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I have been combing the markets for stocks that could have the potential to double my money this year. I think there are a handful of these companies in the FTSE 250. In particular, I believe investors are overlooking the oil and gas sector. This could change as we move through the year, and rising oil prices enable these businesses to generate blockbuster profits. 

Undervalued FTSE 250 producer

Harbour Energy (LSE: HBR) is the UK’s largest independent oil and gas business. It was formed in 2020 through the merger of Premier Oil and privately-held Chrysaor Holdings. The combination has created a champion with lower operating costs, a stronger balance sheet, and a wider operating footprint, supported by some of the largest commodity traders in the world. 

Unfortunately, despite the company’s advantages, it is still an oil and gas producer. This means it is still a slave to commodity markets. In 2020, the group’s losses hit $1.3bn as low oil prices and the costs from the merger drained the business. 

However, with oil prices now back at a multi-year high and natural gas prices surging, the corporation is on track to report substantial profits over the next two years. According to City analysts, who have used the company’s projections in their research, the group can report a net profit of $423m in 2021, followed by just over $900m of income for 2022. 

Based on these projections, the FTSE 250 stock is trading at a forward price-to-earnings (P/E) multiple of 4.6. By comparison, Harbour’s larger peers are selling at double-digit multiples. This suggests the shares can double if they return to the sector average multiple. 

Of course, there is a reason why investors are not paying a sector-average multiple for the shares today. Oil prices are highly volatile, and Harbour’s fortunes can change overnight. The firm also has a lot of debt, which is another risk I will be considering. Rising interest rates could jack up the cost of the group’s debt and hit profit margins. 

Potential to double

I think the stock has the potential to double this year. This is based not only on its valuation but also on progress in reforming the group. 

I believe investors are still waiting to see how the enlarged enterprise will fare in different market environments. Over the next 12 months, as the world returns to normal, the market should be able to gather this information. At the same time, with cash pouring into the firm’s coffers, the company can start to make headway paying down its $3.3bn debt mountain.

There is also speculation that the corporation can introduce a dividend over the next two years. If it can return cash to investors, this could be a solid sign to the market that Harbour’s management is committed to improving shareholder returns. Such a development could also help drive a re-rating of the shares. 

As such, I would buy shares in the FTSE 250 oil producer for my portfolio in 2022, as I believe the stock has the potential to double in value. 

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.

The Alternative Investment Market (AIM) is London Stock Exchange’s junior market. It’s home to many small and medium-sized companies with ambitions to grow into much bigger businesses. This makes it a perfect hunting ground to find UK shares that could explode in the years ahead.

With this in mind, here’s a growth stock listed on AIM I’d buy today.

A stock with explosive growth potential

The company is Team17 (LSE: TM17), a video games developer and creative partner for third-party gaming studios. Before I dig into the company, the video gaming industry is expected to grow considerably. According to Statista, the global market will be worth $269bn in 2025, up from $178bn in 2021. I view this as a big tailwind for Team17 if it can capitalise on the growth in the wider industry.

A major attraction for me with Team17 shares is the company’s financial metrics. Indeed, the business is able to achieve an operating margin over 30%. Not only this, but Team17 also generates double-digit returns on its capital base. With financial ratios so high, there’s a much better chance for excellent shareholder returns as the company continues to grow.

Team17 also released a trading update in January which was encouraging. Management said the company is continuing to trade above their expectations for the six months to 31 December, which completes a “solid performance in 2021”.

The full-year performance for 2021 does look good, in my view. Revenue is expected to grow over 9%, which should translate into a pre-tax profit growth rate of 17%. Things look even better next year though. Analysts are expecting revenue to grow by 24% in 2022, with an increase in pre-tax profit by 22%.

Risks to consider

Even though the video game industry is expected to grow, it’s still a competitive market. One new and popular game from another developer could steal market share from Team17. For example, games such as Fortnite and Minecraft were huge successes, and could threaten sales of Team17’s games.

