Due to the pandemic and the rise of tech stocks, I am on the lookout for the best ones. Accesso Technology (LSE:ACSO) could be in for a lucrative and exciting 2022. Should I buy shares for my portfolio at current levels?

Rise in demand

Accesso is a technology firm based in the UK. It provides queue management, ticketing, point of sale, virtual queuing, and guest management software solutions to over 1,000 venues globally. Accesso’s core customers include public attractions, theme parks, and many travel and tourism related businesses.

Due to the pandemic, demand for technology has risen. This should set Accesso in good stead to capitalise on this rise in demand and boost performance in 2022 and beyond.

As I write, Accesso shares are trading for 788p per share. This time last year, shares were trading for 445p, which is a 77% increase in 12 months. Many tech stocks have seen shares rise in the past year.

Positives

Firstly, Accesso announced a lucrative three-year partnership with Sensei Technologies in December. Sensei has a huge presence in Japan and will drive marketing and sales activities. Accesso will keep control over products, maintenance, and client management, however. This partnership could be an excellent move in my opinion. Accesso has been looking to make strides in the Far East market and this partnership will enable that.

In addition to the agreement with Sensei, Accesso also agreed a deal to partner up with Canadian amusements firm Calaway, which it announced in November last year. Calaway is one of the biggest amusement businesses in Canada and this partnership will also provide Access with a new revenue stream and boost its profile in North America.

Next, Accesso has reported trading has been positive recently and I expect as the world attempts to continue to reopen, this upward trend will continue. An interim report released in September saw revenue, profit, net cash, and earnings per share all rise compared to 2020 levels. Most of these also reached or surpassed 2019 pre-pandemic levels which was pleasing to see. 2020 progress was hampered by the height of the pandemic.

Finally, many insiders own Accesso shares, which I usually like to hear. Who better to know if a firm is on the right track to succeed, and if these insiders are willing to invest their own money, then I feel better about buying shares for my own portfolio too.

Tech stocks have risks

The pandemic is still a major problem for the travel, tourism, attractions, and amusement segments of the economy. New variants and varying restrictions across the world can affect operations for these types of venues. Revenue, performance, and growth could be affected for Accesso. Furthermore, competition in the technology sector is intense. Accesso may provide a set of solutions vital to the new world but there are larger established tech firms that could enter the market and affect Accesso’s progress.

Overall, I like Accesso as a tech stock. I believe its products and services are a vital component to the world we live in now and I don’t see things going back to the way they were in terms of queuing and point of sale. I think 2022 could be a great year for Accesso. At current levels, I would buy the shares for my portfolio.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Accesso Technology. 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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2021 was an excellent year for UK shares. With the world adapting to the pandemic and operational disruptions slowly alleviating, many businesses have managed to get back on track. As a result, the FTSE 100 index achieved an impressive return of 14.2% – and that’s excluding the extra income from dividends.

Even with this rapid growth, I believe plenty of exciting opportunities remain for investors in 2022. With that in mind, I’ve spotted three UK shares that I think have the potential to explode over the next couple of years. Let’s explore.

E-commerce continues to surge

Lockdown restrictions may be over, but the popularity of online shopping continues to rise. According to the Office for National Statistics, the online sales percentage of total retail spending currently sits at around 30%. By comparison, before Covid-19 showed up, it was closer to 22%.

And this change in shopping behaviour hasn’t gone unnoticed. With almost all large retailers looking to capitalise on the shifting landscape, investments in online shopping platforms have surged. But this transition has created a massive problem when it comes to logistics. After all, simply having the ability to sell online is meaningless if the product can’t be delivered to a customer.

So these three UK shares, Clipper Logistics, Warehouse REIT, and Londometric Property, are helping retailers overcome these challenges.

Investing in logistics services & infrastructure may seem like a boring choice for investors looking to grow their wealth. But, as it stands, the UK is quickly running out of well-positioned warehousing space while demand continues to surge. At the same time, establishing an efficient delivery network can promptly turn into a nightmare – that’s why most businesses outsource it to logistics experts.

This ongoing situation has created some significant tailwinds for each of these companies. And with revenues already growing at double-digit rates, this boost in pricing power could help deliver impressive returns in 2022 and beyond.

Investing in UK shares isn’t without risk

As exciting as the prospect of tapping into this opportunity is, there are some reasons to be cautious. Firstly, these three companies are by no means the only players in the industry. The level of competition, even between each other, is high. And as more companies emerge to meet the rising level of demand, the competitive landscape could get even more challenging.

