The Cineworld (LSE: CINE) share price has staged a modest recovery over the past couple of weeks.

After the shares plunged to a low of 28p in December, the lowest level since the second quarter of 2020, the stock recovered to 42p. This performance in itself is impressive. A gain of 50% in just a few weeks suggests that the firm’s outlook has changed entirely. 

However, I need to put this into perspective. Over the past year, the Cineworld share price has lost 40%. Recent gains have only made a modest dent in the declines of the past year. 

But could this be a sign of things to come for the company in the year ahead? As the economy opens up, Cineworld is reporting a stronger trading performance. If this continues, the group’s outlook could change dramatically. 

Recovery in progress 

Whenever I have covered the stock over the past couple of years, I have noted that the group’s days could be numbered without a substantial recovery in free cash flow. Without cash flow, the company will struggle to pay staff, invest in its cinemas and pay off its debt obligations. 

As the economy has slowly recovered over the past 12 months, Cineworld has issued a series of upbeat trading updates. Trading has recovered relatively quickly, and now it looks as if the business has reached the critical free cash flow benchmark. 

According to a trading update issued last week, group revenue hit 88% of 2019 levels in the fourth quarter. Thanks to aggressive cost-cutting efforts, this helped the business generate a positive cash flow in the last quarter of 2021. 

This is a landmark for the enterprise that cannot be understated. It shows that the company is generating free cash, the lifeblood of any business. After nearly two years of losses, this tells me that the firm could return to stability in 2022. 

Of course, there are plenty of other risks for the Cineworld share price on the horizon.

Debt interest costs are eating up a considerable amount of resources. It will take years to pay down these obligations.

What’s more, the corporation is facing a huge potential liability from its aborted Cineplex deal. The enterprise is appealing a decision to award Cineplex £800m to cover lost synergies from the merger. Cineworld is appealing the decision, but this cloud could continue to hang over the firm for some time. 

Cineworld share price outlook 

Even after taking this headwind into account, it is clear to me that Cineworld is moving forward. If the company continues to generate positive cash flow in the quarters ahead, the market’s view of the business could change, which may drive a re-rating of the share price. 

As such, I think the outlook for the stock in 2022 is improving. Assuming there are no more restrictions or negative surprises, the firm’s fundamentals could continue to improve, translating into a higher share price. 

Still, I am not buying the shares for my portfolio right now despite this potential. I am going to wait on the sidelines for more progress before building a position. 

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 Lloyds (LSE: LLOY) share price has recovered strongly since the stock market crash of 2020. This is because the pandemic effects on the bank have not been as severe as first feared. Further, with initiatives such as the postponement of stamp duty and low interest rates, the housing market also boomed. As the top mortgage lender in the UK, this has benefited Lloyds hugely. So, if I’d invested £1,000 in Lloyds shares in March 2020, how much would I have now?

The figures

In the stock market crash, the Lloyds share price crashed to around 28p. However, since this point, the shares have rebounded to over 50p (they’re priced at 52p as I write). This represents an 85% increase. As such, if I’d invested £1,000 in the shares during the stock market crash, I’d currently have £1,857. This also represents a greater return than the FTSE 100 in the same period, which has risen 44%. Clearly, this shows the value of investing in stocks when there’s fear in the market.

Furthermore, after cancelling its dividend under advice from the Prudential Regulation Authority, Lloyds has since reintroduced it, albeit at modest levels. Total dividend payments since the stock market crash have totalled 1.24p per share. This equates to £44 in extra income, taking the total return to over £900.

Can Lloyds shares rise further in the future?

Clearly, the recovery has been excellent so far. But Lloyds shares are still down around 15% from their pre-pandemic prices, so is there further to rise?

There have been some positive developments for the bank recently. For example, while inflation has led to struggles for a number of FTSE 100 stocks, banks have benefited. This is because the Bank of England has had to raise interest rates to combat inflation, and further interest rate hikes are expected throughout this year. This makes it more profitable to lend.

Secondly, there is scope for the dividend to be raised in the future. Since the pandemic, Lloyds has continued posting strong profits, including net income of £11.6bn for the first nine months of 2021. Such large profits often equate to large shareholder returns, and there is an expectation that the bank will raise its dividend soon. This gives the shares a prospective yield of around 4.5%, making them attractive to income investors.

