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BP (LSE:BP) shares are among the most popular to own by UK income investors. That’s likely due to its impressive historical track record when it comes to dividends. Recently, the yield has suffered thanks to the pandemic, but it still sits at a substantial 4.4%.

Let’s explore its performance in more detail and discover if there is a better energy company out there for me to buy.

Weak performance of BP shares

Despite the popularity of BP as an income investment, the performance of its shares over the last five years has been pretty underwhelming. A £1,000 investment in January 2017 would be worth around £780 today based solely on the stock price movement. When taking the approximate £340 of dividends that would have been received during that time, the total rises to £1,120 – a 12% return.

By comparison, the FTSE 100 has delivered only a 3.3% return over the same period. But while BP shares may have outperformed the market, the performance is still disappointing, in my opinion. So, what happened?

Obviously, the biggest drag on performance is the falling share price. And to be fair, it’s not really BP’s fault since the global pandemic is mainly responsible.

With lockdowns being enforced worldwide in 2020, most cars were parked rather than being on the road. The seemingly overnight collapse of demand for fuel decimated BP’s revenue stream. And consequently, the group suffered a record-breaking $20bn (£14.8bn) loss for the year.

Since then, the situation has improved. And management has already begun ramping up its investments in alternative revenue streams. The most significant is renewable energy infrastructure. As the world shifts away from its dependence on fossil fuels, BP intends to dispose of 40% of its oil & gas assets by 2030 – replacing it all with green energy technologies.

The transition process is undoubtedly going to be riddled with challenges. As such, the passive income-generating capabilities of BP shares could become compromised in the future. Only time will tell whether that will happen. But assuming the worst-case scenario, is there a better income investment in the renewable energy space?

A lucrative income enterprise

Greencoat UK Wind (LSE:UKW) owns a diverse portfolio of on- and offshore wind farms scattered across the UK. The company lets the weather generate green electricity, which is then sold to multiple energy providers, including SSE, Centrica (British Gas), and EDF Energy, to name a few.

This business model obviously has some risks. With no control over electricity prices, its revenue stream can be pretty unstable. However, with impressive operating profit margins of over 80%, the company should be able to absorb most adverse movements in regulatory energy price caps, I feel.

Looking at the past five years, the shares have risen by a respectable 17.6%. And when factoring in the additional income from dividends, a £1,000 investment in January 2017 would now be worth around £1,440 – a 44% return. That’s significantly better than BP shares.

With its wind farm portfolio continuing to expand, I believe Greencoat UK Wind could be a better source of passive income. Therefore, personally, I’m more tempted to add it to my portfolio than BP shares.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat UK Wind. 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.

Biotech company Oxford Nanopore (LSE: ONT) has not had a long life as a public company. After a very strong start in September, the shares have moved around a fair bit. But the share price had soared 45% above its listing price, at the time of writing this article earlier today.

How might the rest of 2022 look for the shares? Here is my view.

Business to keep expanding

In November, the company updated the market and raised its revenue guidance. Based on a significant expansion of work with a customer in the Emirates, the company set an expectation of life science research tools revenue for 2022 of £135m-£145m. It also raised the expectation for such revenue in 2023 to £170m-£190m. That compares to £65.5m of revenue reported for the 2020 financial year.

It means that if the company meets the top end of its expectations, its compound annual growth rate from 2020 to 2023 will be 43%. That is an impressive rate of revenue growth. Revenues are different to profits, however, and for now there is no indication that the company expects to be profitable any time soon. Indeed, as it pointed out in its listing prospectus, there is a risk that it might never be profitable. In 2020, it lost over £60m. So far though, being loss-making does not seem to have hurt the share price. I reckon that could continue in 2022. If strongly increasing revenue supports an attractive growth story, that in itself might be enough to keep driving the shares higher, even in the absence of profits.