I think there is more than enough room to have multiple winners in this sector. However, should the industry eventually become oversaturated, the current rising trend of pricing power will likely reverse, taking profits with it. Needless to say, this would be bad news for these UK businesses and their share prices.

The bottom line

The competitive risks are concerning. However, with infrastructure already in place, I believe these three UK shares have the capability of staying on top. And with plenty of room for e-commerce left to grow, I don’t think the demand for logistical solutions will wane any time soon. That’s why I think these stocks are some of the best to add to my portfolio for the long term.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Clipper Logistics, LondonMetric Property PLC, and Warehouse REIT. 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 world of penny stocks can be a risky place. After all, these are small companies with limited resources that often fail to turn into anything ground-breaking. But every once in a while, a diamond in the rough can appear. And spotting these opportunities early on can lead to impressive wealth generation over the long term.

With that in mind, here are two penny stocks I think have the potential to explode over the next 10 years.

Data is more precious than gold

As technology continues to advance, data has become a valuable commodity for any business. Analysing and predicting customer behaviour can lead to significantly higher sales for products and services. Of course, simply knowing what customers want is not enough. Businesses need to be able to act on these trends with clever marketing strategies. And that’s where dotDigital (LSE:DOTD) steps in.

This platform-as-a-service provides automation tools for data-driven marketing. In simple terms, it generates personalised advertising content and then distributes it to increase customer conversion and spending of its clients.

With online shopping becoming an increasingly competitive space, the need for such solutions is surging. And looking at dotDigital’s double-digit revenue growth, it’s clear to me the company is capitalising on the opportunity.

Having said that, this is far from a risk-free investment. In recent months, the penny stock has taken a bit of a tumble. And even after falling almost 40% since September last year, it still trades at a lofty price-to-earnings ratio of 45.

This high valuation does open the door to further volatility. However, given the long-term potential, I believe the risk is worth the reward. That’s why I’m looking to increase my existing position in this penny stock.

A thriving penny stock in the mining sector

As industries go, mining is probably towards the top of the list when it comes to risk. After all, exploring, developing, and eventually extracting metals from the ground is a pretty expensive endeavour that often leads to disappointing results.

But despite its small size, Anglo Pacific Group (LSE:APF) seems to be beating the odds – probably because it doesn’t actually do any mining. Instead, this company looks to finance the initial cost of developing a site for other mining companies that have already done the hard and risky work of identifying a suitable digging location. In exchange, the group receives a portion of the extracted metals as a form of royalty payment for providing the funds early on.

With demand swelling for precious metals like cobalt and copper, courtesy of electric vehicles and renewable energy infrastructure, the firm seems to be perfectly positioned to surge in the coming months and years.

But like all mining businesses, it’s exposed to several major risks. Most notably is its lack of pricing power. Suppose the demand for certain metals start to fall, or the supply eventually exceeds what’s needed. In that case, metals prices will naturally begin to decline, taking Anglo Pacific’s profits with it.

Personally, I think this is a risk worth taking. Therefore, I’m considering adding some more shares of this penny stock to my portfolio in 2022.

Zaven Boyrazian owns shares of Anglo Pacific and dotDigital Group. The Motley Fool UK has recommended Anglo Pacific and dotDigital 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.

Not everyone has the luxury to spare large amounts of cash each week to build massive passive income streams in a short space of time. But fortunately, there are ways to generate money passively with only modest amounts over the long term. Even as little as £5 a day is enough to get started. So, how can I do this? Let’s explore.

Weighing the options

The concept of saving capital to invest in building a passive income stream is hardly new. But with so many options available, which is the best approach for me?

The easiest method is simply keeping the money in an interest-bearing savings account. In the past, this has been a reasonably lucrative option. But today, with interest rates on savings accounts sitting near zero, my money won’t stay ahead of inflation.

What about buy-to-let? This is often a popular choice for many property investors. However, with UK house prices skyrocketing, saving only £5 a day isn’t going to cut it. In other words, buy-to-let is a bit out of my targeted price range.

I’m also going to throw bonds out the window. These financial instruments let investors buy debt from companies or governments and receive interest payments for doing so. As bondholders get priority over shareholders if a company runs into financial trouble, these tend to be a lower-risk passive income strategy. But as I just said, interest rates are currently low. Therefore, unless I start buying some high-risk junk-grade bonds, the interest I’m going to potentially receive will not be meaningful.