Even so, there are factors that could see the Lloyds share price decline. For example, many incentives to boost housing demand are now over and higher interest rates may also stifle the appetite for buying a home. This could see the housing market suffer. As Lloyds remains very dependent on a strong housing market, such an event would have devastating effects for the bank.

Would I buy?

Overall, I think Lloyds shares are a very attractive option. While many other companies are struggling with the impact of inflation, Lloyds seems like a prime beneficiary. The boom in the housing market is also showing no current signs of slowing down, despite risks that it could do in the future. Therefore, I may add some Lloyds shares to my portfolio.

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

When I am looking for UK shares to buy for my portfolio, I concentrate on looking for companies that have long -term potential. I am looking for businesses that I can acquire and hold in my portfolio for the next decade or more. 

Unfortunately, these businesses are few and far between. They need to exhibit a robust competitive advantage and balance sheet to pass my strict tests. 

That does not mean these businesses are impossible to find. Here is a list of UK shares that I would be happy to buy for my portfolio today and hold for the next decade. They all exhibit the qualities I am looking for in individual investments. 

UK shares with management ownership

As well as the qualities outlined above, I also want to include stocks in my portfolio where management has skin in the game. 

Two examples are financing group S&U and Associated British Foods. At both of these companies, the founders, or their descendants, continue to own a significant interest in the enterprise. 

I believe this fosters long-term thinking, as these shareholders are likely to stick around for many years. ABF and S&U also have competitive advantages. ABF’s is its size and scale in the UK food and clothing market through its ownership of the value brand Primark. Meanwhile, S&U’s advantage is its conservative underwriting policy for new financing agreements. 

I would add both of these UK shares to my portfolio for these reasons. A risk of investing in corporations with significant management ownership is that this means these shareholders could have too much influence on the firms. As such, the companies may not always act in the best interests of minority shareholders. 

Shares to buy for growth

Two other UK shares that I also believe offer exceptional competitive advantages are Auto Trader and Rio Tinto. 

These are very different businesses. Auto Trader owns and operates one of the most recognisable websites in the country. It is the first port of call for customers looking for new and used vehicles. This is the company’s competitive advantage. 

Meanwhile, Rio is one of the world’s largest iron ore producers. Its size and scale mean that costs are lower than the industry average, an advantage that looks set to stay. On top of this, the group has a cash-rich, debt-free balance sheet. 

Risks the companies may have to deal with as we advance include competition and inflation, which could increase their costs and reduce profits. 

Despite these headwinds, I am optimistic that both businesses can exert their competitive advantages to continue to grow in the years ahead. Of course, I will be keeping an eye on the risks outlined above as well. Nevertheless, I believe these are some of the best shares to buy for the next decade. As the economy rebounds, they should be able to reap the rewards of the recovery.

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

There is a curious trend in the UK’s stock markets right now. The FTSE 100 index is on the up and up. In the past month, it has made gains and even rose higher than 7,500. It has also largely continued to stay above this level. The FTSE 250 index, on the other hand, is headed in the opposite direction. It is down more than 3% in the past month as I write. When it started the year, it was close to 24,000. And after relatively few sessions in January, it has fallen below 23,000. 

As an investor in multiple FTSE 250 stocks, I am now wondering just what is going on here.

Inflation’s rising

FTSE 250 stocks tend to be more UK-centric than those that are part of the FTSE 100, which is more globally-focused. So, domestic conditions in the UK may well be playing on investors’ minds. Inflation, in particular, is worrisome. The latest figure is high and it is expected to remain elevated through the year as well. I expect that there will be a lot of inflation references from FTSE 250 companies in their updates in 2022.  

This could keep the index uncertain until such time that inflation comes under control. Moreover, considering that inflation is not just a domestic phenomenon, I think the trends in the FTSE 250 index could also indicate weakness in the FTSE 100 in the near future. It is not a given, of course, but I am keeping that possibility at the back of my mind. 

