probably already priced in. This in turn means there is limited scope for its stock price to rise. 

Also, its share price is still way below its pre-pandemic levels. If it were really on a rising curve, I think it would have moved way past by now given the strong showing in its financials. To be fair, part of the ostensible decline is because it had a rights issue in July 2020. This reduced its per share price in one go. However, it has had plenty of time since to recover, which has not happened. In the last six months, in fact, it has fallen. Added to this is its elevated P/E, which makes it hard for me to imagine that the stock has won investors’ favour. 

Would I buy the FTSE 250 stock?

I still think this is a good stock for me to buy for the long term. But just to get a better idea of where it is at, I will wait until the next financial release to figure out a good time to buy it. 

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.

Key points

• Supply chain issues and labour abuse allegations continue to plague the boohoo share price
• Good historical growth data on revenue and profit
• Company is addressing problems and could be a good long-term investment

With the decline of the high street, many shoppers have turned to online fashion retailers to purchase clothing. An AIM 100 constituent, boohoo (LSE: BOO) represents the e-commerce sector. In the past year, however, the boohoo share price has fallen around 70%. What are the causes of this collapse? Indeed, I want to know if this stock is now oversold and it is time to buy some for my portfolio. Let’s take a closer look.

Factors negatively impacting the boohoo share price

Troubles began in summer 2020 with serious allegations that workers of boohoo’s clothing suppliers were being paid well below the minimum wage. This allegedly occurred at factories in Leicester. The market responded very negatively to this news, with the boohoo share price falling massively by 42.5%.

This issue resurfaced the following summer, with workers alleging that they were being paid only £3.50 per hour. While the company has taken measures to address these allegations, like publishing its global supplier list, this problem has been left hanging over the boohoo share price.

Many of the stock’s problems, however, are due to the pandemic. In December 2021, the company issued a profit warning. This was largely due to supply chain issues and higher return rates of clothing.

Unsurprisingly, a number of institutions have slashed their target prices for boohoo this month. RBC cut the price from 330p to 150p and stated that boohoo’s “international proposition remains uncompetitive”. Liberium acted similarly, slashing its price from 360p to 200p because of the “supply chain logjam”. This latter issue, however, may well subside in the short term.

Why this stock should improve in the long term

In the last five fiscal years, boohoo’s revenue has increased sixfold. Furthermore, profits have grown by 400% for the same period. Indeed, the company’s earnings per share (EPS) record is impressive, registering an average annual growth rate of around 31.8%. From this longer-term fundamental analysis, the boohoo share price should start to reverse its recent poor form.

While the recent trading update for the three months up to 30 November 2021 warned on profits, the report also stated that its year-on-year total net sales were up 10%. Indeed, this figure had increased 53% compared to the same period two years previously.  

What’s more, the company has recently commenced building at its first ever production site in Leicester. The factory, which creates 180 jobs, will also act as a training facility for many suppliers. For me, this is evidence that boohoo is seriously addressing the labour abuse allegations.

Pandemic issues have clearly plagued the boohoo share price. Ongoing labour abuse allegations compound the negativity. However, the world is reopening and supply chain problems should soon subside. Recent developments are also tackling the sub-standard pay issues. While I won’t be buying shares immediately, I will be keeping an eye open for the aforementioned problems being resolved. When this happens, I will be purchasing boohoo stock.  

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo 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.

For Tesla (NASDAQ: TSLA) shareholders, the past 12 months have been a wild roller-coaster ride. In 2021-22, Tesla stock has slumped then jumped, dived then soared, and recently crashed spectacularly. For lovers of extreme volatility, TSLA is probably the best S&P 500 stock to own today!

Tesla is an amazing business

For years, I’ve been enchanted by three things about Tesla. First, its marvellous vehicles, which are like no other I’ve ever ridden in. Second, by the company’s magnificent ambition to disrupt and discard fossil-fuel motoring. And third, by the mercurial and unpredictable behaviour and passionate pronouncements of its genius leader, Elon Musk.

However, experience shows that being early adopters or innovative disrupters of established industries is often accompanied by highly volatile and turbulent stock prices. That’s certainly the case with Tesla, whose shares soar and plummet in dizzying fashion. Hence, since mid-2019, I’ve been fascinated by the wild gyrations of the Tesla stock price.

