2 no-brainer FTSE 100 stocks to buy to beat inflation

Inflation has been soaring in recent months, hitting around 7% in the US in December. The UK is also seeing high rates. This has become a key factor for me in deciding which stocks to buy. It is also the reason why multiple growth stocks have crashed recently. But there are still several companies that should be able to cope well with inflationary pressures and may even benefit. Here are my top two. 

Rising price of commodities

Mining stocks are known to do fairly well in times of high inflation, due to the rising price of commodities. Anglo American (LSE: AAL) is my personal favourite, due to its diversified source of revenues. This includes operations in iron ore, diamonds, rhodium, and copper. The soaring price of many of these commodities also meant that in the first half of 2021, revenues were able to rise 114% year-on-year to $2.8bn. Underlying EBITDA also reached $12.1bn, over a 250% rise.

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Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

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Such excellent results have led to very generous shareholder returns, including a special dividend and a large share buyback programme. For the next year, it has a prospective yield of around 6%, far higher than other FTSE 100 stocks.

Unfortunately, the price of some of these commodities has fallen back from its highs last year, despite the effects of rising inflation. This includes iron ore, which fell due to reduced Chinese demand. There is a risk it could drop further. Even so, inflation seems to be here to stay, and for Anglo’s overall operations, this should have a positive effect. Therefore, I may add this stock to my portfolio for some protection against inflation.

A luxurious FTSE 100 stock

While inflation does not benefit Burberry (LSE: BRBY) in the same way as it does Anglo, I still believe that it will be able to cope well. Indeed, as a luxury fashion house, its customers are affluent and less focused on budget-cutting. This means that rising costs should not affect them in the same way as the general population. This differentiates Burberry from other FTSE 100 stocks.

There are also promising signs for the company. Indeed, in the first half of FY22, both revenues and adjusted profits were slightly higher than pre-Covid levels. This has allowed the fashion house to raise the interim dividend slightly and launch a £150m share buyback programme. The recent results also give the shares a price-to-earnings ratio of around 24, lower than rivals such as Kering, which owns brands like Gucci and Saint Laurent, and LVMH, the owner of both Louis Vuitton and Dior. This suggests Burberry may be an extremely solid choice in luxury fashion.

I feel optimistic about the appointment of Jonathan Akeroyd as CEO, who will begin in April. With experience at Versace and Alexander McQueen, Akeroyd seems well equipped for the role. Hopefully, new management will enable Burberry to increase profits further.

I am very tempted to add some Burberry shares to my portfolio. This is despite the risks that Chinese demand may slow due to potential taxes on the rich as a method of redistributing wealth. Such a move would adversely affect Burberry, as China generates a large amount of demand for luxury fashion. Even so, I feel the positives outweigh these risks, and Burberry remains a top pick, especially as it’s more resistant to inflation than some other FTSE 100 stocks. 

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Stuart Blair owns shares in Kering. The Motley Fool UK has recommended Burberry. 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.

If I’d invested £1,000 in easyJet shares 5 years ago, how much would I have now?

easyJet (LSE: EZJ) is a favourite among many consumers as a low-budget airline that’s based in Europe. In the past, its popularity has seen the easyJet share price soar, reaching highs of over 1,900p in 2015. It has also sported a very healthy dividend yield. However, everything turned around a couple of years ago, with the emergence of Covid-19. This saw demand for airlines grind to a halt, forcing easyJet to raise extra cash through both debt and equity to say afloat. With this in mind, what would a £1,000 investment in easyJet five years ago be worth now?

The figures

Five years ago, the easyJet share price was around 1,044p. With £1,000, I would have been able to buy around 96 shares. Since this date, the share price has declined by nearly 40%. Therefore, my investment would only be worth £606 today, a fairly poor return, and far worse than the FTSE 100 return of nearly 5% in the same period.

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Nonetheless, although dividends are no longer being paid due to the pandemic, easyJet used to offer large shareholder returns. Between 2017 and 2020, the firm paid dividends worth 197.2p per share. With 96 shares, this would equate to shareholder returns of £189.30. Therefore, a £1,000 return five years ago would total around £795 today, a loss of £205.