Why I am optimistic for the FTSE 250 index

However, there are reasons for optimism too. I expect that there will be plenty of policy action to curb inflation this year. The Bank of England has already raised interest rates once and could do so again. Significantly, the US Federal Reserve, is also expected to increase interest rates at least a few times this year. This should bring runaway price rises under control over the course of the year. 

Moreover, the economy is doing much better now than it was even a few months ago. This also makes me positive on the FTSE 250 index for 2022. The latest growth numbers, released just a few days ago, show that the UK economy is back to its pre-pandemic levels. And the growth is quite widely distributed, which reflects a healthy pick-up across segments and is not restricted to just one or two sectors.

What I’d do

In fact, even now, many FTSE 250 stocks are doing quite well. I can speak from the impact on my own portfolio. One example is the fast pick-up in Cineworld stock. But there are also travel stocks like National Express and easyJet. I reckon this is because of the light we can now see at the end of the Covid-19 tunnel, which is something to be positive about. 

In sum, even though inflation is a risk to the FTSE 250 index for now, there are a lot of positives that could balance out its adverse impact. I would buy stocks from the index that I know have solid credentials and will continue to grow over time, despite inflation. 

Manika Premsingh owns Cineworld Group, National Express Group, and easyJet. 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 FTSE 100 pharmaceutical giant GlaxoSmithKline‘s (LSE: GSK) share price had a very decent 2021, rising almost 20% and easily outpacing the the lead index. It’s had a pretty good start to 2022 too, albeit as a result of Unilever‘s interest in acquiring its consumer healthcare business rather than any news on trading. That’s all set to change when GSK provides the market with Q4 numbers on 9 February.

For me, this definitely makes the company one to watch. It’s not the only top-tier stock I see myself checking in on either.

Bid target

Unilever has ruled out another bid for GSK’s brands. Whether this is actually true, it’s certainly got the market talking about these sleepy giants once again. There’s little doubt the CEOs of both companies, but particularly GSK’s Emma Walmsley, are under pressure to deliver for their owners.

I suspect Walmsley might be willing to do a deal… eventually. I also believe that most shareholders would support this if GSK’s leader promised to return the vast majority of what it receives from the sale back to them. Of course, she may have other ideas.

If Unilever stays quiet over the next few weeks, GSK’s short-term performance will likely depend on whether it’s been able to build on the rebound in sales of non-Covid-19 vaccines seen in Q3. There’s a chance this won’t be the case. The world has been grappling with the Omicron variant over the last few months, after all.

Overall however, I think there are more reasons to be bullish than bearish right now. GlaxoSmithKline’s shares aren’t overpriced at 14 times forecast earnings and come with an expected 53.8p per share total dividend. Yes, the latter is a step down from the 80p holders that have grown accustomed to. However, it still equates to a 3.3% yield. That’s almost identical to that offered by the index as a whole.

Another FTSE 100 stock I’ll be watching

After some early promise, the Barclays (LSE: BARC) share price looks like ending January near where it started. I’m actually a little surprised by this. The possibility of quicker-than-expected interest rate rises should be good news for the financial juggernaut and its peers.

Still, it’s hard to complain if you’re a Barclays shareholder. Despite the resignation of CEO Jeff Staley in November, the shares are 45% up on where they stood this time last year. For perspective, that’s a smaller gain than that achieved by Lloyds (53%) but higher than over at HSBC (27%).

Despite this stellar performance, Barclays shares still trade on a little less than 8 times earnings. That might be deemed cheap given its more diversified business model compared to other banks. A 4.1% yield should also be attractive to income hunters.

I don’t see 2021’s gains being replicated in 2022. Nevertheless, I do think this could prove a decent entry point if final results on 23 February are as good as I expect them to be. Revenue from Barclay’s investment banking arm was already showing great momentum when the company last reported to the market in October. 

Of course, the aforementioned division could become something of a liability if market conditions were to suddenly worsen. So if I was to buy Barclays shares today, I would make a point of also being invested in stocks in more defensive sectors. Oddly enough, GlaxoSmithKline might be an ideal candidate!

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, GlaxoSmithKline, HSBC Holdings, Lloyds Banking Group, 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.