Tesla stock oscillates wildly

Since 2018, owning Tesla stock has been astonishingly profitable. On 31 December 2018, TSLA ended the year at $66.56. But then the shares collapsed, hitting their 2019 intra-day low of $35.40 on 3 June 2019. However, they then rebounded strongly, reaching their 2019 intra-day high of $87.06 on 27 December. They then closed out 2019 at $83.67, for a one-year return of 30.8%. But this was tame compared with what was to come.

During the Covid-19 crisis that began in early 2020, Tesla became the ultimate large-cap meme stock. Many Tesla fans were convinced that the firm was destined to become the world’s leading carmaker. As a result, Tesla stock soared, driven sky-high by buying pressure and energetic options trading. But after soaring to an intra-day high of $193.80 on 4 February 2020, the Tesla share price then collapsed, crashing as low as $70.10 on 18 March. But then, like one of Musk’s SpaceX rockets, the stock went stratospheric. By the end of 2020, it hit a record high of $718.72, before easing off to end 2020 at $705.67.

Tesla stock continued to set new records in 2021. After surging to fresh highs in early 2021, the stock fell back to close at $563.46 on 19 May. But Tesla’s hyper-growth phase was not yet over. Yet again, it raced upwards, spiking to an all-time high of $1243.49 on 4 November, before easing to a closing high of $1,229.91.

Would I buy Tesla now?

At its peak, Tesla’s market value neared $1.25trn. Not bad for a company making less than 1% of the world’s total car output. The day before, on 3 November, I said, “the Tesla stock price was madness”. I added, “It seems obvious to me as a veteran value investor that TSLA is hugely, mind-bendingly overvalued”. As I write, the Tesla stock price is $820.14, having crashed more than a third (-34%) since its 4 November high. So is Tesla on my buy list now?

Today, Tesla is valued at $832.3bn. That’s a colossal price tag for a minor — yet hugely disruptive — automobile manufacturer. But the futuristic nature of Tesla’s products — and the fanatical worship of its leader — almost make Tesla a ‘cult company’. And, as we all know, cults are built on faith, not financial fundamentals. Speaking of fundamentals, Tesla stock trades on around 175 times earnings, offering a tiny earnings yield of 0.57% and no dividend. As an old-school value investor, I won’t buy Tesla at these heights. But I’ve no doubt that faithful fans will keep buying at these levels. And what if Tesla does become #1? I could be wrong!

Cliffdarcy 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.

Last week, the famed market-bubble guru, Jeremy Grantham, published an intriguing article under the eye-catching title “Let the Wild Rumpus Begin”. In it, he argues that the US stock market is now in what he characterised as a “superbubble”. If he is correct, can nothing now stop a huge stock market crash?

Grantham’s warning regarding the frothy nature of the US equity market is nothing new. In January 2021, he penned a similar piece under the title “Waiting for the Last Dance”. There he stated the US market was in an “epic bubble”. So, is it finally time to take Grantham’s doom-monger predictions seriously?

Lessons from previous stock market bubbles

Grantham argues that the US is in the midst of only its fourth superbubble of the last 100 years. The other three were in 1929, 2000, and 2006. Every superbubble, he argues, has the same underlying characteristics. True to form, he claims, these underlying characteristics are playing out again in this superbubble.

The first characteristic of a late-stage bubble is that stock prices begin to accelerate by two or three times the normal average rate of a typical bull market. In the aftermath of the Covid crash to February 2021, the Nasdaq more than doubled.

The second characteristic of a superbubble is that the speculative part of the market begins to crumble, while the blue-chip market continues to climb. There is evidence to suggest that this has indeed been happening. Since February 2021, large-cap US stocks have significantly outperformed the smaller ones. For example, Cathy Wood’s Ark Innovation ETF, which plays almost exclusively in the more speculative side of the market, is down 56% in this time frame.

However, Grantham argues, safer, large-cap stocks are not immune. At the end of every great bubble, the “confidence termites attack the most speculative and vulnerable first and work their way up, sometimes quite slowly, to the blue chips”. Again, there is evidence of this characteristic starting to play out. Netflix, a supposed safe stock, recently plummeted over 20% over fears that its days of heady growth are over. Although not witnessing as dramatic a one-day fall, the Amazon share price is still down nearly 20% since the beginning of 2022.

