I have been looking for FTSE 250 shares to buy for my portfolio over the past couple of weeks. I am looking for companies with the potential to compound shareholders’ capital consistently for the next decade. 

These businesses are few and far between as not many will be able to maintain their competitive advantages for the next 10 years. Numerous companies in the FTSE 250 are cyclical businesses, which struggle when times are hard. 

Only a few organisations have the qualities required to ride out the peaks and troughs of the economic cycle. With that in mind, here are three shares I would buy for my portfolio to hold until 2030. 

FTSE 250 international giant

The first company on my list is international shipping broker Clarkson (LSE: CKN). I think this business has a tremendous long-term outlook as the shipping industry continues to expand. A combination of rising trade volumes and low levels of capacity has sent demand and prices surging across the industry. 

As a result, Clarkson’s profits have also jumped. According to its latest update, trading in December was “stronger than anticipated“. The company is now expecting to report pre-tax profit for the 2021 financial year of more than £69m.

To put this figure into perspective, due to the volatility in the global shipping market throughout the pandemic, the company lost a total of £41.7m during 2020 and 2019. 

Vital role

Clarkson fulfils vital roles in the global shipping industry. It helps companies buy and sell ships, arrange financing for new vessels, and predicts future industry trends. Therefore, the group has multiple defensive qualities. Shipping corporations rely on its research and services to help them manage their operations.

These are the qualities I believe will help the business prosper over the next decade. As well as its growth prospects, the stock also offers a dividend yield of 2.2%, at the time of writing. 

The biggest challenge the company will face as we advance is competition. Clarkson is a leading enterprise in the shipping sector, but it is not the only operator. It will have to fend off competition from challenges, who may want to grab market share from this FTSE 250 enterprise. 

Shares to buy for growth

One of the most defensive sectors of the market is utilities. As there will always be a demand for electricity and water, so companies in this sector will always have a guaranteed market. 

That is the primary reason why I would acquire Drax (LSE: DRX) for my portfolio of FTSE 250 shares. The corporation is the largest publicly-traded power plant operator in the UK. In recent years, it has transformed its facilities to burn biomass rather than hydrocarbons to help it meet the UK’s strict climate change commitments. 

Thanks to its position in the market, Drax has capitalised on surging UK energy prices over the past six months. The company sells its power on forward contracts, which are agreed far in advance. Therefore, it has not benefited from rising power prices immediately. Nevertheless, the corporation has been able to lock in higher prices for 2022 and 2023.

It seems likely this initiative will produce a windfall for the enterprise in the years ahead. City analysts expect earnings per share to rise 121% next year. 

Unfortunately, I do not think it is sensible to suggest that this environment will last indefinitely. Power prices are likely to fall sooner or later, which will impact the company’s earnings potential. 

Energy transition

Still, in the long run, the group’s biomass and pumped storage generation assets will play a vital role in the UK energy transition. The assets will help the country stabilise the electricity grid during periods of low renewable energy generation.

Thanks to this crucial position in the energy market, I think the company will prove to be a solid investment for my portfolio over the next decade. The stock also offers a dividend yield of 3.2%, at the time of writing. 

Risks Drax could have to deal with in the months and years ahead include higher input costs for its biomass power plants. Higher costs could eat away at profit margins. Regulators may also restrict how much profit the group can generate and place stricter environmental requirements on the enterprise. All of these challenges could increase costs and reduce growth. 

FTSE 250 retailer

The final company that makes it onto my list of FTSE 250 shares to buy for the next decade is Pets at Home (LSE: PETS). 

The UK pet population has exploded over the past couple of years, leading to a surge in demand for related products. Historically, the pet and pet care industry across the UK has been highly fragmented, with small stores and partner-owned vets making up the bulk of the market. 

Pets at Home is changing this. It is consolidating the market and using its size and scale to grab market share. It has also rolled out a series of online and subscription products to crystalise its position in the minds of consumers. 

Considering its position in the market and the general lifespan of pets, I think the company will remain a force to be reckoned within the retail industry for the next decade. There is also plenty of room for the group to continue expanding in the market as it takes over smaller peers. 

The most significant risk to this growth is that of competition. Considering the organisation’s success, I do not think it will be long before competitors start to attack. Private equity and venture capital companies could launch their own pet-focused retailer and begin to nibble at the group’s market share. 