All of those options have their virtues, of course. But with just £5 a day to spare, buying dividend stocks is my personal choice for building a passive income stream. This approach does carry more risk, as dividends can be cut or cancelled by a company at any time. Not to mention, the share price could also fall, wiping out any gains made via dividends. But on the other hand, stocks can generate substantial returns, and by diversifying my portfolio, a good chunk of the risk can be mitigated.

Saving cash to build a passive income stream

There are plenty of UK shares priced under £5, including many established enterprises in the FTSE 100 index. So, is this just a matter of picking a few solid businesses that pay dividends and buying a few shares each day? No, that wouldn’t be a particularly sensible approach because of trading fees.

Whenever I buy or sell shares, my broker takes a cut. The amount can vary, but a typical figure here in the UK is around £10 per transaction. That means if I only invest £5 at a time, my money will need to double for me to simply break even. So, to minimise the amount spent on broker fees, I want to keep the number of trades to a minimum.

By putting £5 a day aside and letting it collect, I’d save £35 in a week, which is the equivalent of £1,820 a year. By saving and investing in blocks of, say, £455, I would only need to execute four trades a year. My total annual broker fees would be £40, which means my investments would only have to rise by 2.2% to break even.

That’s far more reasonable, and with some companies in the FTSE 100 offering dividend yields as high as 8%, the cost of building a passive income stream this way could be quickly recouped.

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.

British American Tobacco (LSE: BATS) shares can be a popular buy-and-hold investment for passive income generation. The stock currently comes with a very high 8.3% dividend yield forecast, after all.

But has British American Tobacco been a good investment over the past five years? And should I carry on holding the stock from here? Let’s take a look.

British American Tobacco shares have fallen

For all the benefits of holding the company as an income stock, the return has been pretty terrible. Over the last five years, the stock has fallen by a huge 38.6%. Therefore, my £1,000 investment would be worth a much smaller £614 today.

I can look at a total return calculation, too. This means I include the dividends I would have received over this time, assuming I reinvested them back into buying more shares. But my total return would still have been a 15.3% loss. Not quite as bad, but still not great. This would have turned my £1,000 into £847.

What’s gone wrong?

British American Tobacco has been hit by tighter regulations over the five years. For example, the Food and Drug Administration (FDA) in the US announced plans to reduce nicotine to non-addictive levels. The FDA followed this by pursuing a ban on menthol cigarettes.

It hasn’t just been regulatory concerns though. A French anti-smoking organisation also launched a legal complaint against British American Tobacco and three other companies, claiming they manipulate tests associated with nicotine levels in cigarettes.

Alongside these ongoing issues, the emergence of Environmental, Social and Governance (ESG) investing has also weighed on the company. There’s no doubt that smoking is detrimental to a person’s health. The consequence of this means a stock like British American Tobacco will get screened out of an ESG-based portfolio. This increases the selling pressure on the shares, which ultimately reduces the price.

Should I buy British American Tobacco shares?

If I was investing with ESG in mind, it’s fair to say I’d screen this company out of my investable universe. However, to counterbalance this, I do recognise that British American Tobacco is working towards its own ESG agenda. As an example, the company is investing in non-combustible products it says are “scientifically-substantiated, reduced-risk alternatives”.

I’m an income investor and I still view the shares as highly attractive. As mentioned, the forward dividend yield for 2022 is a sky-high 8.3%. What’s more, the company has been a regular dividend payer, even throughout its troubles in recent times. For example, the 10-year average dividend yield has been a highly respectable 4.8%.

Finally, the stock has become far cheaper over the past five years. Back in 2017, the shares were trading on a price-to-earnings (P/E) ratio of almost 18. Today though, the forward P/E is a lowly 8. I think this means the recent issues are fully priced in to the shares, given how much the valuation has fallen.

So, as an income stock, I’m going to keep my British American Tobacco shares. It’s a relatively small position. But the dividend yield is excellent, and I think the valuation already reflects the risks ahead. I’d also consider adding more shares to my portfolio to boost my passive income.

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

One of the attractions to me of investing in shares is the ability to earn passive income from company dividends. By investing the £20,000 of an ISA allowance, I think I could earn quite a healthy amount each year. Here is how I would try to do that through buying UK dividend shares.

Investment approach

Investing in different companies and business areas would give me the opportunity to benefit from companies exposed to different parts of the economic cycle. It would also give me diversification. That would help reduce my risk if a company underperformed.