The future for easyJet shares

Due to the effects of the pandemic, the past five years have clearly been very negative for the airline, despite the fact that it has outperformed some others in the industry. Such a severe drop in the share price therefore seems justified. In fact, the company’s FY21 earnings were a loss before tax of over £1.1bn. But things are starting to look slightly more positive.

In fact, bookings for the second half of this financial year are ahead of pre-pandemic levels. And in the fourth quarter of this year, the firm expects that demand will return to near pre-pandemic levels. A full recovery is expected by 2023. If these forecasts are correct, I feel that this could result in significant long-term upside potential for the easyJet share price. But there is a big ‘if’, especially as the pandemic continues to cause such high levels of uncertainty.

Despite this uncertainty, easyJet looks financially strong, having £4.4bn of liquidity.  Hopefully, this will allow it to capture more opportunities. In fact, it has already obtained additional slots in Lisbon, Porto, and Gatwick. This is ahead the expected surge in demand later this year. After a couple of years of disruption, I’m also confident that demand for holidays will be strong later this year, and low-budget airlines will be a prime beneficiary.

As such, although issues such as inflation, high oil prices and coronavirus will certainly not make it easy, I feel that easyJet may finally be able to launch its recovery in 2022. The next five years seem more promising than the past five. This tempts me to buy easyJet shares.


Stuart Blair 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.

Here’s why the Scottish Mortgage share price is falling, and what I’m doing about it

Scottish Mortgage Investment Trust (LSE: SMT) is the successful fund managed by Baillie Gifford. Remarkably, it was first launched back in 1909, and today it’s the largest investment trust in the FTSE 100. But recently, the Scottish Mortgage share price has been falling. Already in 2022, the fund has lost over 14% of its market value. It’s down over 7.5% over one year too.

So, what’s going on? And does this weakness present me with a buying opportunity?

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Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

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Why is the Scottish Mortgage share price falling?

I think the recent weakness in Scottish Mortgage has to be set against its strength over a longer timeframe, in particular. Since the end of 2019 the fund is up by almost 100%. If I’d held the Trust throughout this period I’d be extremely pleased with this return. But this outperformance over the pandemic period may also be a reason for the share price to fall this year.

With this in mind, the first thing I do before buying any fund it to check the most recent factsheet. It should tell me what the investment strategy is, and show the top 10 holdings within the fund. Scottish Mortgage’s recent factsheet describes it as an actively managed global equities portfolio. It looks to deliver returns predominantly from share price rises over a long-term horizon. From here I can check the underlying holdings to see that the fund is heavily weighted towards technology, consumer discretionary and healthcare stocks. For example, the Trust holds Moderna, Tesla, Nio and Nvidia shares.

I can now check the individual performances of these stocks in 2022. Indeed, they haven’t been great. Moderna is Scottish Mortgage’s biggest position and this stock is down almost 20% in 2022 already. Nvidia has fallen over 8%, and even Tesla, usually a stock market darling, is 1% lower.

These companies performed extremely well over the pandemic. Moderna in particular was able to develop a leading vaccine against Covid. Recently though, risks such as inflation, the prospect of higher interest rates, and over-valuations have been weighing on these share prices.

But does this matter in the grand scheme of things?

Here’s what I’m doing

I don’t think it does. After all, Scottish Mortgage has been picking stocks successfully for over 100 years now.

For me, the key point to consider is the time horizon. The Trust’s strategy, as described in the factsheet, says it aims to outperform the FTSE All-World Index over a rolling five-year period. The volatility of share prices over a few weeks, and even over one year, shouldn’t matter to me if I take a long-term view of Scottish Mortgage shares. The managers have shown they can pick good stocks for many years now, and the recent share price fall doesn’t really change this fact.

So, I would consider buying the Trust at this share price. I have a high tolerance for risk and need that as the Scottish Mortgage share price might continue to be volatile from here due to the issues I mentioned above. Nevertheless, I consider this Trust a high-quality potential addition to my higher-risk portfolio.


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

Will the Cineworld share price double in 2022?

Key points

  • Cineworld’s customers are flocking back to the big screen
  • The company says that it’s now generating positive cash flow
  • But the $8bn debt pile remains a big worry for me
  • And the threat of a C$1.2bn legal penalty can’t be ignored

Cineworld Group (LSE: CINE) shares surged on Friday after the company said that cinema revenue rose to almost 90% of 2019 levels in December. The Cineworld share price has now risen by almost 25% so far this year.

