I’ve been thinking lately about some of the shares I’d like to stock up on in my portfolio for 2022. One of them is Lloyds (LSE: LLOY). I think the bank could perform strongly in 2022. Here’s why.

Three reasons I remain bullish on Lloyds

The Lloyds share price has already had a strong run. It has increased 36% over the past year, at the time of writing this article earlier this week. But I continue to see possible upside. Here are three reasons why.

First, the bank’s mortgage book remains highly profitable. The book stood at £308bn at the end of September. Economic resilience could help keep defaults low, making this a rich seam of profits. As many of the mortgages last for decades, I expect this to help propelling Lloyds’ profits not just in the next several years, but for the long term too. Rising interest rates could boost profitability.

Secondly, the company has been moving into new business areas including growing its own residential property portfolio. I have mixed views on this. I see a risk that it distracts management from the core banking business. On the positive side, if these new business ventures work well, they could add a new string to the bank’s bow.

Thirdly, I like the company’s strong balance sheet. It could help fund a much higher dividend. It also means Lloyds is better prepared for any economic downturn than it was at the time of the last financial crisis.

Where will Lloyds go in 2022?

The upwards share price movement has been strong. But I still don’t think the Lloyds share price fully reflects the company’s financial potential. For example, in the first nine months of the year, Lloyds made a profit attributable to ordinary shareholders of £4.6bn. Yet its current market capitalisation is just £33bn. 

That seems very cheap to me. If Lloyds can keep its business performing strongly I think that could lead to the shares moving up next year. Another trigger could be a much bigger dividend. Lloyds could fund that from its current excess capital. Many investors already expect a raise, so it may be factored into the share price already. But I still think any such announcement could be positive for the share price, especially if the dividend increase is large.

Then again, the shares could go lower. Initial costs building up the property business could hurt profits. On top of that, if the broader economy declines, that could hurt Lloyds’ profits. For example, struggling businesses defaulting on loans could lead to bigger provisions. That would likely translate to smaller profits. 

But overall, I remain bullish on the bank. I think it could move up in 2022. That’s why I’d happily add to my position today.

Christopher Ruane owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking 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.

Many popular growth stocks of the past year were found in the US. But so many have lost their shine in recent months. Growth stocks don’t have to be high-octane and popular. The UK is home to several reasonably priced and relatively unknown companies that are demonstrating great potential, in my opinion.

My top three have a market capitalisation of just £200m to £300m. This is pretty small compared to the relative giants of the FTSE 100. But smaller companies can offer great potential. I frequently see shares of small firms double or triple over a few years. That would be difficult for a large company like BP, in my opinion.

Granted, investing in smaller growth stocks can be riskier. Often their share prices can be more volatile. Sometimes their shares are more illiquid. This can amplify movements up and down. Also, small companies are still growing and can often face short-term hurdles and hiccups.

Overall, I hold a diversified selection of companies in my Stocks and Shares ISA. As I have a reasonably long investment time frame, I own several growth stocks. But I also own shares that have styles spanning value, defensive, income, and momentum.

A supreme leader

Often, companies have characteristics that share multiple styles. For instance, a growth share could also demonstrate defensive qualities. One such share I’d consider buying for 2022 is a relatively small company called Supreme (LSE:SUP). Supreme is a manufacturer and brand owner of several consumer goods. Its main business areas are batteries, lighting, vaping, and sports nutrition.

There is much to like about Supreme. It’s run by competent management, in my opinion. CEO Sandy Chadha offers an owner’s mindset. I’m also encouraged that he has ‘skin in the game’ and owns 57% of the shares. Sandy started in the company from school and grew the business from £1m to over £90m of revenues over a few decades. Starting with batteries, Supreme became a major supplier to the big discounters including B&M and Home Bargains. Using these customer relationships, Supreme was able to expand into the lighting business, then into the fast-growing vaping space.

I’d say it benefits from a great business model. By creating brands from scratch and manufacturing in-house, it can keep its costs low and profit margin high. This allows it to sell particularly good value products that are popular with customers. The plan seems to be working. Sales have grown by 14% per year on average over the past three years. All while achieving an impressive gross profit margin of 30%.

I do have to bear in mind that Supreme’s largest 10 customers account for over half of the group’s sales. If any of these customers decide to stop or reduce orders, it could have a material impact. That said, many of the brands are only sold by Supreme and some of its relationships span over 30 years.

Overall, I reckon the future looks bright for Supreme. It’s expanding into new areas and doing so at low cost. I’d be happy to buy shares in this British growth stock for my portfolio.

Laser-focused growth stocks

Next on my list of growth stocks for 2022 is an AIM-listed company called Somero Enterprises (LSE:SOM). This £280m business manufactures laser-guided equipment that’s used to make perfectly level concrete floors. Yes, it might seem quite random. But I’d say that this niche business is a high-quality growth share with some remarkable characteristics.

