The technology company Apple (NASDAQ: AAPL) has been both a successful company and a lucrative investment for many investors. Indeed, since Warren Buffett decided to buy Apple shares five years ago, it has ended up being his largest position.  It has earned Buffett a paper profit for him in excess of $100bn.

This week the company’s market capitalisation has been close to reaching $3 trillion. Is now the time for me to buy Apple shares for my portfolio, or am I too late?

Apple’s onward march

For years now, bears have suggested that the Apple story is in danger of running out of steam. Where are the new products? Where is the visionary leadership? What about the threat posed by cheaper competitors?

I think some of those concerns have merit. I do see a risk that the rise of less costly smartphones could hurt Apple revenues and profits over time, for example. But so far, I think the company has proven to be highly resilient. Last year it recorded revenues of $365bn. That means that on average the company is making around $40m of sales every hour of the year. Profits were also enormous, at $109bn.

So I don’t find the bear case very persuasive. In fact, some of what is seen as weakness for Apple actually reflects its strength in my opinion. Take the perceived lack of innovation. Apple is basically focusing on a tightly controlled, small portfolio of products. That helps reduce complexity from the supply chain. It also means the company doesn’t dilute profit margins by getting into hundreds of less lucrative product areas.

That doesn’t mean there aren’t risks. An economic downturn could hurt demand for Apple’s premium products, damaging revenues and profits. Its juicy services margins could also be cut by the threat of regulatory action, something we’ve already seen when it comes to the company’s app store.

I’d buy Apple shares at today’s valuation

With the Apple share price touching new highs recently, is this bullishness fully factored into its valuation?

I don’t think it is. In fact I see further upside potential for the Apple share price over the long term, although in a volatile tech market there could be ups and downs along the way. That doesn’t bother me, though, as I reckon Apple has the potential to be a cash machine for decades to come. It’s reinvented itself for changing circumstances before – Apple has been listed on the stock market for over 40 years already.

Apple has a huge customer base. Many of them are deeply integrated into its product and service ecosystem. That makes them less likely to switch to other brands because of the time and effort it would require. The company has massive economies of scale. Its iconic brand continues to give it pricing power, which I expect to endure.

Its price-to-earnings ratio of 32 is not cheap. But I don’t think it’s expensive given my confidence that Apple can keep increasing its earnings in coming years. I’d be happy adding the company to my portfolio at that price. I don’t know if Apple will ever reach a $4tn valuation, but if it does I don’t want to be kicking myself for having missed an opportunity.

Christopher Ruane has no position in any of the shares mentioned. 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.

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UK’s inflation has been a topic of concern for a few months now. The economic impact of last year’s sudden shutdown is evident now. And the inflation rate rose to 5.1% in November, its highest since 2011. With the FTSE 100 down 1.1% in the last week and the UK reeling from the Omicron spread. Is there any way for investors to navigate this treacherous post-pandemic market?

Historic data shows us that some sectors are relatively ‘inflation proof.’ By combining this data with shares that offer a healthy dividend, I think I have a winning combination of security and steady income that could potentially stabilise my portfolio during inflation. 

Cheap mining share

Rio Tinto (LSE:RIO) stock is up 8.8% in the last month and is currently trading for 4,848p at the time of writing this article earlier today. But it still looks very undervalued to me given its profit-to-earnings ratio of 5.5 times and the whopping 10.1% dividend yield. Here’s why I think the miner can be a good barrier to protect my savings during the UK inflation.  

Although a lockdown could dampen Rio’s sales, I think governments are better equipped to tackle Omicron. And I think construction efforts will continue without major disruptions. This is highlighted by the rising iron ore prices since mid-November, up 28.4% in a month. Also, investors and analysts often turn to commodities to during a period of higher inflation to counter the diminishing value of cash. And miners like Rio often see an increase in revenue with rising demand and prices. 

The rise of green tech is a major boost for Rio. The miner has an abundance of aluminium, copper, and lithium, all crucial in the manufacture of electric vehicles. And the ore prices of these three metals have risen steadily through 2021. 

But there are some issues that Rio has to tackle. Its Jadar mine in Serbia could make Rio a lithium superpower. But residents around the  project are calling for an environmental impact study, which Rio is yet to produce. Estimates suggest that 80,000 people could be affected by the operation. But the FTSE 100 firm is working on addressing concerns and I think it can continue its stellar growth in 2022. 

Inflation-proof share?

The UK’s housing sector has been on a roll lately, with property prices driven up by the increase in demand. And housing shares have historically performed well during periods of inflation. Real estate income could increase during inflation, and developers like Persimmon (LSE:PSN) stand to benefit.

The housebuilder‘s shares come with an incredible 8.5% yield at its current share price of 2,764p. And the company has an established supply chain and generates a lot of raw materials used in-house. This reduces the impact rising costs and could help the company maintain its above-average profit margins. Coupled with the large cash cache of £895m and zero net debt, Persimmon’s looks like a good option for my income portfolio.