I’ve been taking a fresh look at the latest news and crunching the numbers. Should I add the shares to my portfolio in hope of a quick double bagger?

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People still like the cinema

Covid-19 was a disaster for cinemas. But there’s light at the end of the tunnel. Pandemic predictions that we’d all stay at home and stream movies on television are turning out to be wide of the mark.

Cineworld said box office and concession revenue rose to 88% of 2019 levels in December. The recovery was strongest in the key US market, where cinema revenue surged to 91% of pre-pandemic levels.

Strong attendance was helped by an impressive slate of new films, including Spider-Man and No Time to Die. I’m confident this recovery will continue. More blockbuster movies are expected over the coming months, including new Batman, Top Gun and Jurassic World titles.

Money worries?

Friday’s trading update was short on financial detail. The company didn’t provide any clues on whether 2021 revenue would hit forecasts. The only thing we know is that Cineworld generated positive cash flow during the final quarter of 2021.

We’ll find out more when Cineworld issues its 2021 results on 17 March. But to be honest, we know 2021 was bad. In my view, what matters most is the outlook for 2022 and 2023.

Broker forecasts suggest that Cineworld’s recovery will accelerate this year. City analysts think that the group could generate around $420m of surplus cash in 2022. That might allow CEO Mooky Greidinger to start repaying some of the group’s $8.4bn net debt.

Earnings are also expected to recover. Broker forecasts suggest earnings of 1.5 cents per share in 2022, rising to 13.1 cents per share in 2023. That prices Cineworld shares on 36 times 2022 forecast earnings, falling to just 4.2 times projected 2023 earnings.

If the recovery goes to plan, I guess Cineworld shares might be cheap at current levels.

My verdict

Cineworld’s share price is still 40% lower than it was one year ago. One cloud hanging over the firm is a recent Canadian court ruling that it must pay rival Cineplex C$1.2bn in damages for a failed acquisition deal.

The UK company is appealing that verdict, but if Cineworld loses I think it will be difficult to find the cash without further fundraising activity.

For me, this situation is too much of a gamble. If everything goes right for Cineworld, I think the shares might double this year.

But there’s a lot that could still go wrong. And with nearly $10bn of potential liabilities, I think the shares could also fall sharply in 2022. I’ll be staying away.


Roland Head 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.

“Laundering money”: an excerpt from my financial diary

Image source: Getty Images


It’s glorious sunshine outside, but clouds have descended over my home as I’ve had to dip into my rainy day fund…

There I was, happily commissioning TMF UK Personal Finance articles from the comfort of my desk until the strains of my washing machine reached me from downstairs. It’s usually loud – but not that loud.

No surprises for guessing it had packed in (likely the motor). Leaving me with two choices: a repair or a replacement.

Now, it’s worth mentioning that the machine was thrown in for free when we bought this flat in late 2018, as the sellers didn’t want the hassle of carting it between their two homes. So I know that it’s at least two and a half years old – and likely a fair bit older.

The quote I got for a repair – from various sources, of course, to compare the field – was about £175, including the replacement motor and callout fee of £60+…

Not committing to anything yet (never without the proper research!) I started scouting around to see how much a brand-new washing machine would cost. Complete with delivery, installation, and recycling/removal of the old unit, I was quoted £285.

Okay, so £110 does seem like a pretty big gulf between the two prices. But who knows when the next thing might go wrong with the old machine – especially without knowing its history! 

If just two incidents happen in the next two years and I need to call someone out again, then that’s £120 in callout charges alone, replacement parts notwithstanding…

I’d rather take the hit on this occasion and order a new machine, with the comfort of knowing how old it is, where it was bought from – and that the next two years are covered by a guarantee!

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If I’d invested £1,000 in Scottish Mortgage Investment Trust 5 years ago, here’s how much I’d have today

Scottish Mortgage Investment Trust (LSE: SMT) is a global investment management company that has achieved incredible returns over the last five years. This primarily results from two achievements.