One of the hardest qualities to define in a later stage bubble, Grantham argues, is “the touchy-feel characteristic of crazy investor behaviour”. Here, Grantham provides a number of examples. Firstly, the infamous meme stocks. Recall the dramatic rise in the share price for Hertz after it announced it was buying a fleet of Teslas. Secondly, the speculation in cryptocurrencies. The Dogecoin price spiked last year based simply because Elon Musk tweeted about them. A final example has been the craze with non-fungible tokens (NFT).

How am I positioning my share portfolio

Unsurprisingly, I am avoiding US equities for the moment, particularly the mega-cap stocks and software companies. Although trading at significantly lower valuations than just a month ago, they still look expensive to me.

My investment strategy toward FTSE 100 companies has remained unchanged, however. Although jam-packed with ‘old economy’ businesses like oil, banks, and miners, I still believe they will outperform the wider market. I am also keeping some powder dry, because if there is a big correction in US equities, I can hoover up some bargains.

Andrew Mackie has no position in any of the shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon. 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.

One FTSE 100 stock I am considering adding to my holdings is Bunzl (LSE:BNZL). Here’s why.

Outsourcing and distribution

Bunzl is one of the largest distribution and outsourcing firms in the world. It has operations that span across the Americas, Europe, Asia, and the UK & Ireland. Bunzl’s products can be used across a multitude of industries such as healthcare, food service, retail, and cleaning. Some of its prominent products include packaging and general cleaning products such as gloves and disposable liners.

As I write, Bunzl shares are trading for 2,747p. At this time last year, the shares were trading for 2,350p which means the shares have returned 16% over a 12-month period.

Potential risks involved

Bunzl has benefitted from the pandemic as the rise of Covid-19-related equipment orders such as masks, gloves, and other cleanliness products boosted its balance sheet and performance. There is every chance that if the pandemic slows, sales of these products slows down also, affecting future performance and returns.

Many FTSE 100 stocks that specialise in consumer products have been affected by rising interest rates, which has led to rising costs. This means the rising costs of raw materials, some of which will be essential to Bunzl’s products, could eat into its profit margins. Other macroeconomic issues such as supply chain issues could also hinder Bunzl’s progress, performance, and returns.

A FTSE 100 stock I’d buy

Bunzl has a good track record of recent and historic performance, although I do understand that past performance is not a guarantee of the future. Looking back, I can see revenue and gross profit have increased year on year for the past four years. Coming up to date, Bunzl released a pre-closing statement last month for the year ending 31 December 2021. It said that revenue for 2021 should increase compared to last year by between 2% and 7%. Furthermore, it reported recent acquisitions had been successful and contributed towards further revenue growth.

Bunzl is also a consistent dividend payer. These dividends can make me a passive income. The current yield stands at 2.5%. It is worth noting that the FTSE 100 dividend yield average is 3%-4%. Dividends can be cancelled, however.

Finally, Bunzl operates in a burgeoning growth market and caters to many industries with its essential products. In addition to this, it has one eye on growth which I like. This can be demonstrated by Bunzl’s numerous acquisitions, especially over the past two years. I like it when a company is performing well but also investing to grow in the future, by acquisitions. 

Overall Bunzl is a solid FTSE 100 stock, in my opinion. I would add the shares to my holdings at current levels. It possesses a good track record of performance, pays a dividend to make a passive income, and has one eye on the future to continue its growth trajectory.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Bunzl. 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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The AIM-listed mixer drinks manufacturer Fever-Tree Drinks (LSE: FEVR) has long been on my investing wishlist. But for some reason or other, the time never seems quite right for me to buy it. However, now that it has plunged 20% in a month, I am wondering if this might be a better time than ever to swoop in and buy it before it starts rising again. 

What the trading update says

To do that, the first essential step, of course, is to figure out why on earth it has dropped so dramatically. It turns out that much of the fall was seen yesterday when it released its trading update. The stock fell a whole 8.5%! What has happened here? In one word, inflation. That is what happened. The company says, “cost headwinds in 2022 will be more significant than we anticipated”. As a result, “margins are expected to remain broadly flat in 2022”. 