£5bn market cap

Currently the company has a market capitalisation in excess of £5bn. I think that is a lot given its revenues and lack of profits. But clearly there is investor enthusiasm for sequencing companies like Oxford Nanopore. The market for the company’s services could expand massively in coming decades. If it establishes itself as one of the leading global players, that could help its share price grow in years to come. Rival Illumina, for example, has a capitalisation on the US NASDAQ market of around £43bn.

That might be enough for the company to maintain share price momentum in 2022. If it announces more good news, such as a big new contract win, I reckon the share price could even keep growing this year.

Share price risks

But there is definitely a risk the shares could fall too. With such high revenue growth expectations, any slowdown could hurt the investment case and cause investors to reassess the elevated valuation. The fact that recent guidance upgrades were driven by a single customer suggests a risk of concentration on a small number of key clients. That could make Oxford Nanopore revenue more susceptible to a tumble if one of its customers ends its relationship with the company.

Along with the lack of profitability, those risks are big enough to put me off buying Oxford Nanopore for my portfolio.

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.

The FTSE 100 index has been in existence since 1984. And throughout its almost-40-year history, this evolving collection of companies has delivered an average return of approximately 8.9% annually. Over the long term, that has led to some substantial wealth generation, even for investors who know very little about the stock market.

Yet recently, the index hasn’t exactly been a stellar performer. In fact, over the last five years, a £1,000 investment in an exchange-traded fund tracking the FTSE 100 would be worth around £1,030 today (excluding fees). When including the additional income generated by dividends, the investment rises to around £1,250.

This translates into an average return of 5.7% on an annualised basis. Needless to say, that’s below its historical average. And by today’s standard, it barely beats the 5.1% inflation rate. So the question is, how can I enjoy higher returns to grow my wealth faster?

Beating the FTSE 100 through stock picking

The stock market has its ups and downs. There will be periods of poor performance, and every so often, a market crash will rear its ugly head like the one seen in March 2020. But when looking at some individual companies in the past few years, plenty have put the FTSE 100 to shame.

Looking at my own portfolio, several of my UK shares have outperformed the blue-chip index as a whole, and not by a small margin. Two, in particular, Alpha FX and Somero Enterprises, have generated triple-digit returns over the last five years.

Of course, stock picking is not a risk-free endeavour. And it can very easily lead to some substantial losses if poor decisions are made. I’ve certainly made plenty of mistakes over the years and will likely continue to make more in the future.

So, what makes a good stock pick?

In my experience, some of my top performers that have beaten the FTSE 100 share some similar traits, despite being completely unrelated enterprises. The most prominent of them is an economic moat. This represents all the factors that give a company an edge over its competitors.

For example, a business with a reputation for high-quality products can charge customers more for its goods, even when there are cheaper alternatives. This is called pricing power.

Another competitive advantage that can be even more powerful is the creation of switching costs. This is when a service or product becomes so heavily integrated into a client’s operations that switching to a cheaper competitor is either financially unviable or so challenging that it’s an unappealing prospect.

There are plenty more traits to look for, from network effects to high entry barriers. But the point is, the more advantages a business has, the more likely it will thrive in the future. And since shares represent a tiny piece of an underlying company, if its profits start climbing, so should the share price. At least, that’s what I think.

I have to take into account the risk that individual stocks may underperform, of course. But I can minimise this risk by diversifying across companies and sectors.

Zaven Boyrazian owns Alpha FX and Somero Enterprises, Inc. The Motley Fool UK has recommended Alpha FX and Somero Enterprises, Inc. 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.

Tesla (NASDAQ:TSLA) shares have been on fire in recent years. As the world moves away from traditional combustion engines and towards electric motors, the company has delivered some fairly stellar performance. And with an eccentric, headline-grabbing CEO like Elon Musk, investor excitement about this business is arguably through the roof.

So just how much have these shares risen by? And can they continue to climb from here? Let’s explore.

Investigating Tesla shares’ performance

Often popular stocks don’t tend to deliver very good returns. I’ve previously highlighted some like Lloyds Banking Group and Rolls-Royce that fall into this category. But in the case of Tesla shares, the returns have been monumental. So much so that a £1,000 ($1,350) investment in January 2017 would now be worth around £20,760 ($28,025)!