Firstly, the success of its growth-focused investment strategy, which is largely due to acquisitions of technology stocks such as Tesla and Nvidia. Both of these companies, constituting 8.3% of SMT’s portfolio, have shown consistently strong year-on-year performance. Scottish Mortgage Investment Trust’s portfolio currently has a 44% exposure to U.S stocks. With high returns from indexes like the S&P 500 and NASDAQ, it becomes clear how this trust has delivered exceptional returns.

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Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

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Secondly, the decision-making of management must be noted. Scottish Mortgage Investment Trust sold 80% of its Tesla shares during May 2021. This was right before an approximate 17% drop in Tesla’s share price across the following month. This company clearly has an effective decision-making process behind its trading.

Making a £1,000 investment

Over the last five years, Scottish Mortgage Investment Trust’s share price has risen 257%. This means a £1,000 investment, placed in January 2017, would now sit at £3,570. Including a 0.6% average annual dividend yield over this period, which would bring in an approximate £50, total investment value would sit at £3,620! This is a very impressive return on investment, and is why this trust has always been held in high regard. Compare this against the FTSE 100, which has only returned roughly 4.5% in the last five years.

Scottish Mortgage Investment Trust has even beaten investment competitors. 3i Group has produced a five-year return of 98%, while F&C Investment Trust sits even lower at 65%. This performance results from Scottish Mortgage Investment Trust’s heavy technology focus throughout the pandemic. It’s clear that the company has performed exceptionally well. But with an 11% drop in share price over this last month, where is this company headed in 2022?

Investing today

The recent decrease in the share price is due to concerns of an expanding tech bubble. Many investors believe the value of technology stocks Tesla and Nvidia are far over fair value, and are facing correction soon. Such concerns have led to a decrease in SMT’s share price as investors consider the bubble’s impact on this company’s tech-heavy portfolio.

This drop has prompted me to consider whether now is the perfect time to invest. With an exceptionally strong five-year performance, it is tempting. However, there are certainly risks.

Fears over a tech bubble are valid. Nvidia has seen an extremely high annual return of 101%. While it has benefitted Scottish Mortgage Investment Trust, this tech stock has potentially reached its peak value at such returns. Regardless, when looking forward, I am more interested in examining how the trust will adapt to such concerns rather than whether such a bubble is growing.

Scottish Mortgage Investment Trust has altered its portfolio recently. The company now holds large amounts of shares in NIO and Meituan, which exposes its portfolio to the Chinese market. As well as this, fund allocations to healthcare stocks now constitute 21% of the trust’s portfolio, surpassing technology stocks at 17%.

The technology sector is certainly at risk of value correction. While this does still pose danger to SMT, I have confidence in the company’s managerial decision-making to mitigate potential risks. Because of this, I will be looking to add Scottish Mortgage Investment Trust shares to my portfolio.

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

2 mega-cheap FTSE 100 dividend stocks to buy!

I think these FTSE 100 shares could help me make excellent returns over the next decade. Here is why.

Dirt-cheap… on paper

Signs are growing that Britain’s housing market is cooling after 2021’s spectacular performance. The Bank of England last week said that mortgage demand for home purchase fell during the final three months of last year. Threadneedle Street thinks  the number will continue to fall during the first three months of 2022 too.

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Housebuilders such as Barratt Developments (LSE: BDEV) aren’t likely to see prices of their newbuilds rocket like they have during the pandemic then. At the same time, margins are coming under increasing pressure from rising building material costs.

The low earnings multiples of the likes of Barratt suggest a storm could be coming. Today, this FTSE 100 share trades on a forward price-to-earnings (P/E) ratio of just 9.1 times. It’s my opinion though, that such valuations don’t reflect just how brightly conditions in the housing sector remain.

Healthy growth + big dividends

A combination of historically-low interest rates, ongoing Help to Buy support for first-time buyers, and intense competition among lenders should keep property prices rising at a healthy rate. At the same time, government plans to build 300,000 new homes a year to stop the home price boom look bang in trouble.

City analysts believe Barratt’s earnings will rise 16% in this fiscal year (to June 2022) and increase an extra 3% in financial 2023. I’m backing Barratt and its peers to continue delivering solid and sustained bottom-line growth beyond the medium term too.

