I’m looking for FTSE 100 stock to buy to help me retire in comfort. Could these two blue chip shares help me achieve this?

A high-risk FTSE 100 share

There’s a lot that I believe International Consolidated Airlines Group (LSE: IAG) has going for it. It owns established brands like British Airways that are popular with travellers. It has exposure to money-spinning transatlantic routes. And despite its failed attempt to acquire Air Europa the business also operates in fast-growing European low-cost segment through its Aer Lingus and Vueling divisions.

It’s impossible to talk about travel stocks like IAG without discussing the Covid-19 crisis. And as things stand this remains a big concern to me as an investor. Today reports emerged that British Airways will scrap hundreds of flights to US destinations Nashville, Baltimore and New Orleans due to soaring Covid-19 infections.

There could be much more disruption too as Covid-19 infection rates soar in many regions. The number of US cases has just hit a new daily record high of 1.5m. Also this week the World Health Organisation has warned that Europe faces a “tidal wave” of Omicron infections that could affect half of all Europeans in the next couple of months.

Debt worries

This is particularly concerning for IAG given the huge amounts of debt it has to pay off. It had €12.4bn worth of net debt on the books as of September, and it may have to accrue even more before the pandemic is over to survive the crisis. Shareholders should be braced for the possibility of fresh share placings that could dilute their interests, too.

It’s also worth remembering that such high debt levels could seriously undermine IAG’s growth plans and its ability to exploit industry opportunities like the highly-popular budget segment if it comes though the crisis.

Banking on Bunzl

For these reasons I’d much rather invest in Bunzl (LSE: BNZL) shares instead. In fact this is a stock I’ve already bought to try and build funds for retirement. I like the broad range of essential everyday products it supplies across many industries. The goods it sells include wound dressings for hospitals, packaging for supermarkets’ fruit and veg, and hard hats for construction sites.

Bunzl has its fingers in many pies and it does what it does across many territories, too (it works in some 31 countries in total). This diversification by product, sector and geography gives it exceptional profits stability. And as a consequence it provides supreme peace of mind for me. There’s good reason why Bunzl’s grown the annual dividend for 28 years on the spin.

My only concern for Bunzl is that its acquisition-led growth model could see it run into trouble. This could be, for example, if it overpays for an asset or a company fails to deliver expected returns. That said, I’m encouraged by the FTSE 100 firm’s strong track record on this front. It’s why I’m considering buying more Bunzl stock for my portfolio today.

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

It’s no secret that airline stocks have been hammered over the past couple of years (thanks a lot, Covid-19). I reckon 2022 is going to be one of renaissance for the airline industry, though. I think some tidy profits are up for grabs from investing in what are, from my viewpoint, cheap airline stocks. 

An uplift in airline share prices can already be seen since the turn of the New Year, with IAG up around 12%, Easyjet 11%, and Wizz Air 13%, at the time of writing. Personally, I think there is scope for further movement upwards and so I’m pondering which airline stocks will fit well into my portfolio.

Why I think airline stocks still look cheap

There seems to be an upbeat mood around not just the UK but Europe in general at the moment. The potential for disaster promised by the Omicron variant hasn’t materialised and I certainly hope that will remain the case. This is good news for the markets, of course, with the FTSE 100 easing nicely into 2022.

I’m strongly of the view that stocks for companies in leisure and travel are going to do well this coming year, predicated on the idea that we’ve seen the worst of Covid-19.

I don’t want to jump the gun of course. I appreciate that government advice around Europe is that we’re still in the midst of a pandemic, and that we shouldn’t count our chickens. But really, do you think we’re going back into full scale lockdown any time soon? I know I don’t think that. 

Travel stocks – and in particular airline stocks – look like a cheap investing opportunity to me. I’ve already written positively about IAG elsewhere, but my optimism from that article extends to the general airline industry.

Vaccine take-up is pretty high right across Europe. This safer environment helps to encourage more international travel. Furthermore, when I reflect on my own experience of travelling internationally during the pandemic I know the passenger experience has improved immeasurably over the last six months or so.

Improved customer experience

During the Christmas period I flew with Aer Lingus, a renowned brand under the IAG banner, and I didn’t have a moment of delay or trouble. Like other passengers I was encouraged to use the ‘Verifly’ app. This ensured I had cleared all Covid-19 checks before I got to the airport. The in-airport experience was great as a consequence. It certainly wasn’t chaotic like when travelling throughout much of 2021.