It offers a return on capital employed of almost 60% and an operating margin of over 30%. These are some of the best quality metrics that I’ve come across recently. But it doesn’t end there. Usually these factors result in a more expensive share. But I can buy Somero for a price-to-earnings-ratio of just 11 times. I reckon that’s cheap.

Earnings are growing steadily and it recently noted strong trading momentum. It also seems to be well-placed in growing markets. For instance, its equipment is used to create flat floors for large warehouses and multi-storey data centres. I reckon demand for these could continue for some time.

Somero does operate in a cyclical market. There’s ample business when the economy is strong, but this can potentially reverse in a recession. The shares could be volatile at times too so that’s something I should consider. That said, it currently has a forecasted dividend yield of 7%. This should provide some buffer to share price turbulence. All in all, I’m a buyer.

Small but mighty

My third British growth stock is the smallest of the three. It’s called SDI (LSE:SDI) and it has a market capitalisation of just under £200m. SDI (formally known as Scientific Digital Imaging) designs and manufactures scientific and technology products. It focuses on two main areas, digital imaging and sensors.

SDI has demonstrated strong financial growth for several years. It has shown average annual sales growth of 33% over the past five years. That’s impressive. Its profits have been equally as impressive. So what’s driving the great performance? Well, SDI has a buy-and-build strategy. What I mean by this is it looks to purchase profitable companies within its niche areas of expertise. It then creates an environment for these typically smaller companies to flourish.

Business is growing nicely at this AIM listed group. It recently reported “another strong set of results and solid operational progress for the six months to 31 October 2021”.

Acquiring companies does come with risk. There is much that can go wrong. That said, SDI seems to have a decent track record. This somewhat mitigates acquisition risk. One more thing. With a price-to-earnings ratio of 34, the shares do not look particularly cheap. But I’d say that’s not unusual for quality growth stocks.

Overall, I like what I see. A good-quality small business with a proven model of successfully buying smaller companies. If it can continue doing so for at the least the next few years, I reckon its share price could potentially double.

Harshil Patel owns Scientific Digital Imaging, Somero Enterprises, Inc., and Supreme Plc. The Motley Fool UK has recommended B&M European Value 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.

The Argo Blockchain (LSE: ARB) share price has had a mixed 2021. As the price of Bitcoin surged during the first half, shares in the cryptocurrency miner rallied strongly. The stock added more than 700% between the beginning of January and the beginning of March. 

However, the stock has been under pressure since touching a 52-week high of nearly 290p in the first half. It has lost two-thirds of its value since the beginning of March although, over the past 12 months, the Argo Blockchain share price has still returned more than 500%. 

The question now is, what happens next year?

The Argo Blockchain outlook 

Over the past year, Argo has really transformed as a business. Its cryptocurrency mining operation is highly profitable and generates a recurring income stream. It has also accumulated a large number of crypto coins on its balance sheet, providing capital and financing to fund expansion plans. 

On top of these positive fundamentals, the firm is in the process of developing a substantial Bitcoin mining operation in Texas. The new facility will increase output and allow the company to move away from using fossil fuels to mine, as it will be powered by renewable energy. 

Even though the company is investing heavily for growth, its fortunes are tied (to a certain extent) to the Bitcoin price. No matter how many coins the group mines, it can only sell them for what the market is willing to accept. The same is true for the value of the coins on its balance sheet. 

If the price of Bitcoin drops 10%, Argo has to accept the decline. It can get around this issue by not selling. This is something the firm has been doing by holding the cryptocurrency on its balance sheet.

It can hold on and wait for better prices, although if the Bitcoin price remains depressed, it may never get a better price. The company could be taking a considerable risk by waiting around for the next price rally. 

Bitcoin fortunes 

Of course, it is impossible to predict what the future holds for any share price. I cannot say with any level of certainty how Bitcoin will trade next year, and if Argo will hit its growth targets. 

Nevertheless, I can evaluate the risks and potential rewards for owning the Argo Blockchain share price at current levels. I think the company is attractive as an investment, especially if the cryptocurrency sector continues to grow. Compared to its US-listed peers, the stock even looks cheap on an earnings and sales basis. 

Still, without any significant catalyst, the stock could remain cheap for the foreseeable future. It could even become cheaper if cryptocurrency prices fall substantially from current levels.

Based on these factors, I am happy to buy the stock for my portfolio in 2021, although I will be limiting it to a speculative position, considering the risks involved.

The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of investment advice. Bitcoin and other cryptocurrencies are highly speculative and volatile assets, which carry several risks, including the total loss of any monies invested. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

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

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As we move from 2021 into 2022, I’m thinking about the relentless shift towards e-commerce and how it will impact my portfolio. Internet shopping has already had a big boost from Covid and the rise of the Omicron variant is only likely to exacerbate it. Indeed, according to an S&P report, US online sales are set to pass $1trn in 2022. In light of this, I’m again looking at an interesting ETF.