I would split the money across 10 companies, investing in no more than two per sector. Dividends are never guaranteed. Spreading my £20,000 would mean a single company cutting its dividend would have less impact on my income.

Oil and gas

In energy, I would plump for Diversified Energy. The company owns thousands of oil and gas wells, as well as pipelines. Buying up small, old assets has allowed it to squeeze money out of the ground and fund an 11% dividend. One risk is the decommissioning costs of such old wells.

I would also buy oil major BP, with a 4.3% yield. It has global exposure and is reshaping its portfolio for changing energy demands, although any future fall in oil prices hurting profits.

Tobacco

For income, tobacco is a common choice because of its high cash flows. I would invest in Imperial Brands and British American Tobacco, yielding 8.5% and 7.7% respectively. Both have profitable businesses that benefit from established brand names. That gives them pricing power. But a decline in the number of cigarette smokers in many markets could hurt sales and profits.

Financial services

I would buy investment manager M&G. With a well-known name and established customer base, I reckon the company could keep doing well in future. It yields 8.9%.

Another company on my shopping list would be insurer Legal & General. Its iconic brand helps it attract and retain customers. I also see it as a well-run business, which has grown profits strongly over the past decade. Legal & General yields 5.9%.

Both companies risk profits falling if a stock market crash damages share returns and leads to customers shopping around, however.

Consumer goods and pharma

I would buy Dove owner Unilever too. The consumer goods giant yields 3.8% and pays out quarterly. Cost inflation threatens profit margins. That has sent the shares 12% lower over the past year, at the time of writing this article earlier today. But I like the company’s huge customer base and established portfolio of premium brands.

GlaxoSmithKline is another purchase I would make. It yields 5%. Soon it will split its pharma and consumer goods division, which could lead to a lower payout. But like Unilever, its premium brands give it pricing power.

Utilities

With a 4.7% yield, I would buy energy distributor National Grid. Its entrenched network and resilient demand should help it keep making profits. One risk is higher capital expenditure eating into profits as it responds to changing patterns of electricity consumption.   

Mining

Finally I would buy Rio Tinto. It yields 9.8%. The mammoth miner faces the risk of boom and bust pricing in natural resources. That could lead to future dividend cuts or cancellation. But as only one tenth of a diversified, long-term portfolio I would be happy to hold it.

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

Setting up passive income streams could help me have more money in future without working for it. But what if I don’t have much money now? How can I start?

I reckon it’s possible to start earning passive income by investing in dividend shares, even with a little bit of money. Here’s how I would do it with a couple of pounds a day.

Dividend shares as passive income ideas

The reason I like dividend shares as passive income ideas is that I can benefit from the hard work of well-established businesses without having to do anything myself. With interest rates low, that means I might get more passive income from my money than I would by parking it in a bank account. That said, owning shares does bring risks.

Not all shares pay dividends. And those that do can stop, for example, if business worsens or management decides to use the money to grow the company. So I would try to diversify across a few companies in different sectors. Two pounds a day adds up to £730 in a year. That would be enough for me to diversify across two or three different stocks in my first year of investing. If I invested in shares with an average dividend yield of 4% — close to the current FTSE 100 average — £730 could hopefully generate around £29 of passive income per year.

Focus on what I understand

It can be tempting to invest in companies that have high dividends. But if I don’t know where those dividends come from, how can I feel comfortable about the likelihood of them continuing?

That’s why I focus on dividend shares in companies I understand. That way, I feel I am in a better position to evaluate their performance and financial results. This can be as simple as starting with companies I use personally. For example, if I shop at Sainsbury, eat lunch at Greggs and use Vodafone for my phone then I already know something about those companies from a customer’s perspective. I would not just base my judgement on that though. I would also look at financial results. They are usually available free online.

Of course, I can always learn about other industries I don’t know by reading up on them. So focusing on what I understand would not necessarily limit me to a small number of possible passive income picks for my portfolio. I would take time to read though. I think I ought to know how companies make money and what their prospects are before I buy them — not afterwards.

Make the move

It’s easy to talk about passive income. But I notice that even a lot of smart, motivated people hold back from taking action. For my passive income streams to become real, I have to do something!

That can be easy. To start, saving £2 a day, I’d want a share-dealing account or Stocks and Shares ISA in which to put the money. Then, as it piled up, I could take some time to research companies. I would also learn more about the stock market. Once I had chosen some investments that seemed right for my own investment criteria and risk tolerance, I could buy. Then I would keep saving my daily £2, while hopefully watching my passive income streams grow.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone. 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.