Dividends can form a useful passive income stream. Over time, by putting more funds into shares, I hope to increase my monthly dividend income.

Here is how I would aim to get to £250 a month within five years, by investing £1,000 per month on average.

Aiming for a certain dividend income

A couple of variables will determine how much dividend income I can start to generate over time. One is how much money I put in. The other is the dividend yield of the shares I buy.

I cannot control the second factor. But the first – how much I invest – is up to me. If I decided to invest around £1,000 each month, that would let me invest about £12,000 each year in dividend shares. I say “around” because in practice, the exact amount may vary. Realistically there may be some months where other spending needs take priority. Equally, in some months I may have a bit more than £1,000 to put into dividend shares.

But if I can manage £1,000 a month on average, that would give me a £60,000 investment pot at the end of five years. If I invested in shares with an average yield of 5%, that should generate £3,000 each year in dividend income — £250 a month.

If I only invest £1,000 each month, it would take me time to build up to my target. But while I saved and invested, I could still earn some dividends. So I might not hit my monthly £250 target for five years, but I could start earning at least some dividend income within just a few months.

Choosing the shares

I would diversify across different shares and business sectors. That would help to reduce my risk in case things turned out worse than I expected for a share I bought.

Although it can be tempting to focus heavily on dividend yield, I would consider some other points when choosing shares for my portfolio. I would want to see how well dividends were covered by a company’s free cash flow, for example. Ultimately a company needs sufficient cash to pay dividends each year. Free cash flow figures could help me see whether a company has enough money to do that.

Additionally I would think about how a business may do in future. To set up dividend income streams for the long term, I would want to invest in businesses that seem to have the ability to grow their earnings as the years go by.

Two dividend income ideas I would use

An example of a company I would consider is consumer goods maker Unilever. Its portfolio of premium brands gives it pricing power. So although there is a risk that inflation could hurt profit margins, hopefully the company could increase prices to maintain its profitability.

Unilever yields 3.7%, below my target average of 5%. But I could compensate by buying some shares with a yield above 5%. For example, Legal and General yields 6.3%. So the average of this financial services company and Unilever should yield me 5%. I like Legal & General’s proven ability to generate sizeable profits: last year’s post-tax profit from continuing businesses was £1.3bn. One risk to profit margins is the impact of new UK rules on renewal pricing for insurance policies. But I think a strong brand and resilient demand for products such as insurance should help the company keep producing profits. 

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

Over the past month, equity markets around the world have experienced a wobble. Although this has been most pronounced across the pond in the US, the FTSE 100 and FTSE 250 are also down. For example, the FTSE 250 has fallen just over 7% in the past month. This has made some new penny stocks in the process. One that has caught my eye is Currys (LSE:CURY). The share price has fallen below 100p for the first time since 2020. Here’s why I’m keen.

Woes causing a share price tumble

Currys is a well-known household electrical appliance retailer in the UK. It also has operations abroad, meaning that globally it has over 35,000 employees.

Although the sector it operates in is very competitive, the company also has to deal with changing demands in the electrical and tech appliance space. This is one of the reasons that the firm has become a penny stock recently. Investors are concerned about rising inflation meaning that interest rates are going to have to be raised quickly. This should stunt demand, causing people to save more than spend. If I’m a consumer who’s concerned about the rising cost of living, would I want to buy a new TV or laptop right now? Probably not.

Another reason why the share price has fallen over the past month is due to some uncertainty over the holiday trading results. In the 10-week trading period to 10 January, year-on-year revenue fell 5%. The overall UK tech segment of the business was down 10% versus last year. Given that last year the country was in lockdown, I would have expected revenue to be much higher this year. 

Combining the above meant that the Curry share price trades at 99p, having fallen 17% over the past month. Over the past year, the share price is down 16%. 

A short-term penny stock?

The reason why I’m keen on Currys is because I think this is just a short-term blip. Although it’s a penny stock according to definition, I see the company as an established player in the market. I think one of the advantages that it has is its strong sales channels. Online sales for the UK and Ireland were up 29% versus the same period two years ago. The company isn’t just reliant on physical stores for growth, but can tap into the website for revenue.