When comparing the US stock to the S&P 500 index, it’s outperformed the market by around 1,970%. That’s pretty impressive, especially for a company that, in the past, struggled to get its cars out of its factories. So, what’s behind the explosive growth?

A lot of the share price gains can be attributed to substantial hype. But is the excitement warranted? In my opinion, yes. Tesla has garnered quite a reputation for quality and technical achievement. Its proprietary battery technology enables its various vehicle models to travel some of the longest distances on a single charge versus competitors. And the addition of its Supercharger technology lets travellers get back on the road in as little as 15 minutes.

Consequently, the company has had little difficulty acquiring customers. In fact, for many years, Tesla struggled to keep up with demand. Today, that problem seems to be disappearing. With more production facilities on-line, the group delivered a record 936,172 cars in 2021. That’s an 87% year-on-year increase despite the global semiconductor shortage and other disruptions created by the pandemic.

With that in mind, seeing Tesla shares explode over the last five years is hardly surprising. And if it can continue to deliver similar double-digit growth, then the stock might continue to surge from here.

Taking a step back

While the achievements of this carmaker are impressive, there remain plenty of challenges ahead. Tesla has operated in a fairly uncontested environment so far. It’s only been in the last two years that traditional carmakers have begun putting serious money into expanding their electric vehicle fleets.

Unfortunately for Tesla, this means the advantage of being first could soon start losing its power. With significantly more options available today, consumers may start looking to other electric vehicle brands – most of which have far more resources at their disposal for production, marketing, and delivery.

Needless to say, if customers aren’t willing to wait in line for a Tesla vehicle, or the company is unable to further ramp up production, then the group’s shares will likely suffer over the long term.

Time to buy?

All things considered, I’m not tempted to add this business to my portfolio. For most of Telsa’s operating history, it’s had very little pressure from its rivals in the electric vehicle space. Now, with fierce competition brewing, I will wait and see how it fares before putting any money into Tesla shares.

Zaven Boyrazian 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.

Cinemagoers tend to really enjoy plot twists, cliffhanger moments and sudden shocks. The same does not apply to cinema owners, though. Shareholders in Cineworld (LSE: CINE) have had a rollercoaster couple of years. And 2022 looks set to bring more of the same, with the Cineworld share price soaring over 20% yesterday. It’s still down 40% over the past year, at the time of writing this article earlier today. So could this be a buying opportunity for my portfolio?

Why did the Cineworld share price surge?

Such a large jump in a single day’s trading session is unusual. So, what was behind it?

There wasn’t any announcement yesterday from the company to trigger improved investor confidence. I think some traders have been reassessing what lies ahead for the chain and reckoning that 2022 could see brighter days for Cineworld.

Yesterday’s gain simply reclaims some of the value lost over the past month. In December, a Canadian court handed down a judgment against Cineworld that could cost it around £710m. That added to the chain’s existing woes and sent many investors heading for the exits.

But the company shouldn’t have to pay the bill while the appeal process is ongoing. If it appeals successfully, it may not have to pay it at all. So, while the judgment is definitely another headache for Cineworld management, in the short term it doesn’t necessarily bode badly for the company’s cash flows. Given Cineworld’s $8.4bn net debt at the end of its last financial year, free cash flow is the key focus for many shareholders right now.

Trading has been promising

To generate cash flow, Cineworld needs its cinemas to be open – and people paying to visit. Things have been improving on that front. In a November trading update, the company said that box office and concession revenues in October reached 90% of their pre-pandemic 2019 levels. If such a strong recovery is sustained, it could help generate sizeable free cash flow. This could be used to reduce debt to more manageable levels.

I don’t see any prospect of Cineworld restoring its dividend in the next couple of years. But if it can reduce debt, the shares could become more attractive again. After all, it is one of the leading cinema groups globally. Crucially, the October numbers show that the appetite to see films in cinema has returned for many customers. If that continues, Cineworld’s market position could make it profitable. Set against that, the current market capitalisation of under half a billion pounds might look cheap a couple of years from now. So I think yesterday’s share price surge was driven in part by bargain hunters thinking about what could happen in 2022.