Another risk for me to consider is that the firm has been acquisitive of late. Only recently, the company announced it was buying Astragon Entertainment for £83m. It’s to be funded by a placing of shares to raise gross proceeds of £80m. Astragon is a developer and publisher of simulation games, so I do view this as a good fit for Team17. However, there’s never a guarantee that acquisitions will be successful. The cultures of the different businesses may not blend well, or the acquiring company might overpay. It’s certainly something to monitor if Team17 continues on its acquisition strategy.

A UK share to buy

On balance, I think Team17 is a buy for my portfolio. It’s not without risk, just like any investment. But I think the potential return over the years ahead outweighs the risks at hand.

Dan Appleby owns shares of London Stock Exchange. 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.

The last few weeks have been pretty brutal for many investors, myself included. Plenty of technology stocks I own, including the likes of Amazon, Nvidia, and Shopify, have fallen 20%+ in the blink of an eye.

Here, I’m going to explain how I’m handling this stock market crash. With share prices plummeting, these are the moves I’m making now.

I’m looking for top stocks to buy

The first thing I’m doing in this environment is creating watchlists of high-quality stocks I want to buy.

You see, while many investors are in ‘sell’ mode right now, I’m going against the crowd and looking for top stocks to snap up. Twenty years of investing has taught me that the best time to buy stocks is generally when there’s panic in the air. And right now, there’s definitely signs of panic. Yesterday, the FTSE 100 index was down 2.6% while the S&P 500 was down nearly 4% at one point. These are big falls.

My watchlists aren’t anything overly complicated. I simply put together a list of stocks with their current share prices, the amount in percentage terms they’ve fallen from their 52-week highs, and their valuations. I’ve provided an example below. 

This kind of watchlist helps me quickly spot opportunities. Within seconds, I can see what stocks have been hammered the most, and whether there’s value on offer.

For example, looking at that list, PayPal stands out to me. It’s down more than 50% from its 52-week high and currently trades on a P/E ratio of less than 30. That strikes me as an opportunity, given the company’s market position, brand name, user base, and growth potential.

Alphabet (which owns Google and YouTube), on a P/E ratio of 22.3 times, also looks like an opportunity to me. It appears set to grow significantly in the years ahead on the back of growth in digital advertising, cloud computing, and artificial intelligence. A P/E ratio in the low 20s also strikes me as a bargain.

I’m buying stocks NOW

The second thing I’m doing is drip-feeding money into the market slowly. The reason I’m taking a cautious approach, and not loading up on stocks, is that share prices could potentially fall further. So I want to keep some powder dry for the future.

As for what I’ve been buying, it’s mainly been Big Tech companies as I’m very bullish on these from a 10-year view. In the last week, I’ve added to my positions in Microsoft, Alphabet, Amazon, and Nvidia. However, I’ve also had nibbles at some smaller tech companies that are benefiting from the digital revolution, including Intuit, Kainos, and Volex.

In hindsight, I’ve been a little bit early with a few purchases as they’ve continued to fall. However, that doesn’t concern me too much, as it’s extremely hard to pick the bottom when stocks are crashing.

While stocks could go lower from here, I’m relatively confident that, in the long run, my purchases will pay off as the world becomes more digital.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns Alphabet (C shares), Amazon, Intuit, Kainos, Microsoft, Nvidia, PayPal Holdings, Shopify, and Volex. The Motley Fool UK has recommended Alphabet (A shares), Amazon, Kainos, Microsoft, PayPal Holdings, and Shopify. 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.

Buy-to-let property and stocks and shares are assets I can use to generate passive income. However, both have different benefits and drawbacks. As such, I have been carefully evaluating which strategy I should use, considering my personal circumstances and goals. 

Buy-to-let outlook

I believe the biggest hurdle for owning rental property is the cost. With the average UK property price now exceeding £260,000, I calculate I would need at least £100,000 to fund a deposit. This also assumes a mortgage lender would provide the remaining 60% of the purchase price. 

By comparison, I can start buying stocks and shares today with just a few pounds. 

Despite this drawback, buy-to-let property does have some significant advantages over equities. Rental income can be more stable and predictable than dividend income. As dividends are paid out of company profits, they can be cut at a moment’s notice if earnings plunge. 

What’s more, if the property’s value also increases, I should be able to benefit from both income and capital growth. The same is true of shares, but borrowing money via a mortgage can improve returns (although it can increase losses if values decline). 