I also think that tech products will see higher demand in the future. For example, as the metaverse grows, more and more people will have a need to own a VR headset to get access to the virtual world. Currys can be a leader in sales here. Although I wouldn’t buy shares in the penny stock as a pure metaverse play, it’s definitely an added benefit of owning shares in the company.

In terms of risks, supply chain disruption and tough competition are both valid causes for concern. Ultimately, there isn’t enough risk there to overly concern me, so I’m considering buying shares at the moment.

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.

It would be easy for me to argue Cineworld (LSE:CINE) was one of the biggest losers due to the Covid-19 pandemic. But could the current Cineworld share price be a contrarian option for my holdings for 2022 and beyond? Let’s take a look.

Cineworld share price turmoil

As I write, Cineworld shares are trading for 39p. At this time last year, the shares were trading for 73p, which is a 44% drop over a 12-month period. This time period only provides a small snapshot into the woes of Cineworld shares.

Looking back even further, the Cineworld share price was trading for 181p on 8 February 2020, just before the pandemic struck and markets crashed. At current levels, that’s a decline of 78%. In early February 2019, the shares were trading for 259p, which is a decline of 85% at current levels. The shares seem to have been on a downward trajectory for some time before the pandemic struck. Could 2022 bring a resurgence?

Things to consider

Going to the cinema is one of my favourite pastimes. Cineworld will be hoping to benefit from the reopening of the film industry and blockbuster releases. Pent-up demand could boost financials and the Cineworld share price upwards. Recent blockbuster releases such as James Bond: No Time to Die and Spiderman: No Way Home have helped revenues surpass pre-pandemic levels.

So what’s next? Could further blockbusters and continued pent up demand boost the numbers? Of course they could. I’m excited to watch the new Jurassic Park and Mission Impossible movies in the coming year. The most recent update from Cineworld said attendance and revenues increased throughout 2021. But will it be enough to resurrect a business that has taken a beating since 2020?

Firstly, debt levels are a major red flag for me. Cineworld had to borrow extensively just to keep the lights on. I often find firms like Cineworld, that have a high debt level, recently mixed performance and uncertainty ahead can have a negative impact on the share price.

Next, competition is intense in the entertainment market. The pandemic got us all used to sitting on our sofas and watching Netflix, Amazon, and Disney +. The rise of these platforms could hinder Cineworld longer term. 

As well as the competition, the Cineworld share price could take another major hit. Recently. A Canadian court ruled Cineworld must pay C$1.23bn to Cineplex. This is for pulling out of a deal it agreed pre-pandemic, to buy the business. The investor sentiment around this, and the costs involved if forced to pay, could be devastating.

My verdict

Although I am a bit more enthused by the prospects for Cineworld shares in 2022 and beyond, I still wouldn’t add the shares to my holdings. Despite positive trading recently and increased number of cinema-goers, debt levels, new competition surging ahead due to the pandemic, and the recent court case all put me off. I think the Cineworld share price is likely to remain quite low for some time. I would rather invest my cash in stocks with better prospects.

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.

I woke up this morning to some weakening in my investment portfolio. The gains of the past days have vanished into thin air, in correlation with what is happening in the broader markets. The FTSE 100 index has lost ground over the last couple of days. This follows the sharp rise it saw in the past week, even closing at the highest levels since early 2020. As I write this Tuesday afternoon, the index has barely risen, trading at around 7,335. 

Why are the stock markets falling?

There are many reasons why this could be the case. To my mind, this could include both profit-taking. When stocks’ values rises enough, investors could sell some of their holdings at a high, which in turn weakens markets. Some market commentators also ascribe it to the Russian conflict with Ukraine.

But I cannot help but wonder if there is something more fundamental to this situation, even enough to bring on a stock market crash. Even if all the exceptional scientific talent and effort working on ridding us of coronavirus succeeds, macro risks could still keep market uncertain. Just think of inflation. It is at 30-year highs in the UK and at 40-year highs in the US right now. This will most certainly be followed by higher interest rates, the process of which has already begun in the UK. The US Fed is expected to start increasing rates aggressively from March onwards as well, according to leading forecasters like Goldman Sachs. 