Even after taking this challenge into account, I would be happy to buy the FTSE 250 stock. 

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.

In an article yesterday, I explained that when stock-picking, I carefully look for reasons not to buy into a company. If anything smells fishy, I simply move on without buying. For me, the best stocks to own are those backed by big, beautiful businesses. That’s why I often hunt for cheap shares in the UK’s FTSE 100 index. Here are three stocks that I don’t own, but would happily buy today to keep for a decade or more.

Solid stock: Unilever

Unilever (LSE: ULVR) is a consumer-goods Goliath. Every day, 2.5bn people use one or more of its hundreds of household brands. That’s one in three people on our planet. And at Thursday’s closing price of 3,917.5p, Unilever is valued at £100.4bn, making it a FTSE 100 giant. But why would I buy this stock, given the City saying that says ‘dinosaurs don’t gallop’? Because Unilever has produced superior returns over many decades. Also, it hasn’t cut its yearly dividend for 39 years. Right now, Unilever shares trade on 22.8 times earnings and an earnings yield of 4.4%. Though this stock’s earnings are highly rated, so is my opinion of the underlying business. Recently, Unilever’s dividend yield has climbed to 3.8% a year, nearing the FTSE 100’s 4%. With this stock falling more than £6 over one year, it’s the first of my cheap shares to own for 2022-32. However, Unilever’s sales growth has slowed in recent years, so the group is unlikely to expand as rapidly as it once did.

Cheap share: Legal & General

Legal & General (LSE: LGEN) is another great British business that I really admire. This venerable firm has been around since 1836, so it’s in its 186th year. L&G is a market leader in providing UK life assurance, savings, and investments. It manages over £1trn of wealth for more than 10m customers. Yet L&G’s shares are up only 8.6% over the past 12 months, bang in line with the FTSE 100. At Thursday’s closing price of 298.6p, L&G is valued at over £17.8bn. Currently, shares in this British success story trade on under 7.9 times earnings, for a bumper earnings yield of 12.7%. In addition, the stock offers a dividend yield of almost 6% a year (1.5 times the FTSE 100’s yield). But L&G’s next 10 years will depend on global asset returns, which might well disappoint. Even so, this is my second cheap share I’d own for a decade.

Dividend share: British American Tobacco

British American Tobacco (LSE: BATS) is the third of three cheap shares I’d buy today to hold for 10 years. However, BAT is hardly an ethical stock to own as its tobacco products are addictive and harmful. Yet around one in five adults worldwide smokes tobacco, which generates huge earnings and cash flows for BAT. On Thursday, this share closed at 2,809.5p, valuing the tobacco titan at almost £64.5bn — another Footsie mega-cap stock. The shares trade on a modest price-to-earnings ratio of 10.4 and an earnings yield of 9.6%. In addition, it offers a dividend yield of nearly 7.7% a year, nearly double the FTSE 100’s yield. But cigarette smoking is declining, making BAT’s future uncertain. Also, the group carries around £40.5bn of net debt on its balance sheet. Even so, I’d buy this stock for its potential dividend payouts over the next decade.

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco 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.

Whenever I have covered [email protected] Capital (LSE: SYME) in the past, I have consistently concluded that the share price looks cheap compared to its trading history. 

However, over the past six months, the stock has continued to decline in value as the market gives the business the cold shoulder. 

Following these declines, I am starting to wonder if the stock is too cheap to pass up. Considering its market opportunity, I continue to believe the company has enormous potential. 

SYME share price outlook

Over the past year, the company has made tremendous progress on a number of fronts. The alternative finance specialist is working to progress agreements with parties worldwide.

According to its latest trading update, the group is working on completing the signing of a binding agreement with its first funder for the previously flagged inaugural Italian inventory monetisation transaction. 

At the same time, its inventory monetisation platform Trade Flow, which the group acquired in July, is on track to perform better than expected. 

Following a year of consolidation and marketing, [email protected] Capital’s management seems to be optimistic about the year ahead. And I am as well.

The global trade financing market is worth hundreds of billions of dollars each year. And it is only growing.

The company is not the only corporation pursuing this business. Hence, competition is a risk, but it is working to produce a unique product and structure that could give it an edge over competitors. 

So what does this all mean for the SYME share price? Well, in theory, as the company’s fundamentals improve, the stock should track this improving performance. 