Income can be more stable and predictable from rental property but is not guaranteed. Finding tenants can be a lengthy and costly process. I may also have to foot the bill for repair costs, which will eat into my bottom line. 

And then, there are the extra tax obligations to consider. In recent years, the government has been cracking down on buy-to-let landlords. This is something I am factoring into my analysis. 

Passive income from stocks and shares

Unlike rental property, I can own equities inside an ISA. Any assets held in an ISA do not attract income or capital gains obligations. Although ISA contributions are capped at £20,000 a year, that is still a significant benefit. 

It is also easier to diversify with stocks and shares than rental property. For example, with an investment of £1,000, I can buy a basket of shares in different sectors and markets worldwide. It would be impossible for me to do the same with buy-to-let property. I would need tens of millions of pounds to build an international property portfolio and the infrastructure to manage these assets. 

Another advantage equities have over property when investing for passive income is time. I mean that it is a lot faster to buy and sell stocks, and I do not need to worry about managing the underlying businesses. 

Indeed, I already own passive income champions British American Tobacco and Direct Line in my portfolio. These stocks currently support a dividend yield of around 7%. Earning this income requires absolutely no effort on my part. And with an investment of £100, I could make a passive income of £70 a year. 

Therefore, while buy-to-let property does have its advantages, I think stocks and shares suits my own needs better. 

Rupert Hargreaves owns British American Tobacco and Direct Line Insurance. The Motley Fool UK has recommended British American Tobacco. 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.

Here are three top penny stocks I’m considering buying next month.

A dirt-cheap penny stock

I’d buy building materials supplier SIG (LSE: SHI), as I think demand for its insulation products could rocket for years to come. A backcloth of soaring energy bills is likely to bolster sales of its heat-preserving products. Growing concerns over the climate crisis also looks set to improve demand for SIG’s energy-saving foam-based hardware.

Housebuilders are being tipped to turbocharge production over the next decade at least to solve the country’s housing crisis. This bodes well for SIG, and particularly as these construction firms put greater focus on the energy efficiency of their products. I do note that a downturn in the housing market, and the subsequent damage this could cause to build rates, could significantly impact SIG’s profits.

I think SIG’s shares could be too cheap for me to fail to act. The business currently trades on a forward price-to-earnings growth (PEG) ratio of 0.2. Investing theory says that any reading below 1 suggests a stock could be undervalued by the market.

Use your noodle

The Restaurant Group (LSE: RTN) is another penny stock I’m paying close attention to today. Even though the pandemic rolls on and we can’t rule out further lockdowns, I think the potential long-term returns here could outweigh the risks. Brits are spending increasingly large portions of their income on eating out and firms like this stand to be big winners.

I like The Restaurant Group in particular because it owns the highly-popular Wagamama noodle chain. Sales here rose a healthy 11% and 8% in October and November compared to the same months in 2019. I’m also encouraged by the improved performance of the penny stock’s other brands like Frankie & Benny’s and Garfunkel’s. Strong trading at The Restaurant Group — allied with the success of disciplined cost-cutting — actually encouraged the business to hike its full-year growth forecasts late last week.

The Restaurant Group is a very different beast to what it was a few years back. Its turnaround plan is bringing hungry customers back in their droves, and I think now could be the time to grab a slice of the stock. But I have to remember that the dining out sector is highly competitive.

Battery-powered profits

I’m also thinking about building my exposure to the green economy. And I believe adding Atlantic Lithium to my portfolio could be an effective way to do this. The company is developing Ghana’s Ewoyya lithium project, which continues to illustrate its exceptional mining potential.

Demand for lithium is predicted to soar over the next decade as electric vehicle production rates increase. Analysts at Statista think global consumption of the battery-making material will rocket to 1.8m tonnes by 2030, up from a projected 497,000 in 2022. As a consequence, I’m thinking profits at Atlantic Lithium could soar. I have to keep in mind that there’s a range of operational problems that could affect a mining company like this, potentially damaging profits. But I’m confident enough to buy the shares for my portfolio.

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.