This in turn will have an adverse impact on all the liquidity that has been flushed into the system since the pandemic started, as money becomes dearer. Note that this is happening in the UK and the US is significant, because both economies house some of the biggest financial markets in the world. Just this monetary tightening could have a pretty sobering impact on stock markets in my view. 

What could drag them down further

Maybe not immediately, but higher interest rates could also mean bigger government bills. The government has run-up its debt during the pandemic, interest payments on which will rise now. And all governments have one key source of revenue. You guessed it. Taxes. From last year’s spring budget, we know that in the UK, higher corporate taxes are coming from April 2023 onwards anyway. I reckon that other tax categories could rise too. That would lower our disposable income and could slow growth down, and hence also the stock markets. 

What I’d do now

Higher taxes might be good for the overall health of the economy, but for companies and the stock markets in the short term, they are not. Going by what I understand of the government’s temperament so far, however, it is unlikely to spring any unexpected tax shocks to the system that could lead to a market crash. Also, I think the stock markets are likely to price in high inflation and interest rates sooner rather than later. Based on this, I do not think that a stock market crash is coming, but stock market uncertainty might stay. As such, I will keep calm and keep buying my favoured FTSE 100 stocks. 

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.

Worldwide, the FTSE 250‘s TI Fluid Systems (LSE: TIFS) is one of the leading players in the automotive industry. And the company has been developing a strategy to ramp up its participation in the accelerating electric vehicle (EV) market.

And for me, one of the key components of the case for investing in the stock now is last autumn’s appointment of a new chief executive. Hans Dieltjens parked his cardboard box of possessions on his new desk in October 2021.

New blood, new growth?

I’m a big fan of new blood pumping into the management team of an established business. New leaders often bring with them energy and a determination to make their mark and succeed. And in this case, it seems clear Dieltjens’ main task is to drive the business forward into its new phase of growth.

The enterprise has been around in various forms for about 100 years. But it has grown — a lot. And now the company concentrates on manufacturing automotive fluid storage, carrying, and delivery systems for light vehicles. For example, things such as brake and fuel lines. And products for thermal applications, fuel tanks and other applications.

Since joining the stock market in 2017, the business has performed erratically with weakness in the profit figures and a volatile share price. However, I’m encouraged by the positive tone in today’s post-close trading update. It covers trading in 2021, but we’ll get even more detail with the full-year results report due on 15 march 2022.

The company said the financial performance of the business has been “robust”. And that’s despite market headwinds such as microchip shortages, supply chain disruptions, and volatile customer demand. The directors expect to report constant currency revenue for the year of around €2.95bn. And revenue growth will likely have exceeded global light vehicle production growth by about 3% — suggesting TIFS has been winning market share.

Despite cyclicality, I’d buy the stock for growth

Meanwhile, cash flow generation has been “strong” and in line with the directors’ previous expectations. And City analysts are upbeat about the company’s immediate prospects. They’ve pencilled in an uplift in earnings per share for 2022 of almost 70%. But I admit such an increase will only take earnings close to where they were in 2019. Indeed, the arrival of the pandemic proved the high element of cyclicality in the business model because revenue and earnings plummeted during 2020. And cyclicality is a risk worth me keeping an eye on going forward.

However, with the share price near 244p, the forward-looking earnings multiple is just over 11 when set against analysts’ expectations for 2022. And I see that valuation as undemanding. Meanwhile, the share price is close to its level from 2017 when the stock first arrived on the stock market.

The stock performance has been underwhelming and there are no guarantees that it won’t continue to be so. However, I’m encouraged by the appointment of the new chief executive and other high-level executives. And by the company’s prior statements about the firm’s determination to accelerate its EV strategy. I’d buy the stock now for growth.

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

As investors pay close attention to what might happen next in stock markets, I think there is a lot to be learnt from past experience. Even today, lessons from the 1929 stock market crash will hopefully help me navigate turbulent markets. Here are three lessons from 1929 I am applying when making decisions about my portfolio.