I was certainly taken aback when I saw the claim of a market ‘superbubble’ a few days ago. If we’re in one, then it could be only a matter of time before we experience a stock market crash. When I saw who made the claim — Jeremy Grantham, the co-founder and chief investment strategist of GMO — I was even more concerned. He’s been an expert in spotting and avoiding financial bubbles over his long investing career. In fact, Grantham identified the oncoming dotcom bust in 2000, and the housing bubble that led to the financial crisis of 2008.

So, when I noticed Grantham made the claim of a superbubble, I sat up and took notice. He published a research paper last week that detailed his thoughts. He started by explaining that “today in the US, we are in the fourth superbubble of the last hundred years”.

I actually shared similar views earlier in January about the prospect of a stock market crash in the US. I didn’t call it a superbubble, though. So now, I want to review what Grantham said about the US market, and also his conclusion on what investors should do. I might be able to take some wisdom from it for my own portfolio.

Are we in a superbubble?

Grantham says that this bubble is comparable to before the Great Depression in 1929 and the dotcom crash in 2000, and to the housing bubble in 2008. This is why he claims the US is now in “the fourth superbubble”.

So what is a superbubble? Grantham says it’s when prices rise far more quickly than they previously have done. Then, he says, the market narrows so only blue-chip stocks rise, and speculative stocks underperform.

This does seem accurate in the US right now. There was a huge rally in the S&P 500 from the March 2020 low to the end of December 2021 where the index rose over 100%.

I wrote about how growth stocks in the US were crashing back in December. In the article, I also recognised that the mega-cap stocks, such as Apple, Microsoft, and Alphabet, were all up. In other words, the blue-chips were higher, but the speculative growth stocks were underperforming. Therefore, according to Grantham’s definition, the US could be in a superbubble.

However, I don’t see the same signals in the UK. For a start, the UK’s large-cap index, the FTSE 100, is still lower than where it was before the crash of March 2020. And there hasn’t been the speculative crash in growth stocks in the UK market like there has been in the US.

Will the stock market crash?

Grantham seems to think the US markets will crash. Already this year, the Nasdaq 100 is down 11.5%, which could be a sign of blue-chip tech stocks beginning to crash. But he suggests that value stocks in other developed markets could be a good option for investors.

I think the US market could fall further from here, and even crash. The valuation of the Nasdaq index based on the forward price-to-earnings (P/E) is 28. It’s not the same in the UK market as the FTSE 100 is valued on a forward P/E of 12. 

If markets do fall, buying value stocks outside of the US could be a good option, like Grantham suggests. I’ll be looking to snap up cheap UK shares if they do!

Dan Appleby has no position in any of the shares mentioned. 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. The Motley Fool UK has recommended Alphabet (A shares), Apple, and Microsoft. 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.

Some parts of the global stock market have experienced sharp falls so far this year. US shares have been particularly weak, especially the US technology sector. For instance, the tech-heavy Nasdaq index is now down 10% this year. Given it’s still January, that’s pretty weak and concerning. However, UK shares have fared relatively well so far. The FTSE 100 index is currently in positive territory for this year. Nonetheless, I’m still preparing my UK shares portfolio in case a stock market crash in the US negatively affects my UK shares.

Which UK shares?

So which shares should I consider buying in this environment? I’m currently looking at stocks in two sectors – consumer staples and utilities. I reckon these two areas could be the least volatile sectors if there’s stock market turbulence in the UK. There are several reputable stocks in the UK consumer staples sector. My top picks right now include Unilever, Diageo, and Imperial Brands. All three are high-quality companies with an impressive return on capital employed of between 15% -and20%. On average, these three shares offer a dividend yield of 5%. I’d say that’s pretty good. It also offers an additional layer of safety that could act as a buffer if my growth stocks falter.

Pricing power

High and rising inflation is a key concern for economists. If companies can’t pass on rising costs to customers, profit margins can suffer. One thing I like about these three companies is that they own strong brands that have pricing power. This means they’re usually able to pass on price rises, protecting margins.

That said, they’re relatively slow-growing companies. Their sales and earnings grow much slower than some of the higher-octane shares available to buy. But often, slow and steady can win the race over the long term. As such, I’d like to hold some of these staples in my Stocks and Shares ISA.

