Fundsmith Equity is one of the most popular investment funds in the UK, and it’s not hard to see why. Between its launch in late 2010 and the end of 2021, the fund – which is managed by Terry Smith – delivered a return of about 570%, roughly twice that of the MSCI World index.

I’ve been invested in Fundsmith for a number of years now and I’ve always viewed the fund as a core holding in my portfolio. Currently, it’s one of my largest fund positions. But is Fundsmith still one of the best funds for me (a long-term, growth-oriented investor) to invest in going forward? Let’s take a look. Here’s my view for 2022.

What type of fund is Fundsmith?

Let’s start with a basic review of what Fundsmith Equity is and what it invests in. It is a global equity fund, meaning it invests in companies all over the world and not just those listed in the UK. As a concentrated fund (it holds just 20-30 stocks), it only invests in companies that meet its strict investment criteria.

Specifically, Fundsmith seeks to invest in high-quality companies that:

• Can sustain a high return on operating capital (they are consistently very profitable).

• Have advantages that are difficult to replicate.

• Are financially strong.

• Have a good chance of generating growth.

• Are resilient to change and technological innovation.

• Have attractive valuations.

It then aims to invest for the long term.

Overall, I really like this approach to investing. Since the fund’s inception, this approach has managed to generate strong returns, outperforming its benchmark comfortably while, at the same time, minimising downside during periods of volatility.

Having said that, there are likely to be periods where this style of investing underperforms the market. I’ll discuss this later in the performance and risks section of this review.

Which companies are in Fundsmith?

Looking under the bonnet (its the latest factsheet), we can see that as of 31 December 2021, the top 10 holdings in the fund were:

• Big Tech giant Microsoft

• Pet diagnostics firm Idexx

• Diabetes specialist Novo Nordisk

• Beauty group L’Oréal

• Beauty group Estée Lauder

• Payments firm PayPal

• Big Tech company Meta Platforms (Facebook)

• Accounting software specialist Intuit

• Tobacco giant Philip Morris

• Medical technology company Stryker

My own research tells me that other stocks in the portfolio  include Nike, Visa, PepsiCo, Starbucks, Unilever, Diageo, and Amazon.

Is this a good mix of companies? I think it is. There are a couple of companies I’m not the biggest fan of for ethical reasons, such as Philip Morris (cigarettes) and Meta Platforms (referred to as the ‘new cigarettes’). However, in general, I do like Fundsmith’s portfolio holdings. I’m very comfortable owning these kinds of companies in my portfolio in 2022.

Performance

In terms of performance, this has been excellent over the long run. As we can see from the table below, the fund returned more than 20% in four out of the last six years. That’s an impressive achievement.

2021 2020 2019 2018 2017 2016 Fundsmith 22.1% 18.3% 25.6% 2.2% 22.0% 28.2% MSCI World 22.9% 12.3% 22.7% -3.0% 11.8% 28.2% Outperformance No Yes Yes Yes Yes No

Source: Fundsmith

It’s worth noting however that last year, the fund did underperform its benchmark slightly. For 2021, the return was 22.1% versus 22.9% for the MSCI World. This did was largely down to the fact that 2021 was very much a recovery year and Fundsmith’s companies – which tend to be highly resilient – didn’t have much to recover from.

It’s also worth pointing out that on Hargreaves Lansdown there are a number of global equity funds that have delivered superior returns over a five-year timeframe. Baillie Gifford Global Stewardship and Rathbone Global Opportunities are two examples. However, Fundsmith’s returns tend to be more consistent than some of these other top performing funds. For example, some rivals actually generated negative returns last year.

Overall, I’m very happy with the performance here.

Risks in 2022

In terms of the risks as we start 2022, I see a few. One is that Fundsmith tends to avoid highly cyclical areas of the market, such as oil companies and banks. Most of the fund is invested in three main sectors – consumer staples, technology, and healthcare. Looking at the current economic environment, I think there’s a decent chance cyclical stocks could lead the market in 2022. So I have to be prepared for some underperformance from Fundsmith in the short term.

Another risk is the concentrated nature of the fund. Given that it only holds around 20-30 stocks, stock-specific risk is quite high, relative to more diversified funds. To give an example here, PayPal has been around 7-8% of the fund in the recent past. However, this stock has fallen more than 30% over the last six months. This will have impacted fund performance significantly.