1. London and New York feed off each other

The month before Wall Street crashed, the London market did. A leading British investor was jailed for fraud, the markets gyrated wildly for some days, and then prices collapsed. A ripple effect contributed to the Wall Street collapse just weeks later.

1929 is almost a century ago. Yet what happened in London already impacted New York markets and vice versa. Today with advances in technology and globalisation, that is perhaps more the case than ever. A lesson I take from the 1929 stock market crash is that one market can be affected by another, even if it is thousands of miles away. Looking at Tesla or Peloton trading in New York, it could be easy for me to think that the performance of these shares I do not hold will have no impact on the British shares I own. But almost a hundred years ago, the impact of events in the financial markets could already ripple strongly across the Atlantic. No stock market is an island.

2. Every bubble bursts

In the years leading up to the 1929 crash there was increasing speculation. A speculative bubble grew and an increasing number of warning voices urged caution on investors.

But this time, extreme bulls argued, things were different. The economy had been transformed fundamentally. Shares deserved their valuations even if they looked excessive using previous valuation metrics. So the argument went.

Sound familiar? It is basically the story of every stock market bubble, of which 1929 was just the most notable. In the end, the bubble always bursts. It can be a dramatic popping, like the 1929 crash. Or it can be the slow release of air that takes the life out of a bubble gradually, as seen in the Japanese property market from the 1980s onwards. But for me, the lesson is the same: if it looks like speculation and smells like speculation, it is probably speculation.

I do not know when any given bubble will burst, but I do know that bursting is the fate of bubbles. By focussing on long-term investment rather than speculation, bubbles bursting can turn from a possible source of panic to a buying opportunity for my portfolio.

3. A stock market crash and the long haul

I try to buy shares I would be happy to hold for decades. I think the 1929 crash shows why that strategy makes sense. The Dow Jones index did again reach its September 1929 peak. But it only did so in 1954, a quarter of a century later.

Buying overvalued shares with the hope of offloading them in a hot market is speculation not investing. If a market peaks and takes a quarter of a century to recover as it did after the 1929 crash, such an approach can be very costly. That is why I focus on buying shares in high-quality companies whose future prospects look good to me. If I end up holding such shares for decades, that suits me fine.

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

One of my favourite ways to earn passive income is to invest in dividend shares. I like this method because it allows me to receive money from the success of large, well-known companies without having to do anything myself for it.

So far in 2022, stock markets seem to have been nervous. That could make it a lucrative time for me to start building passive income streams by investing in dividend shares. Here is how I would aim to do it with just £3 a day.

Starting small

If I wanted to buy a property in the hope of getting rental payments, I would need quite a bit of money to begin. With shares, I can start with nothing and build up slowly. £3 itself is not enough for me to start investing, after commissions and fees are considered. But £3 a day would add up to almost £1,100 a year. That is definitely enough for me to set up passive income streams in the stock market. It is also enough for me to diversify my portfolio by investing in different companies. I think that is important as it will help me to reduce my risk if any one company disappoints me.

Investing not trading

But while the prospect of buying shares – perhaps for the first time – may seem exciting, I would try not to get carried away with it. Trading regularly brings costs. It can also be nerve racking. Instead of being a trader, I would set out to be an investor.

That means that I would be on the lookout for good companies with strong income prospects that I thought I might hold in my portfolio for years. After all, if a share is attractive enough for me to buy now because of its passive income prospects, hopefully if it keeps performing the same way it will still be a suitable choice for my holdings in years to come.

Doing research to find passive income ideas

While I was waiting for my daily £3 savings to mount up, I would use the time to research some companies in which I might want to invest. I think it is important that my passive income plan focusses on my own financial priorities. What is right for other investors might not suit me.

For example, if I wanted to receive regular passive income, I might be more attracted to companies that pay dividends quarterly or even more regularly, such as Unilever and Games Workshop, rather than those that pay just once or twice a year, such as Antofagasta.

But I might be more interested in size not timing of dividend payments. If I invested £3 a day I would have £1,095 after one year. Investing that at an average yield of 2% — what I could earn from Games Workshop, for example — would earn me just under £22 of passive income a year. But if I invested in shares with an average yield of 8%, like Imperial Brands, after one year my portfolio would hopefully be generating almost £88 of passive income per year.