Rising losses 

Unfortunately, it could be some time before investors see any concrete results from the business. According to City analysts, the enterprise is expected to lose money for the next two years, at least. It seems likely that this uncertainty will continue to put the market off from investing in the company. 

I am also wary about investing in the business. While I have expressed optimism about its prospects in the past, it is taking longer than expected for the group to start earning returns for investors.

The longer it takes for the corporation to move into the black, the more money it will consume. In the past, the company has leaned heavily on shareholders to provide the funding to keep the lights on.

The number of shares in issue has increased from 9m to 27bn over the past six years as management has continually issued stock to raise money from investors. 

As such, I am not willing to invest in the company today. I think the SYME share price has potential. Still, until the group starts earning its keep, I believe the business will continue to struggle. 

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.

Price inflation is with us and it’s starting to look like the problem could stick around for a while. And the last place I want to have the bulk of my funds is in a cash-savings account — most pay a paltry amount of interest far below the rate of general price inflation. And that means cash savings could lose their spending power over time as inflation eats into it.

Maintaining profit margins

So I’d set aside a bit of cash for my immediate and shorter-term needs. And then, for me, there’s only one asset class worth heading for now — stocks and shares. And the reason for that is the businesses backing them up. Many will have the ability to raise their selling prices in the face of inflation. And that means they have a good chance of maintaining their profit margins.

When they do that, in theory, share prices should adjust a little higher to accommodate the new pricing levels. So if I’m holding shares in my portfolio, it could keep pace with inflation almost by default.

But, as my granny used to say, there’s many a slip between cup and lip. Theories don’t always work out as we hope in practice. And any number of operational challenges could affect a company’s ability to maintain its earnings while I’m holding the shares. And the extra difficulties caused by higher inflation could work to make things even harder for a business to thrive. I could even lose money rather than keep up with inflation.

And we can get an idea about how difficult it can be to outperform the wider stock market from some recent research. According to CNBC, citing research by Morningstar, just 25% of actively-managed share funds beat their benchmarks over the 10 years to June 2021. And fund managers picking just large-cap stocks scored even lower, with just 11% beating passive funds over the prior decade.

Stock picking

It seems active fund managers tend to be terrible stock-pickers. And in many cases, we’d be much better off choosing simple, low-cost and mechanically-managed index tracker funds.

However, holding an index tracker means we get wide diversification across many underlying businesses. But it also means we’ll be holding businesses that struggle with inflation as well as those that can cope with it well. And Warren Buffett — arguably the greatest living investor — often tells us that not all businesses are equal. He reckons the stock market comprises many poor or mediocre businesses and just a handful of good ones.

And that theory steers me back to stock picking — I can aim to choose some of the good stocks myself without all the rest of the poor ones that feature in a tracker fund. And Buffett advised us recently that businesses need pricing power and low capital intensity to thrive in an inflationary economic environment.

So I’m looking for businesses with some kind of competitive advantage in their operating markets. For example, stocks such as branded fast-moving goods companies Diageo, Britvic and Unilever. And global financial markets infrastructure provider London Stock Exchange Group. They all come with risks, of course, but I feel their strengths outweigh these.

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

I think one of the most effective ways to create passive income is through investing in UK dividend shares. I like the juicy dividends and the fact I don’t need to work for the income. These two stocks in particular have caught my eye for their dividend paying potential this year.

The high yielding passive income stock

Polymetal International (LSE: POLY) is a miner focused on primarily gold and silver extraction. The stock yields over 7%, making it a good provider of passive income. What’s more, the dividend cover is 1.75, which means the dividend is relatively well covered by earnings. The shares are also quite cheap on a price-to-earnings multiple of eight. This combination of income and cheapness is appealing to a value focused investor like me. There seems to be little point to me buying overpriced shares.

A recovery in the prices of gold and silver in 2022, perhaps as a result of inflation, against which gold is sometimes seen as a good hedge, could see the shares re-rate upwards.

Polymetal operates at nine mines, which means it is not reliant on any one pit for production. This limits risk to some degree. However, the mines are located in Russia and Kazakhstan, which may put some investors off.

As with any miner, further risk comes from the fact precious metal prices can fall as well as rise. This makes earnings and profits quite cyclical and lumpy. A sustained downturn could lead to the dividend being cut. Not good for passive income. However, Polymetal has raised the dividend in more years than not in recent times. Overall, I think its high yield, decent dividend cover, and share price make it a top passive income stock for my portfolio.