It’s important to note that I have skin in this particular game. I own Barratt shares in my stocks portfolio alongside Taylor Wimpey. I wouldn’t have bought these companies if I didn’t have a positive view of the UK housing market, of course. It’s also why I also count brick manufacturer Ibstock among my holdings.

At current prices, I’m considering buying more Barratt shares. As well as that low P/E multiple, the builder also carries a mighty 5.3% dividend yield.

Another FTSE 100 bargain!

I think HSBC Holdings (LSE: HSBA) could be set for more near-term turbulence than Barratt. Upcoming Federal Reserve interest rate hikes to curb the inflationary boom threaten to significantly damage economic conditions in Asia. But as a long-term investor I still think it could be too cheap to miss at current prices.

Today the FTSE 100 bank trades on an undemanding P/E ratio of 11 times for 2022. It also carries an index-beating 4.4% dividend yield (the Footsie forward average sits around 3.4% times). I don’t think soaring banking product demand in HSBC’s emerging markets is reflected in its current price.

World Data Lab analysts think a staggering 1bn Asians will join the middle class by 2030. These people will need places to park their cash and financial products to match their increased affluence. I think regional banking heavyweight HSBC will be in one of the box seats to make big profits from this megatrend.

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Markets around the world are reeling from the coronavirus pandemic…

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Royston Wild owns Barratt Developments, Ibstock, and Taylor Wimpey. The Motley Fool UK has recommended HSBC Holdings and Ibstock. 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.

How I’d invest £10k right now

If I had a lump sum of £10,000 to invest today, I would take a cautious approach to investing my money. 

The outlook for the global economy is both encouraging and troubling. The economy is recovering from the pandemic, but headwinds such as the supply chain crisis, inflation, and a worker shortage are all causing problems. 

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Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

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Some companies will be able to deal with the challenges better than others. Some countries may also have more flexibility to deal with rising prices and import disruption. 

The UK is more exposed than most. Brexit trade headwinds and the fact the country imports more than it exports presents a unique set of challenges for the region.

With this being the case, I would invest some of my £10,000 lump sum outside the UK. 

Invest outside the UK

I think the best way to invest this cash would be to buy a global investment trust. As I am not particularly comfortable investing in different markets around the world, I would be happy to outsource this task.

Using this approach also means I do not have to worry about foreign exchange or finding the right broker to deal in international securities. 

One option I would be happy to buy for my portfolio is the Baillie Gifford US Growth Trust. This trust owns the highest-conviction US names of the Baillie Gifford investment team, which has far more experience in picking stocks than I do. I would be happy to allocate around 25% of my investment to this trust, considering its track record and diversification. 

I would also invest in a UK trust to build exposure to my home market, focusing on a trust that targets small-cap stocks. Once again this is a section of the market where I am not particularly confident finding opportunities, so I would be happy to outsource idea generation. 

The BlackRock Throgmorton Trust aims to find the next UK growth champions. It searches in the small-cap section of the market to find these opportunities. The firm has a great track record of finding these gems, having outperformed its benchmark for the past few years. 

The one downside of using investment trusts is the fact that they charge a management fee. This could eat away at my returns in the long run, especially if the trusts underperform the market. In this situation, I may be better off only buying individual stocks.

I would allocate around 50% of my portfolio to trusts, and I would invest the rest in individual stocks. 

Single stocks 

I would try and pick corporate champions, companies with strong balance sheets and impressive potential. 

A couple of examples include AstraZeneca and Rightmove. I think both of these organisations have a substantial competitive advantage and a long runway for growth ahead of them

Challenges they could face include competition and higher costs in the inflationary environment. These headwinds could hit growth. 

I would be happy to invest half my £10,000 portfolio in individual stocks and shares despite these risks. Combined with the trusts outlined above, I reckon this approach will improve my chances of being able to grow my nest egg. 


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

2 penny stocks I’d buy to hold until 2030

Acquiring penny stocks can be an excellent way to build exposure to smaller businesses. However, this approach also comes with risks. Smaller companies may lack the checks and balances in place at large corporations. This could expose investors to unnecessary challenges. 

Still, I like to own a selection of penny stocks in my portfolio to build exposure to this part of the market.

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As such, here are two companies I would be happy to buy and hold for the next decade. 