Dividends are never guaranteed though, so I would want to hunt for companies whose future outlook I felt was strong. I would also pay attention to prospects for dividend growth. With some dividend shares experiencing price falls, the current market turbulence could provide a useful hunting ground for me.

Christopher Ruane owns shares in Imperial Brands and Unilever. The Motley Fool UK has recommended Games Workshop, Imperial Brands, and 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.

Key points

• Unilever could be strong in a crisis
• Excellent earnings record
• Potential £50bn acquisition has given the market food for thought

Chart data from global indexes, like the FTSE 100 or the NASDAQ, does not currently make pleasant reading for investors. Although the FTSE 100 is only down 1.79% in the past month, the NASDAQ is down 15.5% in that period. Given that markets have had a decent year overall, the recent downturn in price is troubling. This is why I want to buy shares in Unilever (LSE: ULVR), a FTSE 100 stalwart, to see me through any future difficulties.

A FTSE 100 value stock to see me through

Fundamentally, Unilever appears to be a smooth-running operation. As a consumer goods conglomerate, it owns well-known brands like Dove, TRESemme and Vaseline. It currently has operations in over 190 countries.

This stock has delivered consistent earnings for shareholders over the past five years. Indeed, earnings per share (EPS) data shows that the company has managed 5% compounding annual growth rate for this period. With a potential stock market crash in mind, this is exactly the steady fundamentals I like to see.

What’s more, it appears that Unilever shares are actually quite cheap. With price-to-earnings (P/E) ratio and the most recent EPS data, I am able to calculate the fair market value of this stock. The P/E ratio is 22 and the recent EPS is 248p, so Unilever stock is actually worth 5,456p per share.

According to my workings, therefore, the shares are currently trading at a 27.6% discount. By buying Unilever, I would be getting a great deal for my money. This FTSE 100 stock has great earnings and is trading at a discount. Also, as far as dividends go, this stock has a relatively stable yield of 3%

GlaxoSmithKline consumer healthcare

In recent days, much has been written about Unilever’s attempts to buy the GlaxoSmithKline consumer healthcare brand. The approach appears to have been made on 15 January 2022, with two subsequent bids made. The last bid amounted to £50bn and Unilever has since stated it will not increase this offer.

The market has looked with a degree of scepticism on this series of events. Société Générale recently upgraded the Unilever to ‘buy’ and increased its target price to 4,100p from 3,500p. It also believed that the acquisition could enhance this FTSE 100 stock’s own diversification. On the flipside, the bank stated that the leaked nature of the bid seemed “clumsy”.

Bank of America agreed that the proposed deal would balance Unilever’s portfolio but expressed concern at its lack of experience in the over-the-counter healthcare market. For me, however, it is heartening to see management trying to broaden the scope of the company’s operations.  

At the current time, a stock market crash appears possible though not guaranteed, of course. Regardless, in times of strife I want companies that I can rely on. With its excellent earnings record and the global reach of its operations, this FTSE 100 stock is the right place to put my money just now. I will most certainly be buying this fantastic stock right now.

Andrew Woods does not own shares in any of the companies 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.

Could we witness a deeper stock market crash over the coming months? That’s the big question that I’m asking myself. It’s been a torrid start to the year for many global stock markets. Just looking at the FTSE 100 index, it may not feel too bad. After an 18% gain in 2021, the UK’s largest 100 shares have barely fallen by 1% so far this year. This is in contrast to the much steeper declines seen in the major US stock markets. For instance, the tech-heavy Nasdaq index is currently down by 15% year-to-date, wiping out much of the 21% gain last year.

Stock market crash: potential causes

To try to predict if the stock market pullback could get worse, I’d analyse what is currently causing the weakness. Many shares have been relatively weak ever since the US Federal Reserve indicated that it will start to raise interest rates and reduce the size of the central bank’s balance sheet. High and persistent inflation has become a problem for economic stability, and central banks will want to keep it under control. They can do this by using various tools at their disposal. However, there are consequences to these policy actions. Higher interest rates tend to reduce company valuations (and share prices), as future cash flows are discounted back to the present day at higher rates.