Cineworld risks

Despite that, there is no way I will be adding Cineworld to my portfolio right now.

I do think potential returns could be juicy if things work out. But I see large risks. Even if cinema visits were at normal levels, $8.4bn is a huge net debt for a company of Cineworld’s market cap. Servicing the debt and repaying it will require large financial efforts in coming years. If free cash flow proves insufficient, the shares could go to zero. Added to that, further restrictions in some markets and the growth of streaming new films could both hurt revenues and profitability.

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.

It’s clear electric vehicles (EVs) will have a huge role to play in 21st century transportation. Demand for the low-emission cars is soaring amid growing concerns over the environment and increasing fuel costs. I think there’s a world of opportunity for me to make a stack of cash with EV stocks.

More battery-powered vehicles were sold in Britain in 2021 than in all the previous five years combined. That’s according to Society of Motor Manufacturers and Traders data released today. In total, some 452,527 battery-powered, plug-in and pure hybrid vehicles were sold in the UK, up 58.7% year-on-year. Similarly-spectacular sales figures are being recorded all over the globe.

In a rush to grab a slice of the action, Sony on Tuesday announced plans to enter the EV market. It even unveiled its Vision S SUV prototype on the stage at this week’s CES2022 show. Apple also continues to make tracks in a bid to launch its own fleet of ‘green’ cars by the middle of the decade. More EV manufacturers are set to follow Rivian’s November’s IPO amid lively investor interest too.

2 EV stocks I’d buy today

So the market is packed with potential for investors. But which EV stocks could help me make great returns over the next decade? Here are two of my favourites for 2022.

#1: Tesla

It’s hard to talk about EV stocks without mentioning market leader Tesla. It has the technology and the brand recognition to take the industry by storm. In the fourth quarter of 2021, it sold 308,600 of its cars, smashing broker forecasts for 266,000. Tesla has plans to build a suite of so-called ‘gigafactories’ in Europe and the US (and possibly Asia too) to meet soaring demand and keep those electrifying sales numbers going.

My main concern for Tesla looking ahead is competition. Not only could its market share sink as new EV makers enter the fray. Its position is under threat as existing major car makers, from Rolls-Royce and VW to Ford and Toyota, invest billions in electric technology.

#2: TI Fluid Systems

Last summer, I bought shares in TI Fluid Systems to get exposure to the EV explosion. It’s not the sexiest of stocks, but the fluid carrying-and-storing components it makes are essential in making cars move. I think it’s a great stock to buy because the parts it makes are required in much higher quantities in electric and hybrid cars than those powered by internal combustion engines.

I am concerned though, that demand for TI Fluid Systems’ product is vulnerable to broader supply chain problems hitting car production rates. Revenues at the business dropped 14.7% in the third quarter of 2021 as light production volumes slumped by almost a fifth. That said, over the long term, I’m confident this EV stock could make me a decent pot of cash.

Royston Wild owns TI Fluid Systems. The Motley Fool UK has recommended Apple. 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.

Passive income is a term thrown around a lot today. Many dream of having that extra cash flow through whilst they sleep. However, not everyone can afford to directly invest in real estate and properties. Luckily, dividend investing can be a very effective strategy for building passive income.

Many investors target dividend shares in order to create a stable and regular payout from their portfolio. With yields averaging 4.1% within the FTSE 100, a £1,000 investment would return an average £41 annually. Now, if I were to put this investment in BHP Group, a stock boasting an 11% figure, annual dividend returns would leap to £110. But income investment isn’t as simple as finding the highest figure.

A company issues dividends based on its free cash flow. This decision is routinely reviewed by management, meaning these returns are never guaranteed. Whilst high payouts may indicate strong financial performance, it may also be an unhealthy distribution of free cash from the company’s management. The strategy certainly has its risks. With this in mind, how am I approaching dividend-focused investing in 2022?