I know this is only my own personal experience, but when combined with the anecdotal evidence of friends it does suggest that airlines are learning and adapting to customer needs. This is great to see, and I think it will help encourage increased passenger numbers.

When I align the improved customer experience with my belief that more people are simply going to want to travel again in droves in 2022, I can’t help but think airline stocks remain cheap. The question for me now is which particular stock do I want to add to my portfolio!  

Garry McGibbon 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.

Rhodium is a very rare and precious metal that is predominately used to offset harmful nitrogen oxides in exhaust gases.

Over the last few years stricter emissions standards across the world, including in China and India, have led to a rise in demand. More stringent requirements mean that more rhodium is needed in catalytic converters to regulate greenhouse gas emissions.

The supply of the metal is also subject to constraints. First, the vast majority is produced in South Africa. Any commodity that is overly dependent on a single country for output is usually in short supply. Second, its processing is especially difficult due to its high melting point relative to other metals.

It’s no wonder that the price has skyrocketed over the last few years, when the demand has been strong against a backdrop of scarcity.

The ETC I’m looking at

I’m able to invest in rhodium through an ETC (exchange-traded commodity). This is a fund that tracks the price of a commodity but trades like a share that I can buy from most online brokers.

The ETC in question is db Physical Rhodium ETC (LSE: XRH0). It’s a small fund, being less than $100m in size. I also think it’s quite expensive, with a management charge of 0.95%.

However, the management charges pale into insignificance when looking at the past returns of this ETC.

A £500 investment in January 2016 would be worth around £8,000 today. By any measure, this is a phenomenal return. 

For 2022?

Supply is likely to increase as the strict Covid restrictions in South Africa subside. This is likely to be outstripped by an increase in demand.

Automakers are by far the biggest buyers of rhodium and over the last 12 months, car output has been restricted due to component shortages. Looking ahead, car output is likely to rise as the global semiconductor supply normalises, allowing car production to be ramped up.

This can be seen in the price action for 2022 already. At the time of writing, this ETC has increased by around 40% since the start of the new year.

However, further along the timeline, the picture is not so clear.

Over a longer time horizon, it’s clear that governments across the world will continue to pursue long-term carbon net-zero targets. This will probably lead to a decrease in the production of internal combustion engines requiring catalytic converters. Indeed over the last 12 months, the performance of this fund is broadly flat. 

It’s very likely that over the long term, the production and popularity of battery-electric and fuel-cell vehicles will probably grow. These don’t require catalytic converters.

I could be wrong, but for my own portfolio, I like to consider the long term. Since the demand for shares in this precious metal ETC seems uncertain, I will keep looking for alternative investments.

Niki Jerath does not own shares in db Physical Rhodium ETC. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

As 2022 kicks off, I’m looking for the best shares to buy right now. And I think the FTSE 100 holds some exciting opportunities for my portfolio. Most of these businesses have proven to be resilient in the pandemic, with two in particular that look primed for explosive growth in 2022. Let’s explore.

ITV could be a top pick

ITV (LSE:ITV) is a TV broadcasting company that generates the bulk of its income through selling advertisements.

When the pandemic kicked off, my initial thoughts were that this business would thrive during lockdown. After all, if everyone was stuck at home, watching TV could be an excellent way to pass the time. As it turns out, that wasn’t the case. With new content production put on hold, people seemed to venture to other streaming platforms for their daily dose of entertainment. And consequently, revenue for the year dropped by around 16%.

Fortunately, the Covid-19 disruptions appear to be largely over for this business. And looking at its latest earnings report, revenue is now back on the rise, coming in 8% higher than in 2019 for the first nine months of 2021.

Yet despite this growth, the ITV share price is still trading below pre-pandemic levels. The group will undoubtedly continue to face rising competition from other streaming platforms. But with the launch of its own, along with a seemingly cheap stock price, I think this could be one of the best shares to buy now for my portfolio.

From online grocery to warehouse automation

Ocado (LSE:OCDO) is best known for being an online grocery retailer among consumers. And while that’s currently the core activity for the company today, management is refocusing operations towards its warehouse automation platform. Using a fleet of robots, online orders can be fulfilled without any human involvement – cutting costs and improving efficiency.