Implications for the Fever-Tree Drinks stock

The stock already has a pretty big price-to-earnings (P/E) ratio of 62 times. This explains why the stock was falling even earlier. Over the past year too, it is down by 13.5%. If its profits will underwhelm in the next year, such a high market valuation would be even harder to justify in my opinion. So, clearly there is a case for its share price to decline. 

That said, the stock is far from being a bad one. On the contrary, it is a financially healthy company. For the year ending 31 December 2021, Fever-Tree Drinks saw revenue growth of a robust 23% compared to the year before. This growth was dragged down a bit by a 15% increase in its biggest market, which is the UK. Its other significant markets of US and Europe both showed 30%+ growth. 

What could go right

It also expects to see a revenue rise of up to 17% this year. I think this ties in with the fact that the pandemic is quite likely expected to moderate even further during 2022. And this would mean that we would go out more to public places without fear, which is likely to increase sales of alcohol and mixer drinks like Fever-Tree products. Moreover, since the economy is also recovering, this is even more likely to be the case. During phases of high economic growth, consumption spending rises and vice versa. In any case, I think its long-term prospects look good.

As far as inflation goes, it is clear that efforts are in place to bring it under control. High government spending required during the pandemic will soon be a thing of the past it appears. And central banks are increasing interest rates too. Just two days ago, the US Federal Reserve said that it will start tightening rates soon. The Bank of England probably has a few interest rate increases pencilled in for the year too. My point is, that it might just be a matter of time before inflation starts coming off. And that could mean easing cost pressures for the company. 

I am looking forward to further developments on this aspect and how they impact the stock. For now though, I have moved this AIM stock up to the top of my watchlist. 

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended Fevertree Drinks. 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 believe some UK shares are too good to miss out on for my holdings. One such stock is Kingfisher (LSE:KGF). Here’s why I’m considering it for my portfolio.

Home improvements

Kingfisher offers home improvement products and services in the UK and globally. Here in the UK, some of its best known retail banners include B&Q, Screwfix, and Tradepoint. It boasts over 1,300 store locations across Europe and is supported by over 75,000 employees.

As I write, Kingfisher shares are trading for 326p. At this time last year, the shares were trading for 277p, which is a 17% return over a 12-month period.

The home improvement sector, as well as the property market, which are linked, benefitted from the pandemic. The UK government introduced a stamp duty holiday for a period of time to encourage home purchases. In addition to this, many consumers had a bit more cash in their pockets due to a lack of social events caused by the lockdown. This led to many people spending money on home improvements.

UK shares have risks

Despite my bullish stance, I must note risks associated with Kingfisher shares. Two primary risks standout to me. These are both macroeconomic factors that Kingfisher has no control over.

Firstly, rising interest rates have pushed up the price of many raw materials and other product-related costs. Sometimes, these costs cannot be passed onto customers who may turn to competitors for cheaper alternatives. Due to this, profit margins, performance, and returns could be affected.

Second, the supply chain issues facing many firms could hinder Kingfishers performance and returns too. Most of its products are manufactured overseas. Once complete, they are then moved around by shipping containers and HGVs.

Why I like Kingfisher shares

I believe the current tailwinds the property and home improvement sector have experienced recently are set to continue. Kingfisher is in an excellent position to benefit from this. It has an excellent presence and profile and some of its retail banners are staple names, especially here in the UK. I frequent B&Q and Screwfix often when attempting home improvements personally.

At current levels, Kingfisher shares look cheap with a price-to-earnings ratio of just eight. It also pays a dividend which could make me a passive income. Kingfisher’s dividend yield stands at over 3.5%. Some of my best UK shares are those that pay a good dividend. It is worth noting that dividends can be cancelled, however.

Finally, Kingfisher’s recent and historic performance has been good, although I understand that any past performance is not a guarantee of the future. Looking back, revenue increased from 2020 into 2021, as did gross profit. Before that, performance was very consistent, with revenues of over £11.5bn in 2018 and 2019. Coming up to date, a Q3 update released in November was also positive. All its retail banners reported positive performance and perhaps most tellingly, it continued to win market share from competitors.

Overall Kingfisher is one of the best UK shares right now, in my opinion. I would add the shares to my holdings at current levels. The shares are cheap; I can make a passive income from dividend payments and the market as a whole is growing right now.

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