Some investors also believe the fund’s size (£29bn at 31 December) is a risk. They worry that this could limit investment opportunities. Personally, I’m not too concerned about this risk, given the fact that companies like Microsoft and Amazon are worth several trillion dollars.

Is Fundsmith worth the fee?

Finally, let’s take a look at fees. Personally, I pay an annual fee of 0.96% to invest in Fundsmith through Hargreaves Lansdown. I also pay Hargreaves Lansdown’s fund charges (0.45% per year).

These fees are relatively high. They’re significantly higher than the fees I’d be paying if I was invested in cheap index tracker funds.

However, I think the excellent long-term performance here justifies the higher fee.

Is Fundsmith a good investment for 2022?

Putting this all together, I’m convinced Fundsmith remains a great choice for my investment portfolio in 2022. The long-term track record is excellent and I’m very comfortable with the fund’s holdings.

There is a chance the fund could underperform the market in 2022 if cyclical stocks have a great run. However, I’m comfortable with any short-term underperformance. As a long-term investor, I’m more concerned about what this fund does over the next five-to-10 years. And I’m confident it can continue to generate strong returns for me.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, 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 Amazon, Diageo, Hargreaves Lansdown, Idexx Laboratories, Microsoft, PayPal Holdings, Unilever, and Visa and has a position in Fundsmith. The Motley Fool UK has recommended Amazon, Diageo, Hargreaves Lansdown, Idexx Laboratories, Microsoft, Nike, PayPal Holdings, 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

• The FTSE 100 hit the highest levels in almost two years last week
• The index still has some room to move higher before reaching its all-time highs of just under 7,900
• Fundamentally, the UK economy could support further gains this year, but there are risks

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Last week, the FTSE 100 made fresh highs by breaking above 7,550 points during Thursday and Friday trading and it has started Monday strongly too. The last time we were trading at these levels was back in January 2020, just as the wobble around Covid-19 started. Given that this ground has now been fully recovered, it does spark a valid question. As we’re only in January, how high could the FTSE 100 go this year?

Considering the charts

Before I get to the fundamentals, it’s worth taking a look at the historical performance of the FTSE 100. Past performance doesn’t guarantee future returns. But it can give me an indication of the relative value of the index as we stand.

The FTSE 100 has made back all of the ground lost during the stock market crash in March 2020. If I take a look at the couple of years prior to that, I note that the index has room to move higher still. Back in May 2018, it reached 7,877 points. Even during 2019, the FTSE 100 traded above 7,600 and 7,700 during periods of the year. 

This shows me that the FTSE 100 isn’t forging new ground at present. Unlike some of the US stock markets that are around all-time highs, the FTSE 100 doesn’t strike me as being overbought at the moment. Given the past track record, I think the index can run up to 7,800 or even 7,900 points before alarm bells might start to ring about it being overvalued.

FTSE 100 fundamentals

Considering charts from the past can only teach me so much. The other important consideration is the fundamental value of the companies within the index. 

I’ve read through countless updates from businesses in Footsie releasing their Q3 or Q4 results. Some are still struggling, but I’ve been surprised by the amount of firms that are now putting out results that are better than 2019. Or if results aren’t quite beating pre-pandemic levels, they’re certainly up significantly from 2020.

We also have the situation that no lockdowns have been implemented in the UK since the New Year. I really thought we would have a short lockdown given the rise of Omicron. Yet the fact that the Government isn’t keen on adding restrictions is good news for FTSE 100 stocks. It allows operations in the UK to be unhindered. The positive sentiment should also help consumers to feel more confident in going about their daily live and making purchases.

If this continues, then I don’t see why the FTSE 100 can’t post gains in 2022. Adding another 5% from current levels would post all-time highs, which I think is the first point of call for the index. Beyond this, the 8,000 point level would be a landmark to conquer for bullish investors.

There are risks to my overall view. Clearly, 2022 still has a lot of unknowns. These include new variants, a China slowdown, political unrest in the UK and tensions with Russia. All of these could derail potential FTSE 100 gains, and I need to be aware of this.

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.

Although the stock market had a good run in 2021, I reckon there could be further gains for many shares in 2022. Below are three shares I would pick for my portfolio in 2022 because I like their growth prospects.

Tarnished brand but a solid business: Boohoo

To say that online retailer Boohoo (LSE: BOO) has had a hard time lately is putting it mildly. The shares’ prices sat 68% below where they were a year ago, at the time of writing this article earlier today.