Dividends have saved my long-term investment in Lloyds Banking Group (LSE: LLOY) from being a total disaster. I’m down about 40% on the share price since I invested. But the 4%-5% or so in income that I’ve been getting each year has helped offset that pain. Well, my Lloyds dividends had been rolling in until Covid-19 arrived, at least.

After a pause, the bank came back with a modest 0.57p per share in 2020. That was really not too exciting. I’m not expecting the 3p levels we saw prior to the crash. But I do want to share my thoughts on what might affect the Lloyds dividend in 2022 and beyond.

Firstly, what does Lloyds itself say? With 2021 interim results released in July, the bank said it had “reintroduced a progressive and sustainable ordinary dividend policy, with an interim ordinary dividend of 0.67 pence per share“. That’s not a lot, but it does exceed the total paid for 2020. And the statement went on to speak of “the Board’s commitment to future capital returns“.

It was probably wise for Lloyds to remain reasonably tight-lipped about full-year dividend prospects at the time. Our Covid-19 outlook was, after all, very uncertain. And the economy didn’t look too bright either. But six months on, what are the Lloyds dividend prospects looking like?

Lloyds dividend cover

At that halfway stage, the bank had posted pre-tax profit of £3.9bn. And by Q3, the nine-month figure was up to £5.1bn. I remain cautious, though, as there’s a net impairment credit in there. It wasn’t purely through improved trading.

A first-half EPS figure of 5.1p implied dividend cover of 7.6 times. By comparison, the 2018 dividend was covered 1.7 times by earnings. If Lloyds had paid out at that old ratio, it could have afforded 3p per share. And that alone would represent an annual yield of 5.9% on today’s price.

Saying that, I’m really not expecting the Lloyds dividend to get close to 2018 levels of cover any time soon. Progress in that direction will surely depend on a number of things.

One, yes, is that virus. But sooner or later, we’ll surely move from pandemic to endemic status. It will become something we have to live with and deal with, just like influenza.

Post-Brexit banking

I think the big test is going to be the success (or otherwise) of Lloyds’ post-Brexit business model, focused on the UK economy. And we’ve really not seen how it might go yet. As the UK’s largest mortgage lender, the housing market over the next few years should prove crucial too. A then there are interest rates. While those remain super low, I think investor confidence in the banks will remain weak.

Full-year results are due on 24 February. I suspect we’ll see Lloyds continuing with a conservative approach, with no rapid dividend escalation. And I reckon it might easily take another year to get a feel for the long-term Lloyds dividend outlook.

But I do think 2022 could provide the platform for a strong dividend future, even if we don’t see big payments this year. I’m likely to buy more.

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

It’s fair to say January hasn’t been the best of months for investors. Indications that the Federal Reserve may raise interest rates sooner than expected have sent equities, particularly US-listed tech stocks, into a tailspin.

As scary as such drops can be, I’ve been taking the opportunity to load up on a fund whose performance prior to the start of 2022 had been excellent.

Solid gains

Managed by Stephen Yiu, LF Blue Whale Growth returned 20.8% in 2021, according to its most recent fact sheet.  That’s a better return than its benchmark. The IA Global Sector average was 18%. All told, the fund has more than doubled investors’ money in a little over four years.

One reason for this stellar performance is the number of tech-related stocks owned by Blue Whale. These include Microsoft, Adobe and Alphabet. Another relates to just how concentrated the fund is.

Blue Whale’s portfolio is made up of just 27 holdings, almost 73% of which are US-listed firms. You probably don’t need me to tell you any strategy that embraced being overweight in stocks from across the pond paid off handsomely in 2021.

Unfortunately, the first month of 2022 has taken a rather large chunk out of last year’s gains. So the question to ask is whether the current market crash is a great opportunity to buy more. 

New bear market?

On the one hand, the recent rout in tech stocks could continue if the Federal Reserve keeps giving out signs that it’s ready to shift its monetary policy. That’s potentially problematic for Blue Whale’s portfolio, given how concentrated (and potentially more volatile) it is.