Powering dividends

In a volatile market environment I also like companies in the utilities sector. Share prices in this sector aren’t particularly exciting. However, they do tend to offer above-average dividend yields. Currently, I like National Grid and SSE in this sector. On average, they hand out 5% in dividends each year to shareholders. With relatively stable cash flows and reliable dividends, I reckon these two shares could make a good addition to my portfolio.

A word of warning however. I reckon the next move in interest rates is likely to be up. Just as in the US, the Bank of England might choose to push up interest rates to tackle high inflation. Rising interest rates could increase borrowing costs for utilities in particular due to their typically higher levels of debt.

But overall, I reckon these two UK shares could offer lower volatility and fewer swings for my portfolio. So I’d be happy to buy some shares today.

Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo, 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.

When buying stocks, I think it pays to remember one truism. The past does not always reflect what is in store in the future. A recent example is the pandemic and its impact on stock markets. Companies’ best laid plans were upended, and their stock prices tanked. Some of them are yet to return to pre-pandemic prices. And these include some of the biggest FTSE 100 names. 

This poses a challenge to me when I set out to earn a reliable passive income for a long time. But it also gives me an opportunity to carefully consider stocks that are most likely to earn me such an income. These include both stocks that did not cut their dividends during the pandemic and those that quickly returned to paying them after a brief stop during that time. 

Utilities offer good passive income

Utilities are my preferred FTSE 100 stocks as far as dividend continuity goes. I have a number of utilities to choose from among the index’s constituents, like National Grid, SSE, Severn Trent and United Utilities. And their dividend yields are also pretty decent, ranging between 3.5% and 5.2%. Not that all of them have an above-average dividend yield (the average is 3.4% at present). 

SSE’s my FTSE 100 utility pick

Among these, I like SSE the most, which is why I bought it as well. It is no coincidence of course that it also has the highest yield (5.2%) among them. But I also like the fact that it is a big green energy producer, which is the industry of the future as is becoming increasingly clear. I am a bit disappointed by its lacklustre price performance in the recent past. For that reason, I am looking out for any fundamental changes to the company that could affect its prospects, and hence my dividends. But for now, everything appears to be in order. I would still buy it. 

Healthcare stocks’ dividend continuity

I also like healthcare stocks, like AstraZeneca and Hikma Pharmaceuticals. Their dividend yields are far from the highest at 2.4% and 1.9%, respectively. But they have earned investors passive income for a long time, which counts for something, I feel. They have grown investor capital significantly over the past years. Because of this, their yields look much better over the years too. So, for instance, if I had invested in them 10 years ago, my current dividend yield from AstraZeneca would be 6.4% and that from Hikma Pharmaceuticals 4.3%. 

AstraZeneca is my preferred stock

Between the two, I have a preference for AstraZeneca, and bought the stock a while ago. I like the company’s financial growth and more recently, of course, it has become a household name with the development of its Covid-19 vaccine.

But I am watching out for its profits, which do not always consistently rise. In fact, they could be a threat to its share price at present, which is trading at an eye watering price-to-earnings (P/E) ratio of 95 times. This might just cool down with its next financial update, so I am not particularly concerned. I would probably buy more of the stock, going by its good returns over the years.  

Manika Premsingh owns AstraZeneca and SSE. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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.

Peloton (NASDAQ: PTON) stock is having a miserable start to 2022. Already, the share price has crashed 24%. It’s not much better over one year either, as it’s down by a huge 83%. I did expect US markets to crash this year. The Nasdaq 100 is down 11.5%, and the S&P 500 is down 8% so far. Does this mean the fall in Peloton stock is just a case of markets being weak? Or is there something up with the company that means I shouldn’t invest? Let’s take a closer look.

Peloton and its IPO

Peloton is a home fitness company selling stationary bikes and treadmills. Its unique offering is its subscription service where members pay a monthly fee for classes and access to a competitive leaderboard. I view this favourably because it brings a higher-margin software element to the business model. If enough customers subscribe to Peloton’s services, it also strengthens its competitive advantage as users will be competing against one another on its unique leaderboard.

The company listed through an initial public offering (IPO) back in September 2019. At the time, the stock was priced at $29 per share. However, after last Friday’s close, the share price is now only a touch over $27. This means I’d have lost money had I bought the stock at the IPO. A 7% loss to be exact, but this doesn’t tell the whole story.