Penny stocks to buy for growth

The first company I would buy is estate agent Foxtons (LSE: FOXT). I believe that focusing on enterprises operating in defensive markets is one of the best ways to reduce the risks of investing in small businesses.

The property market is not entirely defensive. But, in the UK, the property sector makes up such a large part of personal wealth it does not seem unreasonable to suggest that this industry will only grow in the decades ahead. 

With its focus on the London market, Foxtons is better positioned than many of its competitors to capitalise on this trend. Over the past couple of years, the company has been going through somewhat of a transition. After a series of strategic missteps, the group plunged to a loss in 2018. And it then lost around £30m between 2018 and 2020. 

However, City analysts expect the company to return to profitable growth in the next two years. So as the group builds on its recovery, I would buy it for my portfolio of penny stocks. 

Challenges it could face going forward include a property market downturn and higher wage costs, which would almost certainly hit profit margins. 

Premium market

Private jet broker Air Partner (LSE: AIR) is another company I would buy for my portfolio of penny stocks. 

This firm’s profits jumped 100% last year as demand for private air travel and air cargo services surged. Management is using last year’s windfall to fund acquisitions, expanding the company’s footprint. 

The growth strategy should help the enterprise grow its top and bottom lines as we advance. Further acquisitions could be on the cards, and as the business expands, I think the corporation will achieve substantial returns for investors over the next decade. 

That said, air travel is a cyclical industry. Air Partner is trying to expand into more predictable sectors, such as safety, but its primary business of organising planes for wealthy customers still dominates. This suggests the company’s profits could collapse in an economic downturn. 

Despite this risk, I am optimistic about the potential. With a debt-free, cash-rich balance sheet, it has the financial flexibility to acquire more businesses and expand its footprint. There is also the potential for additional shareholder returns as profits expand and cash flow grows. At the time of writing, the stock offers a dividend yield of 2.8%. 

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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.

Is buying £1k of BP shares a smart decision?

As I have noted before, BP (LSE: BP) shares look cheap compared to the company’s potential. To use the words of the firm’s CEO, Bernard Looney, the corporation has become a “cash machine” as it profits from high oil prices

This could lead to significant returns for investors. With profits flowing, the firm has plenty of funds to reduce debt, increase its dividend, and even repurchase more shares. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

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As such, I have been wondering if I should buy £1,000 worth of BP shares for my portfolio to capitalise on the firm’s growth potential. 

Rising profits 

According to current City analyst projections, BP will report earnings of $12.5bn for 2021. This is the highest figure since the oil price crash in 2014. 

Profits could rise further in 2022. Analysts have pencilled in a net income of $13.8bn for the year, putting the stock on a forward price-to-earnings (P/E) multiple of 7.3. 

Of course, these are just projections. The price of oil is incredibly volatile. There is no guarantee prices will remain at current levels for the next 12 months. If they fall substantially, analysts will have to revisit their projections. And any investors who bought in thinking stock looked cheap compared to its outlook could also be left shortchanged. 

Despite this risk, I am optimistic about BP’s potential. It is not so much the company’s exposure to high oil prices that I am excited about. It is more about management’s green energy ambitions. 

BP aims to establish a pipeline of renewable energy projects totalling 20GW by 2025 and 50GW by the decade’s end. When the organisation announced this target, analysts speculated it would have to reduce shareholder returns or ignore other sections of the business to hit its goals. 

With profits surging, I think BP will be able to return cash to investors, invest in green energy, and reduce debt. To put it another way, I believe the company is currently operating in a goldilocks environment.

BP shares as an income play 

By investing in green energy, the company is preparing for the future. As this transition takes shape, I think the market will reward the stock with a higher valuation.

Indeed, corporations with exposure to the hydrocarbon industry are currently receiving the cold shoulder from investors. Meanwhile, green energy stocks are surging in value. 

It now looks to me that BP has the financial capacity to manage this change without cutting shareholder returns. This makes the company even more appealing in my eyes, as the shares currently offer a dividend yield of 4.2% at the time of writing.

There is scope for this payout to grow too, but I will not stake any money on this just yet, considering BP’s investment goals. 

Overall, BP shares seem to me to offer growth and income potential over the next few years. As such, I would be happy to invest £1k in the stock today as a long-term investment. 

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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.

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