Regardless of what the Fed does, it’s possible traders will move more of their money into value stocks hit most by the pandemic anyway. Rising tensions in between Ukraine and Russia, while seemingly not all that relevant to the performance of a US-focused fund, could also push investors to the exit as a cautionary measure.

Is this the dawn of a new bear market? It’s entirely possible.

Back quality

Of course, there are reasons to stay bullish too. One argument is that all this will prove transitory. With so many US stocks now at least in correction territory, the worst could already be over.  And when we get big sell-offs, the recovery can be just as swift. Thanks to inflation, staying in cash is hardly appealing. 

Perhaps the biggest motivation for feeding my money into Blue Whale specifically is its attitude to stock selection. Like rival Fundsmith Equity, Yiu looks for high-quality shares. He also avoids those “at the mercy of cyclical economic gravity“. The fund has a strict approach to valuation too. This means investors don’t need to worry about owning unprofitable story stocks.

Another potential tailwind is Blue Whale’s size. As a relatively young fund with ‘just’ £1bn in assets, Yiu has considerable flexibility in what he is able to buy. I’d be amazed if he hasn’t put some money to work in recent days.

Long-term focus

The reversal in the fund’s fortunes is a reminder of how quickly sentiment can change. So long as I adopt a long-term mentality (not dissimilar to Yiu) while also maintaining a degree of diversification, I’m confident that increasing my investment here will pay off. I’m still backing Blue Whale.

Paul Summers owns shares in LF Blue Whale Growth and Fundsmith Equity. 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.

Largely speaking, 2021 was a great year to own UK dividend stocks. Shareholder payouts rocketed from the previous year as profits bounced back from the initial Covid-19 shock and corporate confidence improved.

Owners of mid-cap stocks in particular had plenty to celebrate. According to Link Group, dividends among such shares — firms whose market-caps range £1.5bn-£7.4bn ($2bn-$10bn) — soared 40.1% year-on-year in 2021. That’s more than twice the pace at which FTSE 100 shares rose last year.

Link Group said: “Mid-caps benefited from cancelled dividends being restored and the cyclical upswing to which they tend to be more sensitive.”

The prospect of more strong rises in 2022 is fraught with danger as Covid-19 drags on and inflation surges. But I still think mid-cap stocks could have another blistering year.

Here are two mid-cap dividend stocks I’m considering snapping up today.

Ultra Electronics

I think defence companies like Ultra Electronics (LSE: ULE) could have an exceptional 2022 as geopolitical tensions boil over. It’s not only a possible Russian invasion of Ukraine that’s putting the West on edge. A jump in the number of Chinese airplanes flying over Taiwan is a reminder of Beijing’s expansionist foreign policy in Asia too.

In this environment I expect orders of Ultra Electronics’ systems, which include sonar and radar systems on boats and providing mission-critical intelligence, to remain rock-solid.

I also like Ultra Electronics because of its expertise in electronic warfare. It’s my belief that revenues from its cyber security systems could balloon as countries duke it out on virtual battlefields. Researchers at Fortune Business Insights think the electronic warfare market will be worth $33.5bn by 2028, a $10bn rise from last year’s levels.

City analysts expect earnings at Ultra Electronics to rise for a fourth consecutive year in 2022. And they predict dividends to leap 7% too. This leaves the FTSE 250 stock with a healthy 2% dividend yield. I’d buy this UK dividend stock despite the ever-present danger of a systems failure that could prove catastrophic for future sales.

Glanbia

I’m tipping Glanbia (LSE: GLB) to have a strong year too as demand for its high-protein products soars. Its supplement brands such as Optimum Nutrition and SlimFast are becoming increasingly popular as people seek to live healthier lifestyles. Glanbia also makes ingredients that allow food manufacturers to improve the nutritional content of their goods.

The protein supplements market is particularly huge as people take up sports and visit the gym in increasing numbers. Experts at Allied Market Research think the industry will be worth $8.7bn by 2025, up significantly from $4.9bn in 2017.

This explains in part why City analysts think Glanbia’s earnings will rise in 2022 and that dividends will follow suit. A 5% yearly dividend increase is being tipped, a prediction that creates a decent 2.7% yield. I think Glanbia’s a hot stock to buy even though it faces huge competition in the supplements industry.

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