Clearly there are risks here. The company’s supply chain has come under critical scrutiny, potentially reducing the brand’s appeal to its customers. Cost inflation, supply chain problems and unexpectedly high return rates led the company to issue a profit warning last month.

But I think the Boohoo share price may now be focussed on the risks while ignoring the opportunities. It trades at 15 times last year’s earnings. That seems cheap given its strong growth prospects. While this year’s earnings may be lower, I see continued opportunities for the firm to expand its business, which last year saw revenues increase 41%. I would consider buying it for my portfolio now.

Strong business growth outlook: S4 Capital

Another company whose shares have taken a tumble lately is digital ad agency holding group S4 Capital (LSE: SFOR). Its shares are down 39% from their September high.

The S4 Capital share price is now within 1% of where it stood a year ago. I regard that as a bargain given the strong growth in the company since then. Last week it reiterated its expectation of doubling revenues and profits organically within a three-year period. It will likely grow further by bolting on acquisitions, another one of which was announced last week.

The S4 share price tumbled after it warned of higher costs to integrate acquisitions. That risks diluting profit margins. But last week the company tackled investor concerns and said that it is targeting “an improvement in the operational EBITDA margin back towards previous levels“. S4 is working hard to restore shareholder enthusiasm. I see strong growth potential and tightened cost control as possible drivers to push the share price higher in 2022.

UK shares in recovery mode: Card Factory

Retailer Card Factory (LSE: CARD) may help its customers celebrate special moments but it has had limited cause for celebration itself lately. A trading statement last week hurt the shares, but the company actually upgraded its revenue expectations for the year. It expects sales to grow strongly, from over £360m last year to more than £600m within five years.

Profits before tax for last year are expected to be £7m-£10m. That compares to £65m before the pandemic. But it shows that the company is in recovery mode. With the expected sales growth, I think it can surpass pre-pandemic earnings in years to come.

Supply chain risks could hurt the company if increased shipping costs damage profit margins. The shares have risen 46% over the past 12 months. I think a return to profit and plans for strong revenue growth could propel the shares higher in the coming year. I would consider adding Card Factory to my portfolio.

Christopher Ruane owns shares in S4 Capital. The Motley Fool UK has recommended Card Factory and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Tesco (LSE: TSCO) share price has been on a roll over the past six months. Shares in the retailer have added 25% over the period, excluding dividends paid to investors.

Over the past 12 months, the stock has produced a total return (including dividends) of 12.9%. Over the same period, the FTSE All-Share Index has returned 14.5%. 

It has not outperformed the index over the past year, but it has over the past three years and five years respectively. Over those extended periods, the Tesco share price has outperformed the FTSE All-Share Index by around 2.6% per annum. 

Of course, past performance should never be used to guide future potential. However, I believe the competitive advantages that have helped the company outperform over the past five years will continue to work in its favour. 

Competitive advantages

I believe the company has outperformed the competition over the past half-decade for a couple of reasons.

First of all, economies of scale have helped the group keep costs low and reduce prices for consumers. This has, in turn, enabled the business to gain market share and outperform the rest of the UK grocery market.

The second reason I believe the company has been able to outperform the market is its diversification. With its broad array of products, including mobile phones and financial services, Tesco can afford to cut prices to consumers (and take the profit margin hit) in one section of the business, knowing profits in another department will cover some of the giveaways. 

Most of the company’s peers do not have the size and scale to compete with the business regarding product pricing and efficiency. That is why I think this is by far the best operator in the sector. 

What’s more, these advantages should come into their own this year. 

Tesco share price outlook 

With inflationary pressures driving the cost of food and wages higher across the country, retailers are facing enormous challenges. Do they pass these costs onto consumers and risk losing business? Or do they absorb the higher costs? 

Discounter Aldi has already said it will be striving to keep costs as low as possible for customers. That puts Tesco and its peers in a bind. To maintain market share, these companies will have to follow suit. 

With its vast distribution network, economies of scale and diversification, Tesco can afford to follow Aldi. This could hurt profits, and the business is far from immune from the inflationary pressures, but it does have the qualities required to navigate the uncertainty. 

And that is why I believe the Tesco share price can continue to push higher in 2022. Its competitive advantages could enable the business to outperform the market, translating into higher sales and potential profits. 