Consistent dividend grower

Sureserve (LSE: SUR) provides property services such as repairs for social housing and installing smart metering. As the UK looks to meet emissions targets and make buildings greener, I think the group is well placed to benefit.

On the dividend front, I think it’s also well placed to provide a sustainable growing dividend. While the shares may only yield 1% at the moment, increased earnings may push that up and the low yield provides the potential for future faster growth.

Dividend cover is over four, showing there’s plenty of room for bigger dividends in the future.

In summer 2020, the group paid off all its borrowings, putting it on a much better financial footing. That should also help more earnings filter through to dividends because less money goes towards repaying loans.

However, Sureserve is a pretty low margin business and its work can be replicated by other groups, so does not have much of a moat. I think these risks are partially offset by its size and the large contracts it has with social housing groups, for example. I will be keeping these risks in mind. 

Both dividend growth and dividend yield are important considerations for me when it comes to choosing dividend shares. Combined, Polymetal International and Sureserve make a good combination for my portfolio in 2022 and the years beyond.

Andy Ross owns shares in Sureserve. 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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When it come to screening for my next investment, I don’t pay that much attention to the share price. As such, I’m quite happy to add penny stocks to my portfolio, provided I research the underlying businesses. What matters more is the valuation of a company relative to metrics like its earnings. If I deem that a stock is attractively valued, then I’d consider buying it for my portfolio regardless of the share price.

In my search this week, I saw two penny stocks that have surged in 2022 already. Here’s what I’d do next.

Cineworld

The first company is Cineworld (LSE: CINE). The share price is 38p as I write, so it’s still firmly in penny stock territory. But the stock’s rallied almost 19% already this year. However, over one year, the stock is down a quite miserable 41%. Is the recent share price surge just a ‘dead cat bounce’?

The first thing I noticed when researching the stock is that there’s been no update on trading from the company recently. The recent share price surge can’t be explained by positive updates from Cineworld.

However, there was an update on 15 December. In it, Cineworld said it has been ordered to pay C$1.23bn in damages to Cineplex over a breach of contract. This is hugely damaging to the company as its current market value is only £521m.

But what about forecasts for this year? Cineworld is expected to grow revenue by over 100% in 2022 to £3.95bn. Earnings per share (EPS) are expected to swing from a loss back to 2.41p, which would value the shares on a price-to-earnings ratio of 21. I think this reflects the boost in demand the company might see if Covid subsides.

However, all things considered, there are too many risks here for me to want to buy the stock. Therefore, I do view the recent share price rally as a bit of a false dawn.

Hammerson

The next company is real estate investment trust (REIT) Hammerson (LSE: HMSO). Its current share price is 36p, which has popped 8.7% already in 2022. The stock’s also rallied a huge 50% over one year.

Hammerson specialises in managing and developing retail properties in the UK and mainland Europe. Unfortunately, the company suffered substantial losses during the pandemic. The retail sector was severely impacted by Covid restrictions, which reduced Hammerson’s rental income.

The company may be turning a corner though. EPS are forecast to increase by 32% this year, which is a huge turnaround from the heavy losses endured through the pandemic. Hammerson shares are also valued on a price-to-net-asset-value of only 0.6. This looks cheap to me, but it may be signalling further trouble in the retail sector due to continuing Covid restrictions.

I’m in favour of adding REITs to my portfolio for diversification though. They can also be excellent investments to grow my passive income. I do note that Hammerson has considerable debt on its balance sheet, which heightens the risk of any investment. Nevertheless, the stock looks very cheap today. I’m going to keep this on my watchlist for now to see how the retail sector recovers in the months ahead.

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

A stock market crash is never fun. Unfortunately, I don’t have to look far back for the last one. In March 2020, the last time markets crashed, I admit my portfolio looked pretty terrible. Almost everything was falling in price as Covid started to spread around the world.

But here’s how I dealt with my crashing portfolio: I didn’t look at the value at all. I knew things were bad. I could see how much individual stock prices were falling. What I did do was analyse again the balance sheets of each company in my portfolio. I also reassessed their business models to determine if they could manage through lockdown. Once I did this, I didn’t sell a thing. I was content that each one of my stocks would survive the pandemic that followed.