ETFs (exchange-traded funds) are funds that track an index or sector and can be bought and sold like a share through most online brokers. They allow me to invest in multiple companies in a single fund and are usually low cost.

The ETF

The ETF I’m looking at is L&G Ecommerce Logistics UCITS ETF (LSE:ECOG). This London-listed ETF offers an alternative way of investing in e-commerce without investing in online retailers themselves. This ETF focuses on logistics service companies and technology firms that enable e-commerce by tracking the performance of the Solactive E-commerce Logistics Index.

All of the firms in that index either offer warehousing or delivery of online goods or provide software to these logistic companies. The fund is well-diversified across countries. At the moment, there are 43 publicly traded companies in the index from all over the world. The firms are mainly from the US, but there are also entities from Japan, Germany, and the UK. The index doesn’t allow any company in it more than a 15% weighting. Indeed, at the moment, none of the companies represent more than 4% of the index.

The fund is relatively new and has only been going since 2018, but the return has been impressive. Over 12 months and year-to-date it has returned over 20%. Over the three years since the fund was started, it’s increased by 70%.

The ETF has a reasonable ongoing charge of 0.49%. One negative is that the fund does not pay dividends, but I look to this as a growth investment rather than an income stream.

Should I invest?

Despite the notable return of this fund, there have been individual e-commerce companies that have vastly outperformed this. For example, Amazon, over three years has increased by around 120%. Etsy, a global marketplace, has increased over 300% during the same period. Perhaps if I can pick the winning internet retailers, I can beat this ETF.

That said, I’m not confident in picking which online retailers will win in the long run. However, by investing in this fund, I’m not choosing retailers themselves. 

As the famous fund manager Peter Lynch said, “During the Gold Rush, most would-be miners lost money, but people who sold them picks, shovels, tents, and blue-jeans (Levi Strauss) made a nice profit”.

This is how I think about the companies in this fund. Regardless of which internet retailers succeed, they will probably all need the delivery solutions and software of the companies in this fund.

I could be wrong, but for this reason, I’m seriously considering adding it to my own portfolio as we head into 2022.

Niki Jerath has no position in any of the shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon and Etsy. 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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A Santa Claus rally refers to the increase in the stock market that usually occurs in the last week of December through to the first few days of January. Various research over the years has shown this to generally be the case. In fact, last year, the FTSE 100 gained over 1% in December and over 2% between 24 December and 5 January. There’s a possibility the flagship UK index could rise again this year. For my portfolio, I think that an FTSE 100 index ETF offers me the best chance of participating in a rally.

The ETF

An ETF (exchange-traded fund) is a fund that tracks an index or sector and can be bought and sold like a share through most online brokers. I believe that because a FTSE 100 ETF offers me access to all the companies in the index, this could be the best approach for me.

There’s a lot of choice when it comes to a FTSE 100 ETF. Most, if not all, of the major investment companies offer a fund. In selecting a fund there are a variety of strategies, however, I usually consider the three factors that are most important to me. That is, fund size, expense ratio, and whether I want dividends or not.

The fund I’ve selected for my own portfolio is iShares FTSE 100 (LSE: ISF). By fund size it’s the biggest with over £10bn. It’s also among the cheapest, with an ongoing charge of 0.07%.

Finally, this fund pays a dividend. One of the major plus points of the FTSE 100 is that there are so many established, large companies in the index that can pay dividends. Although there is a choice of whether to have the accumulation option or the dividend-paying option of this ETF, for my own portfolio I choose the latter option every time. Currently, the dividend yield is 3.71%.

Is the Santa Claus rally real?

Lots of research show that the Santa Claus rally does exist. Theories to explain it include increased Christmas shopping and institutional investors settling their books before going on holiday over the festive period.

However, it could just be a coincidence and it might not happen this year.

This December the markets have some clouds over them. The Omicron variant of Covid is, sadly, spreading faster than first thought. This could impact Christmas spending. Additionally, worries about inflation and rising interest rates could keep wallets firmly shut.

That said, I can’t help thinking that the specialty retailers like Burberry Group, Next, and JD Sports will do well over this festive period after the subdued Christmas we had last year. As will the big UK supermarkets like Tesco and Sainsbury.

In any case, Santa rally or not, I’m still comfortable holding a small allocation of iShares FTSE 100 among my holdings as part of a diversified portfolio.

Niki Jerath owns shares in iShares FTSE 100. The Motley Fool UK has recommended Burberry and Tesco. 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 way I can find additional funds to invest in the market is via cost-cutting. For example, I estimate that over the course of a normal week, I could save £38.50 from lunches. My usual coffee and food cost me about £7.50, which I could make at home for a couple of pounds. So if I decided to cut this cost down, here are a few ways that I could put the money to work in the FTSE 100.