Historically, the stock has traded at a forward price-to-earnings (P/E) ratio of around 15. If the stock returns to this level, based on City analysts’ growth estimates, the shares could hit 330p.

Although these returns are far from guaranteed, that would be a three-year high for the stock. Further economic disruption could hit growth, and the market may punish the business as a result. 

Still, considering this potential, I would buy the stock for my portfolio. 

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

Last week, I bought several UK stocks to become almost fully invested again. And that’s after sitting with a high weighting of cash in my portfolio for several months.

The shares came from various sectors, but they all have low-looking valuations in common. And the UK market is a bountiful hunting ground for value.

Changing market leaders

For several months many of the stocks leading the charge in the previous bull run have been turning down.

For example, I’m thinking of names in the US market such as the television streaming platform Roku and internet company Twitter. In the UK market, we’ve seen stock weakness for firms such as power products maker Volex and online clothing retailer Boohoo among others.

Stocks like those led the charge higher from the bottom of 2020’s coronavirus crash. But now they are reversing. However, I’m not inclined to focus on such past leaders much unless their valuations become compelling. That’s because it’s often a fresh clutch of stocks that lead new bull runs higher.

And for some time, market commentators have been talking about an investor rotation from high-growth stocks into value stocks. And it’s been happening. However, much of my portfolio remained in cash because the transition of the market looked piecemeal to me.

Even great traders such as Mark Minervini have been sitting in cash. And he’s been wondering whether the rotation is temporary or more enduring. But recent macro events have convinced me the move has legs. And I’m encouraged because plenty of value shares have recently burst into life.

Powerful market drivers

But I’m not the only investor thinking like this. Halfway through my stock buying spree, I read a recent article by Edmund Shing. He pointed out rising inflation is causing central banks to lift base interest rates. And wage growth will likely fuel the problem.

Bond yields have been rising, Shing said, and that puts pressure on growth stocks. And as evidence of the ongoing investor rotation from high-priced businesses, he observed America’s S&P 500 index has been outperforming the Nasdaq since mid-2020.

Shing’s conclusion is many investors are switching into stocks in cyclical sectors such as banks, life insurance, mining, oil, retail and others. And that’s because they will likely benefit from higher interest rates. For example, he said, dividend-focused strategies look like they are beginning to perform well when built around stocks in such sectors.

My own strategy is a little simpler. I reckon bruised growth stock investors will likely look for classic value now. And that’s the shift, as I see it. So for me, expensive, growth-oriented and trend-following tactics are out the window. Instead, I’m looking for stocks with strong value characteristics. That’s because I believe their time in the sun is imminent and they are set for a potentially strong long-term performance.

My recent buys include British American Tobacco, energy company Centrica, media and entertainment company ITV, copper miner Atalaya Mining and power transmission products provider Renold among several others. Of course, my theories could prove to be incorrect. And there’s no guarantee of a positive long-term investment outcome just because I think I’m seeing good value in these stocks now.

Nevertheless, I believe it’s a great time for me to pick UK stocks with strong value characteristics to hold for the long term.

Kevin Godbold owns shares in Atalaya Mining Plc, British American Tobacco, Centrica, ITV, and Renold. The Motley Fool UK has recommended British American Tobacco, ITV, Roku, Twitter, and boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

HSBC (LSE: HSBA) shares are having a good run at the moment. Over the last three months, the share price has risen about 20%. Meanwhile, over the last year, it’s up nearly 30%.

One of my top predictions for the FTSE 100 this year was that stocks in the financial sector would continue to do well on the back of the global economy recovery. With that in mind, should I buy HSBC shares for my portfolio today?

Why HSBC’s share price could keep rising

In the near term, the outlook for HSBC shares looks favourable, to my mind. For starters, economic conditions are quite strong right now and this is benefitting banks.

It’s worth noting that in the group’s recent results for the third quarter of 2021, management said: “While we retain a cautious outlook on the external risk environment, we believe that the lows of recent quarters are behind us.”

One risk to monitor here however is China, which HSBC has significant exposure to. Its economy is struggling a little and economists are downgrading their GDP forecasts for 2022.

Secondly, we’re likely to see central banks raise interest rates this year. This should also support growth. Higher interest rates enable banks to generate a larger spread between their lending and borrowing rates. This typically leads to larger profits.

Third, the company is currently buying back its own shares. In its Q3 results, management announced a $2bn share repurchase programme. This should help boost earnings per share.