What’s gone wrong?

Peloton’s share price reached a peak of $170 back in January 2021. If I’d bought £1,000 of stock back then, my investment would only be worth £159 today. Ouch.

So, what’s gone wrong? Well, Peloton was a major beneficiary of lockdowns due to Covid. When gyms were shut, consumers were left with little option but to exercise at home. Peloton grew sales by 100% in fiscal 2020 (the 12 months to 30 June 2020), and by a further 120% in fiscal 2021.

This is spectacular growth as the company really capitalised on the increased demand for home workouts. It propelled the stock price from the $29 at IPO, to the January 2021 peak. That was a 486% return. It meany my £1,000 investment at IPO would have been worth a huge £5,862 at the top.

However, revenue growth expectations are much lower now. Indeed, for fiscal 2022, revenue is expected to increase by almost 11%. I still consider this a reasonable growth rate, but it’s far lower than the pandemic-fuelled growth that Peloton achieved in the previous two years.

The valuation of the company has also deflated considerably. Peloton is still loss-making, so I can’t value the company relative to its earnings. Based on a price-to-sales (P/S) ratio, though, the shares are trading on a multiple of 2. However, back when the share price was $170, the stock traded on a P/S of 9. The combination of slowing growth and a declining valuation has led to the share price crash.

Should I buy Peloton stock?

I actually think the valuation is more compelling today, at least compared to this time last year. But is this enough for me to invest?

I don’t think it is. While I see the value in the subscription model, I don’t think it’s a strong enough economic moat to get me interested. I see growth slowing further, so I won’t be adding Peloton stock to my portfolio today.

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

I think these top penny stocks could make me great returns over the next five years, at least. Here’s why I’d buy them for my shares portfolio today. 

Long live the King

Revenues at Kingspan Group (LSE: KGP) are climbing strongly amid growing concerns over the climate emergency. The building products business — a big player when it comes to insulation materials — saw sales leap 44% in the nine months to September, latest financials showed.

Kingspan has a huge opportunity to make big profits as interest in foam insulation rises. Analysts at BCC Research think the global market will be worth $29.5bn by 2025, up more than $7bn over a five-year period. I like Kingspan’s wide geographic footprint that should allow it to capitalise fully on this fast-growing industry too. The penny stock operates in more than 70 countries.

A word of warning however. Demand for Kingspan’s product could take a hit if incentive schemes to encourage people to insulate their homes end. Indeed, the UK government is said to be considering rolling back a £1bn levy that helps fund home insulation work.

A penny stock for the pandemic

Concerns over the Covid-19 crisis have dialled down several notches in recent weeks. Worries about the ferocity of the Omicron mutation have dropped on a raft of positive medical data. But it’s far too early to claim that the pandemic is over.

It’s why I still believe buying UK healthcare shares like BATM Advanced Communications (LSE: BVC) is a good idea. And news in recent days that a new Omicron variant is under investigation illustrates why. It seems that living alongside Covid-19 will be the new norm, as many scientists now predict. So I expect the sort of Covid-19 testing equipment that BATM manufactures to remain in high demand.

I am concerned by the amount of competition in the Covid-19 testing space. But I think the potential size of the market of the long term still makes the penny stock an attractive buy today. Besides, the steps it is taking to expand into new geographies also gives it an opportunity to capture significant sales (its RAPiDgen antigen test was approved for sale in Russia just before Christmas).

Call me up

Strong recent trading over at Netcall (LSE: NET) is encouraging me to give this tech firm a close look too. The business — which makes software that allows companies to automate their operations — saw revenues soar 10% in 2021, predominantly as demand for its cloud-based services took off. The rapid pace at which businesses are digitalising their operations is yielding big returns at companies like this.

My main concern with buying Netcall shares is the company’s high valuation. Today, the penny stock trades on a forward P/E ratio of 43 times. It’s the sort of rating that could prompt a sharp share price reversal if signs of explosive profits growth appear in danger. That said, it’s my opinion that Netcall merits such a premium, given the investment businesses are increasingly making to automate their processes.

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.