2021 was a pretty rough year for Ocado shareholders. After a combination of a lawsuit and an electrical fire at one of its facilities, the stock dropped by a disappointing 36% over the last 12 months. But the legal battle is now over, ending in Ocado’s favour. And disruptions caused by the fire at its Erith CFC facility have been resolved. To me, it looks like this business is ready to return to full growth mode, making it potentially one of the best shares to buy now, in my opinion.

However, it’s worth noting that there’s growing competition within the warehouse automation space. Suppose Ocado’s technology can’t deliver more efficient results than its rivals? In that case, the group may struggle to attract or retain existing customers. Needless to say, that could jeopardise its future growth prospects. Nevertheless, given the potential reward, I feel it’s a risk worth taking and may add it to my portfolio in 2022.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV and Ocado 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.

As I consider adding some stocks to my portfolio in January, I need to be selective. 2022 is going to be a much more challenging year for stocks than 2021 in my opinion. The economic uncertainty, mixed with rising interest rates and inflation will mean that I need to be smart about what FTSE 100 stocks to add. As a result, here’s one I like, but also one I’m also staying away from right now.

An attractive FTSE 100 buy

The FTSE 100 stock I’m considering buying is Next (LSE:NXT). Over the past year, the share price has risen by 5.2%. The company is a key player in clothing and home products in the UK. It operates both online and through a network of several hundred stores throughout the country, as well as having a presence internationally.

The online operation helped the business to cope in difficult periods during the pandemic when stores were closed. This is one reason that gives me confidence going forward. Even with uncertainty still in the air around Covid-19, I think that Next is a retailer that’s in a better position than some peers to navigate further disruption.

Another reason why I’m positive on the FTSE 100 stock is due to the recent trading update. It showed a strong trading performance over the two months through to Christmas. Full-price sales were up 20% when compared to the same period in 2019. It also increased its pre-tax profit forecast for the year, as well as expecting net debt to fall by £487m to £625m.

One risk is that prices might have to be increased to counteract higher inflation. The business noted higher overall costs from freight rates, manufacturing costs and wage inflation. Increasing prices could see lower sales if customers choose to shop elsewhere.

A fall from grace

A stock I’m not considering buying at the moment is Peloton Interactive (NASDAQ:PTON). I last wrote about the company late last year, following a 35% fall in a day after bad results.

The company has managed to slow the fall since then, but over the past year it’s still down 77%. Even at $36, I don’t think the company is an undervalued buy, with the IPO price having been $29. 

The business admitted core issues in the latest trading update. It mentioned that fiscal 2022 would be challenging due to “reopening economies, and widely-reported supply chain constraints and commodity cost pressures.” I’d also add into the mix that product recalls from last year over safety concerns won’t help with reputational damage.

With this backdrop, I struggle to see why I’d buy this over a FTSE 100 stock like Next. The company may have long-term value with diversification options away from just the Peloton bike that could support revenue growth in coming years. But I won’t be investing.

Jon Smith has no position in any share 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.

FTSE 100 stocks typically have very strong credentials. Many of the companies underlying these stocks have been around for a long time, are financially stable, and have given good returns to investors over time as well. But the past does not always indicate what will happen in the future. Especially now, when a number of industries are undergoing structural changes. 

Tobacco’s challenge

One of these is the tobacco industry. The proportion of people smoking globally has been on the decline since 1990, according to Lancet research. The developed world in particular, has caught on to the high health risks of smoking. At the same time, tobacco alternatives have not really hit it big yet. This is creating a challenge for tobacco biggies like Imperial Brands (LSE: IMB), which need new avenues for growth. 

Why I’d buy the Imperial Brands stock

Yet, I would buy this stock today. In fact, I already bought it last year and so far it has not been a bad FTSE 100 stock to hold at all. And I reckon that over the next few years, it might just yield positive returns for investors like me in more ways than one. Here is why. 

First, consider its dividend yield. At 8.3%, it has one of the highest dividend yields across FTSE 100 stocks. Moreover, some of the biggest dividend yield stocks from the index today are miners, that have enjoyed an unexpected improvement in financials because of public spending that drove up demand for industrial metals during the pandemic. I am not sure if they would have been able to boast the same kind of yields if this had not happened. Imperial Brands on the other hand, has had a high dividend yield with no outside help. Its average yield even over the past five years is a strong 7.9%. 

Good dividend cover for the FTSE 100 stock

Next, I also like the dividend cover. For the full year ending 30 September 2021, its dividend cover is a strong 2.2 times according to my calculations. This is pretty impressive, considering that a cover of 2 times is considered desirable. This looks particularly good because it includes the impact of a one-off revenue bump-up from the sale of its Premium Cigar Division.