Don’t panic

Another less-discussed factor is psychology. Once a stock market crash starts, share prices can fall further from weak sentiment. Stock market panic can cause more panic, and the sight of losses can cause some investors to sell further. Psychology plays an important factor in the stock market.

History shows that after every stock market crash, share prices tend to recover. For instance, over the past few decades we’ve seen the dotcom bubble in 2000, the global financial crisis of 2008, the more recently the Covid crash of 2020. Bear in mind that some recoveries can take longer than others. Of course, history isn’t always a perfect guide to the future and the situation is different every time. Nonetheless, I’m creating a watchlist of quality UK shares that I’d like to buy at discount.

Top UK shares

The ‘no-brainer’ UK shares that I’ve got on my watchlist right now include property portal Rightmove, credit data leader Experian, and drinks giant Diageo.

The shares on this watchlist all have some characteristics in common. They’re excellent businesses that I believe will thrive over many years. These businesses are profitable and growing. They all have a competitive advantage that could keep them ahead of competition. Lastly, they’re also businesses that are difficult to replicate.

Even though their share prices could fall in the near term if a stock market pullback gets worse, I reckon they could recover well and thrive over the coming years.

Popular investment guru Warren Buffett once commented, “Be fearful when others are greedy, and be greedy when others are fearful”. There seems to be a lot of fear in the market right now. I reckon the second part to his advice could prove useful over the coming days, weeks, or months if the stock market crash gets much worse.

Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo, Experian, and Rightmove. 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 want to know which current FTSE AIM small-cap stocks could be primed for growth in 2022 and beyond. One stock I want to take a closer look at for my holdings is Diaceutics (LSE:DXRX).

Precision medicine business

Diaceutics offers pharma firms precision medicine diagnostic solutions. It is worth noting that precision medicine is a newer medical model. It proposes the customisation of medical care, decisions, treatments, practises, or products being tailored to a group of patients. This is instead of a one drug fits all methodology which is currently the norm within pharma and healthcare.

As I write, Diaceutics shares are trading for 110p. At this time last year, the shares were trading for 146p, which equates to a 24% drop over a 12-month period.

For and against investing

FOR: Diaceutics is a relatively new business in a relatively new sub-sector of pharma and healthcare. The pandemic has reminded us all of the importance of life-saving drugs and the growth potential in this sector. It is said that precision medicine is set to grow exponentially in the years ahead. Investing in this FTSE AIM incumbent now could be a stroke of genius while it is cheap, up and coming.

AGAINST: Pharma is a large and lucrative sector. One of the biggest risks I must note is that of competition. Despite Diaceutics’ progress to date, there is always the chance that a bigger, more established firm provides their own solutions. An established competitor will have more financial muscle to develop precision medicine tools and could leverage existing relationships to launch it successfully.

FOR: With newer smaller firms, such as Diaceutics, I often have to refer to track record of performance and the recent news cycle when deciding to buy the shares for my holdings. I do understand that past performance is not a guarantee of the future, however. Reviewing past performance, I can see revenue and operating profit increased year on year between 2017 and 2019. 2020 pandemic figures were slightly less on both fronts. More recently, Diaceutics released a trading update ahead of 2021 results. It has seen reported revenue grew by 10% compared to 2022 and uptake of its most popular platform had increased too.

AGAINST: Precision medicine is still a new concept in the pharma and healthcare market. There is always the chance that the solutions and methodology to support its uptake could fail, meaning the platforms created by Diaceutics could become useless or obsolete. This could impact the stock massively unless it was able to change tack to another part of pharmaceuticals.

FTSE stock I would buy

There aren’t many investors out there who can profess the ability to pick a small-cap gem that could develop into the next big thing. I do not profess to have such ability, but I do like the look of Diaceutics. It has a decent track record of growth and performance and larger scale pharma firms are taking notice of its groundbreaking work. I would happily add a small number of shares, which I currently consider relatively cheap, to my holdings and see what happens.

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.