Finally, the valuation is still relatively low, despite the recent share price rise. Currently, analysts expect HSBC to post earnings of 71 cents per share for 2021. That gives the stock a P/E ratio of about 9.7 at present.

To put that in perspective, the median trailing P/E ratio across the FTSE 100 is currently about 18.6. This low valuation suggests to me there’s room for further upside in the near term.

Long-term growth potential?

What about the long-term potential here though? Is this a stock that can deliver strong gains for me over the next five to 10 years?

Well, I do like HSBC’s long-term strategy. One of its goals is to accelerate the shift of capital to areas such as Asia and wealth management, which generate high returns for the bank. It believes this shift will enable it to achieve mid-single-digit revenue growth in the medium to long term, with a higher proportion of revenue from fee and insurance income. This is a smart move, to my mind, given that interest rates could remain low on a relative basis for a while.

However, one key risk here is competition from financial technology (FinTech) businesses. The FinTech industry is growing at a phenomenal rate right now, and many small companies are capturing market share from the traditional banks. Revolut, PayPal, and Wise, are some examples of companies that are stealing business from the banks.

I personally believe that the banking industry is going to look very different in a decade’s time, so there’s a bit of uncertainty in terms of the long-term outlook, in my view.

My move now

Given this risk, I’m going to leave HSBC shares on my watchlist for now. I think the stock has the potential to keep rising in the near term. However, as a long-term investor, I think there are better stocks to buy right now.

Edward Sheldon owns PayPal Holdings. The Motley Fool UK has recommended HSBC Holdings and PayPal Holdings. 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’ve been screening for shares to buy as I reposition my portfolio for 2022. These two stocks have attractive prospects, and both are dirt-cheap, in my view.

Leading retailer

The Halfords (LSE: HFD) share price has had a decent start to the new year. It’s up around 3% as I write. Over one year, the stock is up near 19%. But I think the shares can continue to rise through 2022.

Halfords is a recognisable brand as it’s a leading automotive and cycling retailer throughout the UK. It also offers servicing and repair in its auto centres. The company announced a shift in strategy in 2018, which was to evolve into a services-focused business. Progress towards this has been encouraging, with the Group Services division now representing 33% of total revenue.

Within the services offering, Halfords has been expanding its electric vehicle capabilities. For example, the company has already trained 1,300 electric technicians. This is on track to reach 2,000 by the end of fiscal year 2022 (the 12 weeks to 31 March 2022). This should provide excellent growth potential in the years ahead. As it stands, revenue generated from servicing electric cars grew 120% year-on-year in the recent interim results.

The stock is very cheap in my view. On a price-to-earnings (P/E) basis, the shares are valued on a multiple of 11. I think this represents very good value relative to the potential for growth in the years ahead.

There are risks to consider before I buy the shares. For one, Halfords has been impacted by the supply chain disruption of late. I’d also consider the potential for competitors in the electric vehicle services market, too. Nevertheless, I’d buy Halfords shares today.

Another good prospect

The next company is finnCap (LSE: FCAP), a financial services company specialising in corporate finance, and mergers and acquisitions (M&A). It’s much smaller than Halfords, with only a £60m market cap as I write today. The share price has rocketed 53% over one year though, as the M&A and initial public offering (IPO) markets have been extremely active.

The recent interim results showed revenue increasing by 55%, which was a record performance for the company. The deal pipeline for IPOs and M&A transactions was said to be remaining strong too.

This is all great. But if I buy the shares today, I’d be earning a cut of future profits. So, the bigger question is, can the record performance continue?

I think the prospects look good. According to a survey conducted by Ansarada, M&A deals in the UK are expected to rise in 2022. The IPO market has also recently been given a boost by the Financial Conduct Authority, the UK’s financial regulator. The rule changes should encourage businesses to list in the UK at an earlier stage. This is a prime target market for finnCap, and should boost future IPO activity.

The shares are only trading on a forward P/E ratio of 8 as I write today. I view this as a dirt-cheap valuation for the potential growth ahead.

The biggest risk for finnCap as I see it is a stock market crash, possibly due to a new strain of Covid. This is highly likely to reduce corporate financing activity. But on balance, I would buy finnCap shares today.

Dan Appleby 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.