However, even if I consider underlying earnings for the year instead, which does not include this one-off impact, the cover still stands at around 1.8 times. This is not too bad either, in my view. Essentially this means that the company could well sustain its dividends in the foreseeable future. In fact, considering that it expects to improve its earnings next year only reinforces this view.

What I’d do

The Imperial Brands share price has still not gone back up to pre-pandemic levels, even though it has sustained its earnings. This is probably partly because of the question mark on its long-term sustainability discussed earlier. That said, its share price has been on the rise recently and I think that with a low price-to-earnings (P/E) ratio of under 6 times, it could well rise in the foreseeable future as well. In other words, its long-term future is still debatable, but I see potential in the stock for the next few years. That is why I have bought it. And might even buy more of it now. 

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

It has not been an easy time to be an airline – but easyJet (LSE: EZJ) seemed to have a particularly difficult 2021. The share price fell 20% in the year, after having fallen 40% in 2020.

Below I look at why.

Tough times for airlines

The basic reasons for the underwhelming performance are not difficult to understand. The pandemic has continued to hurt demand for air travel. Much business travel has been scrapped as people switch to online meetings. Meanwhile, leisure travel demand has been plagued by ongoing uncertainty about changes in travel restrictions.

The number of seats available on the company’s flights fell by 49% compared to the previous year (much of which was also affected by the pandemic). Despite that, flights were only 73% full compared to 87% in the prior year.

Some airlines benefited from pandemic-related revenue streams. For example, many long-haul airlines sought to increase their cargo operations. But with easyJet’s focus on short- and medium-haul passenger traffic, it did not have the same opportunities. So a fall in passenger numbers left a big dent in both revenues and profits.

easyJet challenges

But weak demand was not the only reason the share price fell in 2021. Investors became increasingly concerned about the company’s strategy. A takeover bid, reported to be from rival Wizz Air, looked opportunistic. But I think it underlined the sense of weakness rather than strength at easyJet. The airline launched a £1.2bn rights issue last Autumn. While that boosted liquidity, it also raised questions about whether the airline had a future as an independent company.

I think easyJet could well overcome its current difficulties. The rights issue boosted liquidity. On top of that, the airline went into the pandemic in a strong position. That means it has felt less financial pressure than some rivals. It has slashed costs, going through its cost base “line by line” to see what it could eliminate. easyJet is also redirecting its fleet to where it thinks it can do best, for example ramping up capacity ahead of an expected Summer travel boom. Indeed, it talks of a “radical reallocation of our aircraft to higher contributing bases”.

easyJet is not alone among UK airlines to face such challenges. But unlike, say, IAG-owned British Airways, it does not have a long-haul network. So it could not profit to the same extent from a faster return of demand in the US aviation market than was seen in Europe. 

Ongoing risks

2021 showed that to a large extent, demand is outside its control. It can use marketing to improve demand and reallocate its fleet to the most profitable routes. But a lot of customers have continued avoiding flying abroad while they remain nervous about fast-changing and potentially costly travel restrictions.

Last year saw a pre-tax loss of £1.1bn, while the company reported £4.4bn of liquidity at its year-end. The company is hopeful that 2022 will see higher customer demand than 2021, which is why it has reshaped its capacity and even leased extra planes for the peak Summer season. 

Christopher Ruane 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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The Frontier Developments (LSE:FDEV) share price collapsed 25% today after the company released its half-year report. This latest drop has pushed the stock’s 12-month performance to a devastating -60% return for existing shareholders like me. So let’s take a look at what’s going on and whether I should be concerned.

Frontier Developments’ share price versus earnings

As a quick reminder, Frontier is a game development studio behind several popular franchises, including Elite Dangerous, Planet Coaster, Planet Zoo and Jurassic World Evolution.

Despite the post-trading update share price collapse, the results had some promising aspects. Most notably, revenue for the six-month period ending in November 2021 grew 33%, reaching £49.1m. This growth is mainly attributable to the release of Jurassic World Evolution 2, combined with continued sales from existing titles and expansion packs.

Sadly, the increased sales didn’t translate into higher profits. Due to marketing expenses promoting the launch of Jurassic World and license royalty fees for the IP, EBITDA came in at £14.1m – a 10% drop versus a year ago.