Snapping up what’s hot

The first way would be to pick my favourite stock each week and put the funds there. This would be a good way to capitalise on what’s hot in the moment. 

For example, over the past couple of months stocks related to the metaverse have been performing very well. This theme is on people’s minds at the moment. Another case was the focus around ESG stocks with the recent COP26 summit. Companies that were declaring big goals and revealing initiatives for being kinder the to planet drew investor attention.

By investing each week in these areas, I can move quickly and always have available funds to put in the next week. The downside to this is that my £38.50 for a particular week is unlikely to make a meaningful difference to my holdings, even if the share doubles in value. Further, if I just feel comfortable in picking FTSE 100 stocks, I might be limited regarding the stocks that fit a particular trend I want to get exposure to.

Building a position over time

The second way I’d invest my £38.50 is to build up positions in solid FTSE 100 stocks over time. For example, I might think that Flutter Entertainment is a good buy. So I could invest each week in the same company for the next couple of months to build up a more substantial stake. 

The added benefit of doing this is that I can average-in my buying price. Each week, I’ll get a different price depending on the market movements. Blending my price should allow me to take advantage of any volatility during these months. It also reduces the pressure of investing in one go and trying to pick the best time.

Buying FTSE 100 dividend stocks

The final thing I’d do is invest the money to try and make passive income. This is becoming more of a priority for me recently, given the high level of inflation. Putting my £38.50 in a stock that will pay me a dividend is a way to try and reduce the erosion of the cash value.

Even with a dividend yield of 5%, my weekly investment would only get me £1.93 in dividend income a year. Not even enough for one coffee! Yet if I stick with it and build a portfolio, it can add up over time. For example, if I stuck with it for a year, then in 2023 I’d be making £100 in income a year. Again, nothing groundbreaking, but enough to buy a few coffees each month.

I do need to be aware that with this amount of money, my transaction costs are going to eat into my investment. For example, with an example £5 fee to buy a stock, it’s 13% of my funds for the week. But I could always save up my weekly amount and buy monthly or quarterly to minimise this issue.

Jon Smith and The Motley Fool UK have 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 250 index is a great place to screen for new stocks that offer both income and growth characteristics. With this in mind, I’ve been looking at the shares in the index, and here’s what I’ve found in my search.

The mid-cap index

The FTSE 250 is the UK’s mid-cap stock index. It tracks the share price performance of 250 companies that range in market value from about £500m to £5bn. This gives me a wide investment choice to look at when I’m researching new stocks for my portfolio.

The index has performed well over one year. At time of writing, it’s up almost 12%. This is despite rising inflation and the new strain of Covid that has heightened risks for stock investors like myself recently. Nevertheless, I still think there are some excellent stocks there to consider for next year.

Growth stocks

The first company I’ve been researching in the FTSE 250 is Greggs. It’s a retail baker specialising in food-to-go. The share price is up a huge 71% over one year, but I think this could increase further in 2022. Greggs is expanding online, has improved its app-based ordering, and now offers home delivery. Revenue is forecast to increase by 10% next year too. Greggs did suffer during the initial lockdowns though, so it’s something to keep in mind before I buy the shares.

I’ve also been looking at real estate investment trust Tritax Big Box. It owns a portfolio of large-scale logistics real estate that are used for bulk deliveries. I think this sector has excellent growth potential going forward as prime warehousing space is critical for online shopping. The share price is up almost 50% over one year, so has far outperformed the index. I think this should continue into next year due to the booming e-commerce sector. Real estate valuations have increased recently though. This may limit the company’s growth if it can’t acquire additional prime location warehouses at reasonable valuations.

Income stocks

Alongside my growth stocks, I also look for companies that offer respectable dividend yields. Dividends can be a great source of passive income, but can also be reinvested back into my portfolio to buy more shares.

The first income stock in the FTSE 250 I’m looking at for 2022 is Brewin Dolphin. It’s a wealth management company operating primarily in the UK. It should benefit from the increased savings ratio of UK households as more people look to wealth management services. Indeed, the company achieved record discretionary inflows in its fiscal year 2022. The dividend yield is forecast to rise to 4.8%, which I consider highly attractive for my portfolio. However, there’s always a risk of a stock market crash that would lower the fees that Brewin Dolphin can charge on its assets under management.

The final company I’ve been researching is The Renewables Infrastructure Group. It’s a close-ended investment company that specialises in renewable energy assets such as wind farms and solar cells. There’s going to be high demand for this sector as governments across the world target a zero-carbon future. This should support the current dividend yield forecast of 5.2%. Dividends are never guaranteed though, so the company has to keep acquiring high quality assets to grow its earnings.

Dan Appleby owns shares of Brewin Dolphin. The Motley Fool UK has recommended Tritax Big Box 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.