I’m beginning to think another stock market crash could start in the US this year. Here’s my thinking.

Rising inflation is a risk

Inflation is accelerating in the UK and the US at present. These are key markets for me, and where I look for stocks to buy.

But why would inflation cause a stock market crash? Well, sticking with the direct impact of inflation, it means that consumers have lower purchasing power. This, in turn, will reduce demand for goods and services, and then impact companies’ profitability. The stock market is priced on the future expectations of profit, and if this reduces, so should share prices.

From inflation to central bank policy

Central banks like the Federal Reserve (Fed) and the Bank of England target inflation of 2%. But it’s currently way higher that this in both countries.

The main tool that central banks use to control inflation is to increase the base interest rate. This is generally negative for economic growth, and then stock market returns, but can reduce inflation.

The Fed was increasing the base rate throughout 2018. Then, in the fourth quarter that year, we saw a stock market crash. At the time the technology-based Nasdaq index fell over 20%. Technology stocks can be richly valued and higher-risk, so are most susceptible to share price falls when interest rates rise. If the Fed raises interest rates again due to high inflation, then the richly valued US market could crash.

Here’s what I’m doing

This time, I’m checking my investments to see if they have pricing power. This will be important in an economy with rising inflation, and should better protect the profits of the businesses I own. Then, if we do see a stock market crash, I’ve got a list of stocks I’d consider buying if they became cheaper.

I’m not as concerned about the UK market though. I wrote here about how I see the FTSE 100 reaching an all-time high this year. The main difference between the UK and US markets is that the UK is currently far cheaper on a forward price-to-earnings (P/E) basis. For example, the FTSE 100 is valued on a P/E ratio of 12, whereas the NASDAQ is on a multiple of 31.

So for now, I’m considering increasing my exposure to the UK market with stocks such as Aviva and Games Workshop. If I do buy US shares, I’d be sure to check each company’s valuation before buying.

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

I think these top-quality penny stocks could help me make a huge amount of cash. Here’s why I think they are dynamite buys right now.

Topps Tiles (trades at 66p)

A strong home improvement market means I’m tempted to splash out on Topps Tiles today. The vast amounts of savings Britons accrued during Covid-19 lockdowns is supercharging the DIY market. So is a rock-solid housing market. As a consequence, Topps Tiles delivered record annual revenues of £227.5m during the 12 months to September.

OK, demand for the company’s tiles could slump if economic conditions worsen and business and consumer confidence dive. But I’m confident Topps Tiles will thrive as it takes steps to build market share (it’s aiming for a 20% by the middle of the decade).

DP Poland (trades at 6.3p)

The booming online food delivery sector offers plenty of opportunity for me to also make some cash. According to Statista analysts, the global market will be worth $154.3bn by 2023. That’s up considerably from the $111.3bn it was valued at in 2020 when Covid-19 lockdowns supercharged takeaway demand.

I’m tempted to invest in DP Poland to capitalise on this theme. As the sole franchisee of the Domino’s brand in Poland, it benefits significantly from the chain’s immense brand power. It is also well-placed to exploit soaring personal wealth levels in the Eastern European nation. I’d buy it even though competition in the food delivery market is intense and a threat to future profits.

Steppe Cement (trades at 43p)

This penny stock (as the name suggests) manufactures cement in and around the Eurasian Steppe in Kazakhstan. I think Steppe Cement could be a great buy for my portfolio as construction activity in the emerging market is ballooning.

Investment in housing is particularly strong as urbanisation takes hold. Between January and November some 13.4m square metres of housing was commissioned, up 10.6% year-on-year.

Revenues at Steppe Cement rose 4% in the first nine months of 2021 amid the construction boom. However, I will be keeping an eye on rising civil unrest in cities across Kazakhstan. This could have significant economic consequences if it escalates further.

Inland Homes (trades at 55p)

Homes are in short supply in the UK and this is playing into the hands of housebuilders like Inland Homes. But this particular penny stock is about more than just putting up new residential properties. It buys up brownfield land and secures planning permissions to either then sell onto other developers, or to build on itself or with the help of industry partners.

Inland Homes’ strategy is highly successful and in the 12 months to September it enjoyed record high turnover of £195m. I am concerned about the high levels of debt the business has accrued to build its land bank. Though the rate at which net debt is falling (down 20% year-on-year in the last financial year) is encouraging.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Inland Homes. 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.