Combining this with adverse movements in foreign exchange rates, the group ended up reporting an operating loss of £1.3m. Needless to say, that’s not a welcomed sight. So seeing the FDEV share price fall as a consequence is hardly surprising to me.

Looking to the future

As frustrating as it is seeing profits dwindle, the situation may only be temporary. December sales volumes, which reached record-breaking highs, weren’t captured in this latest report.

Meanwhile, two new games, FAR: Changing Tides and Warhammer 40,000: Chaos Gate – Daemonhunters, are being released through its publishing arm later this year. Frontier’s first annual release of Formula 1 management games is also coming out in the second half.

Meanwhile, the June release of the Jurassic World Dominion movie is expected to dramatically boost sales of its Jurassic World Evolution 2 game. And with another Warhammer title scheduled for 2023, future growth prospects continue to look solid, in my opinion.

Overall, management has updated revenue guidance for its FY2022 ending in May to be between £100m-£120m. And the outlook for FY2023 has been revised to £130m-£160m. Both are lower than the guidance provided earlier in 2021, and that has most likely contributed to the rapid decline of the FDEV share price today. However, the updated figures still imply a double-digit growth rate, which is an encouraging sight. At least in my view.

The bottom line

All things considered, my perspective on this business hasn’t changed on the back of this report. The reduced guidance and seemingly temporary drop in profitability aren’t great. But the company’s long-term potential and pipeline of future projects continue to look promising.

Therefore, today’s drop in the FDEV share price seems like a potential buying opportunity for me to increase my existing stake.

Zaven Boyrazian owns Frontier Developments. The Motley Fool UK has recommended Frontier Developments. 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.

2022 has, so far, created several exciting opportunities to buy some top UK stocks. Multiple leading businesses have seen their share prices slashed, due to rising uncertainty surrounding inflation, Covid-19, Brexit and related supply chain disruptions.

But, in many cases, these are ultimately short-term problems and don’t jeopardise long-term growth prospects. So if I had £1,000 to invest, which top UK stocks would I buy today?

A top UK stock on sale?

Games Workshop (LSE:GAW) shares have had a pretty rough run so far this year. Since the start of 2022, the stock has fallen by just over 13%. And this downward momentum has pushed its 12-month return to a disappointing -19% for existing shareholders.

As a reminder, Games Workshop is the company behind the vastly popular Warhammer franchise. The group makes its money by selling collectable miniatures that hobbyists can paint and then use to play the tabletop strategy game.

While, for some, this may not sound like the most lucrative venture, the fanbase behind the franchise is enormous. And, consequently, revenues over the last five years have grown by an impressive annual average of 23%.

What’s more, with additional income streaming in from royalty licensing agreements on video games, this growth rate could be set to accelerate even further. But if that’s the case, why has this potentially top UK stock performed so poorly lately?

Looking at its recently-released half-year report, revenue continued to grow, but profits were down. On closer inspection, it seems the group’s margins are facing increased pressure due to higher freight and raw material costs. This is somewhat concerning, especially since the group’s pricing power hasn’t mitigated the impact on margins.

However, since these higher expenses are mostly driven by Covid-19 disruptions, they could diminish once the pandemic ends. If that’s the case, the recent share price drop could be an excellent opportunity to add this top UK stock to my portfolio at a discount.

Digitalising business

Another top UK stock that’s been hit hard recently is Kainos Group (LSE:KNOS). The company specialises in helping corporations and governments digitalise their operations to improve efficiency and reduce costs. Over the last 12 months, its shares have actually performed rather well, generating a return of over 45%. But since the start of 2022 performance has suffered, with the stock falling by 10%.

There are undoubtedly numerous forces at work here. However, primarily, fears centre on the effects of the pandemic. Last November, the group watched its stock plummet by a similar amount following its interim results. Revenues were up by an impressive 33%. But profits only grew by 3%, due to margins getting squeezed by the pandemic.

With UK infection rates near an all-time high and Covid variants continuing to develop, I’m not surprised to see fears of further margin cuts on the rise for this business. Needless to say, that’s not good news.

However, just like Games Workshop, profit margins may simply return to normal levels once the pandemic ends. And given revenues continue to climb thanks to increasing demand for its services, I think there is plenty of growth potential waiting to be unlocked. That’s why I personally believe the recent price cut of this top UK stock is an excellent buying opportunity for my portfolio.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Games Workshop and Kainos. 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.