Although 2021 was a positive year for the FTSE 100 index, the same can’t be said for all of its constituents. Indeed, while the index gained 14.3% last year, a dozen Footsie stocks fell by double-digit percentages in 2021. Also, eight FTSE 100 shares lost 20%+ of their value. In my experience, bottom-fishing in the Footsie’s bargain bin can uncover deep value. Here are three smashed stocks that I don’t own, but would buy today.

Three FTSE 100 fallers I’d buy

These three FTSE 100 stocks are among the index’s worst performers over the past 12 months:

Company	Sector	Friday’s closing price (p)	12-month change	Market value	P/E	Earnings yield	Dividend yield
London Stock Exchange Group	Financials	7,424.00	-20.4%	£41.4bn	83.2	1.2%	1.0%
Flutter Entertainment	Gambling & betting	11,275.00	-24.6%	£19.8bn	N/A	N/A	0.0%
Polymetal International	Precious metals	1,162.50	-31.4%	£5.51bn	6.8	14.7%	8.3%

I regard all three of these fallen FTSE 100 shares as potential recovery plays, partly based on their terrible performances since early 2021. The best performer, London Stock Exchange Group (LSE: LSEG), has seen its shares tumble by 20.4% over 12 months. Meanwhile, Polymetal International (LSE: POLY) shares crashed by 31.4% in one year.

Why I’d buy LSEG

London Stock Exchange Group is a leading operator of stock exchanges and provider of financial data. For me, LSEG is a rare bird: a potentially undervalued FTSE 100 fintech firm. At their all-time peak, LSEG shares hit an intra-day high of 10,010p on 16 February 2021. However, they have since tumbled after the group struggled with integrating data provider Refinitiv (bought for $27bn in 2019). Yet I regard LSEG as having a powerful competitive moat around its business — something that billionaire investor Warren Buffett loves. Over the past five years, LSEG stock has soared by 141.5%, before crashing in 2021. Were LSEG to return to growth, I would expect its share price to respond accordingly. However, it faces stiff competition from very strong rivals, including several US giants.

Two more losers I’d buy

Second is Flutter Entertainment (LSE: FLTR), a FTSE 100 provider of gambling and betting. Flutter’s top brands include PaddyPower, Betfair, FanDuel, FoxBet, Sky Betting and Gaming, and PokerStars. Flutter employs more than 14,000 people, servicing 14m customers in 100 different markets. At their 52-week high, Flutter shares peaked at 17,130p on 19 March 2021. Ten months later, they cost 11,275p piece. That’s a collapse of 34.2%. Flutter’s recent earnings dipped following punter-friendly sporting results in October. Also, it temporarily withdrew from the Netherlands market and has exited other minor markets. But Flutter has heavy exposure to the US, where legal gambling is exploding and where it has a commanding 42% share of online sports betting. However, Flutter shares haven’t paid a dividend since payments were suspended since May 2020. Even so, I’d still take a punt on Flutter stock today.

Polymetal International is the third potentially cheap stock I’d buy now. Polymetal is a complicated beast: an Anglo-Russian miner of gold and silver, registered in Jersey and with headquarters in Cyprus. To me, this FTSE 100 share is the most conventionally cheap of the three. Currently, it trades on a lowly price-to-earnings ratio of 6.8 and an earnings yield of 14.7%. What’s more, the dividend yield of over 8.3% a year is one of the FTSE 100’s highest. Granted, precious-metals prices had a poor 2021, but who’s to say that this will continue in 2022-23? Based on its modest fundamentals, I’d buy Polymetal today.

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

I think these two FTSE 100 shares could be too cheap for me to miss. Here’s why I’d buy them today.

A top e-commerce stock

Packaging producers like Mondi (LSE: MNDI) are facing mounting bottom-line pressure as paper costs rise. So far this particular FTSE 100 operator has been hugely successful in passing these costs onto customers. But whether or not it can continue to do so without demand falling sharply isn’t guaranteed.

I think this danger could be baked into Mondi’s share price at current levels, however. City analysts currently expect earnings at the business to soar 17% year-on-year in 2022. This leaves it trading on a price-to-earnings growth (PEG) ratio of 0.8, below the bargain benchmark of 1.

I’d buy Mondi because I expect sales of its product to continue soaring as online shopping steadily grows. Analysts at data specialist Smithers think the global packaging market will be worth $1.1trn by 2024. That’s up from the $971bn it was estimated at in 2019. I’m confident Mondi’s drive to increase its range of sustainable packaging products will allow it to win more of this business too.