Dividend investing in 2022

The pandemic’s shock to corporate earnings across these last few years has subsequently impacted dividend yields. As disrupted markets have forced companies into rationed operations, payouts have largely withdrawn across the board. However, a few companies have paid consistent dividends throughout the pandemic. These are the stocks I would target to build my passive income portfolio.

First would be British American Tobacco. The manufacturer has consistently kept dividend yields at around 7% since 2018. The company’s increases in adjusted revenue and net cash across FY21 suggests financial resilience will continue throughout the pandemic. I am confident in its delivery of strong dividend figures throughout 2022.

I would also consider National Grid. The company’s dividend rate is noticeably lower at 4.63%. However, boasting undisrupted payouts throughout the pandemic, I have faith in this utilities company to also deliver consistent dividends throughout this year. Indeed, a 27% increase in cash generation seen in the FY21 report suggests a stable direction forward for this company.

The real-estate case

As said before, direct investment in real estate is a very expensive venture. However, investment in the real estate market is still accessible. I would also consider adding a real estate investment trust (REIT) such as Land Securities (LSE: LAND) to my passive income strategy.

This addition would diversify my portfolio by creating exposure to the real estate market. This is particularly important in 2022, as easing lockdown regulations may lead to higher property prices with companies returning to on-site work. Indeed, Land Securities currently holds a dividend of just under 4%. However, the trust’s net rental income margins increased by 25% across FY20-21. This suggests the dividend figure to be in a secure position as the value of the trust increases.

Dividend investment certainly has its risks. However, it can also be very rewarding, particularly with a diverse and considered portfolio. With investments in tobacco, utilities and real estate, I am confident that my passive income portfolio will continue to grow throughout 2022.

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

The Alibaba (NYSE: BABA) share price has slumped 40% over the past six months. Over the past year, the stock has declined nearly 50%. 

As a value investor, this performance has ignited my interest in the China-based, US-listed online giant. As such, I have been taking a closer look at the stock to see if it could be worth adding shares to my portfolio. 

Alibaba share price decline 

Whenever I come across a stock that looks cheap compared to its trading history, I try to understand why the market has turned its back on the enterprise before making any move. 

With Alibaba, it looks as if the market is worried about the tension between the US and China, as well as growing regulatory threats in China. 

Over the past two years, domestic regulators have been clamping down on companies that they believe have too much power. Regulators have also moved against individuals they believe hold too much power, including Alibaba’s founder, Jack Ma. 

If there is one thing the market hates more than anything else, it is uncertainty. Right now, there is a lot of that surrounding the business environment in China. It is impossible to tell where regulators will strike next. 

What’s more, there has been some speculation that growing friction between China and the US could lead the former to cancel the variable interest entity (VIE) structure Chinese companies like Alibaba have used to list in the US.

This structure is not technically legal, although it is also not technically illegal. As such, there will always be a threat that regulators could opt for the latter. If they do, it is impossible to say what impact this will have on the Alibaba share price. 

Business environment

These are the main reasons the market has been selling the stock over the past year. However, away from these headwinds, the corporation’s underlying fundamentals look incredibly attractive. Alibaba is the largest e-commerce enterprise in China, a booming market. For the quarter to the end of September, revenues jumped 30%. Last year, revenues grew 41%, underlining the scale of the company’s growth potential. 

Analysts expect the Chinese e-commerce market to grow at a compound annual rate of 12% over the next couple of years. Suppose Alibaba can ride this growth wave and continue to expand its presence across the country. In that case, I do not think it is unreasonable to say that the business can continue to report double-digit sales growth for the next few years. 

And if it can hit this target, the stock looks dirt cheap. It is currently selling at a price-to-earnings (P/E) multiple of 17. 

Still, despite the company’s potential and valuation, I am not interested in buying the shares for my portfolio. It is impossible to predict how Chinese regulators will act going forward, so I would rather invest my money in a different opportunity.

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.