One more FTSE 100 bargain

I think that ITV’s (LSE: ITV) share price could offer even better value for money today. Analysts expect Britain’s biggest commercial broadcaster to record zero earnings growth in 2022. Yet this still leaves the stock trading on a forward price-to-earnings (P/E) ratio of 7.9 times. Meanwhile ITV also sports a mighty 5.3% dividend yield.

It’s my belief that profits forecasts here might steadily be upgraded as the year progresses, leading to hefty share price gains. The advertising market — which is the lifeblood of commercial broadcasters like ITV — has continued rebounding much more strongly than estimates suggested. A continuation of this trend could well see the FTSE 100 firm follow 2021’s anticipated profits boom.

From a long-term perspective I like ITV because of the huge amounts it’s spending to make its ITV Studios production arm a global heavyweight. I also think the company’s massive investment in its video-on-demand service could pay off handsomely. The number of people using its ITV Hub platform rose to 34.8m in September 2021, up a healthy 8% year-on-year.

Big rewards in store?

ITV might have to row extremely hard to continue taking the fight to US streaming giants like Netflix, Amazon and Disney. These firms are investing huge amounts in programming and technology to win viewers from traditional broadcasters. Total spending on content in 2021 rose 14% year-on-year to $220bn, according to Ampere Analysis, because of the huge sums being forked out by the streamers. And the number is predicted to swell to $230bn this year thanks to the contribution of Netflix et al.

Still, it’s my opinion that these competitive risks are reflected by ITV’s ultra-low share price. Besides, the FTSE 100 firm has proved it has what it takes to churn out popular programming too, from reality TV juggernaut Love Island to drama The Bay. I’d happily buy the business alongside Mondi right now.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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’m searching for the best low-cost UK stocks to buy right now. Here are two cheap shares (including a penny stock) I’m looking at.

5.3% dividend yields

The British Retail Consortium has advised that “retail faces significant headwinds in 2022 as consumer spending is held back by rising inflation, increasing energy bills, and April’s national insurance hike.” I think buying low-cost retailers is a good idea as British shoppers feel the pinch.

People might trim spending on clothing but they won’t stop shopping entirely. They’ll switch down to budget operators like ABF-owned Primark and the likes of penny stock N Brown Group (LSE: BWNG). This particular operator owns increasingly-popular brands like Jacamo and Simply Be.

I think these brands’ focus on people needing larger sizes could help N Brown thrive beyond the near term too. And so could its JD Williams division, which focuses on those aged between 45 and 65. This demographic group, like the plus-size bracket, is growing rapidly.

At the current price around 41p N Brown trades on a forward P/E ratio of six times. The retailer also boasts a 2.2% dividend yield for the outgoing financial year (to February 2022), moving to a meaty 5.3% for the following 12-month period. I’d buy it even though ongoing supply chain problems pose a threat to the company’s bottom line.

A non-penny stock on my radar

I believe soaring data demand in sub-Saharan Africa could make Airtel Africa (LSE: AAF) a terrific long-term buy. Personal income levels are rising sharply on the continent while the telecoms market remains underpenetrated. This provides an exciting blend for this ‘nearly’ penny stock to exploit.

Analysts at GSMA Intelligence put smartphone penetration in Africa at just 50%. What’s more, the vast majority of handsets still run at 2G and 3G speeds. The likes of Airtel Africa then should benefit from the steady uptake of 4G demand and, further down the line, 5G.

As a long-term investor I’m also very excited by the company’s mobile money operations. When combined, Airtel Africa’s voice and data services generate more than 80% of group revenues. But the rate at which its financial services revenues are rising suggests massive potential. Sales here rocketed 42.7% at constant currencies in the six months to September. By comparison, data and voice revenues rose 33.7% and 17.3% respectively.

It’s important to remember a bumpy post-coronavirus recovery could hit demand for Airtel Africa’s services, however. The World Bank predicts that GDP growth of 3.6% this year and 3.8% in 2023 in sub-Saharan Africa. Though it warns that these forecasts could be blown off course if low vaccination rates in the region lead to a resurgence in Covid-19 infections.

That said, from a long-term perspective I believe the potential rewards for Airtel Africa investors far offset the risks. At 139p this low-cost UK share trades on a forward P/E ratio of 13.5 times. A handy 2.7% dividend yield provides an added sweetener for me.  

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Airtel Africa Plc and Associated British Foods. 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.