The only thing that puts me off an investment in Persimmon today is the cyclical nature of the housing industry. We are at the end of a decade-long housing boom, and analysts expect a minor collapse soon. And with the economy looking turbulent, first-time buyers may think twice before investing in a new home.

But the FTSE 100 share still is an inflation beater in my opinion and I am watching it closely to capitalise on a drop in share price.

Suraj Radhakrishnan 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.

FTSE 250 incumbent Ashmore Group (LSE:ASHM) has seen its share price drop recently but FY 2021 performance exceeded forecasts. Should I add the shares to my holdings at current levels? Let’s take a look.

Emerging markets investment

Ashmore is an investment management firm with a focus on and over 20 years experience in emerging markets. The firm manages close to $100bn worth of assets currently.

Emerging markets are defined as economies between the stages of developing and developed. The emerging market phase occurs when economies see their most rapid growth, as well as their greatest volatility. Some examples of emerging markets economies right now include India, Mexico, Russia, and Saudi Arabia.

As I write, shares in Ashmore are trading for 294p, whereas at this time last year, shares were trading for 32% higher, at 434p. Emerging markets are usually hit hard by macroeconomic issues hence why the shares have dropped. Could current levels present an opportunity to buy cheap shares?

For and against investing

FOR: Ashmore’s most recent and past performance, prior to the pandemic, has been excellent. I understand the past is not a guarantee of the future but I use it as a gauge nevertheless. I can see that Ashmore’s revenue increased for three years in a row between 2018 and 2020. Coming up to date, Ashmore reported 2021 results in September which were promising against the macroeconomic backdrop. Revenue declined 9% compared to 2020 levels but profit increased by 28% and it maintained a good cash flow to support a robust balance sheet. Overall assets under management increased and a dividend of 16.9p per share for the year was declared.

AGAINST: When macroeconomic shocks occur, such as a pandemic and market crash, emerging markets can be the most volatile. This is the reason why 2021 performance was less than in 2020 but still exceeded forecasts. Increased volatility is not every investor’s cup of tea and some prefer safer investment opportunities and vehicles.

FOR: At current levels, Ashmore looks cheap with a price-to-earnings ratio of just nine. In addition to this, the FTSE 250 average dividend yield is close to 2%. Ashmore’s is twice this amount, at over 4%, which means I would make a healthy passive income if I were to buy shares. It is worth noting that dividends can be cut or cancelled entirely, however.

AGAINST: The continued implications of the pandemic and macroeconomic issues such as rising inflation, rising costs, and supply chain crisis will put pressure on emerging markets even more than on developed economies. This could result in less returns and progress for Ashmore which could put investors off right now.

FTSE 250 opportunity

Right now I would happily add Ashmore shares to my holdings. I am always on the lookout for a diversified portfolio and Ashmore gives me access to emerging markets. It has a good record of performance and I believe longer term it will return to these levels once macroeconomic issues settle down. I understand I would need to be patient but I invest for the long term anyway.

At current levels, Ashmore is cheap and provides a passive income too, which is a bonus. I am expecting some volatility as this is par for the course with emerging markets economies. I think it is a good FTSE 250 opportunity for my portfolio.

Jabran Khan 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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In a move that surprised a fair few people, the Bank of England decided to raise interest rates today. The increase was from 0.1% to 0.25%. Although this isn’t a huge rise, it’s more about the fact that a hike actually happened. Given the outlook from the Omicron variant in recent weeks, I for one thought that the committee would decide to sit on their hands. However, with a rate hike now announced, what will the move mean for the FTSE 100?

A move lower for the FTSE 100

The initial reaction of the FTSE 100 was to fall. However, there are a couple of things worth noting. First, it only fell about 30 points, from 7,265 to 7,235. Second, the market was already up over 1% on the day before the decision came out. Therefore, the overall positive mood of the FTSE 100 today clearly wasn’t really derailed by the announcement.

The fall after the announcement was expected, given that higher interest rates are generally negative for most corporates. The reason for this is that higher rates make it more expensive to borrow money. Given that most FTSE 100 stocks have debt of some form, servicing and issuing new debt will cost more. 

I think the muted reaction reflects the fact that the rate hike may be a negative, but is minor at this stage. A 0.15% increase shouldn’t be the end of the world for some stocks. However, with the potential for more hikes next year, I feel that as an investor, I need to think ahead and be careful in the shares that I might buy.

Winners and losers from a rate hike

Given that the meeting was the main event for the FTSE 100 today, I can look at the top gainers and losers to see the impact. For example, in the top five gainers today are Lloyds Banking Group, Barclays and Standard Chartered. These banks actually stand to gain from an interest rate hike. This is because it lifts the net interest margin, a key metric for profitability. The higher the base rate, the bigger the buffer that can be built in to the spread between the rate charged for lending versus that paid out for deposits.

Also, Hargreaves Lansdown shares are up almost 6% on the day. Part of this uplift could be down to the rate hike, in my opinion. Volatility in the market is good for the broker, as it’ll likely coincide with higher trading from customers buying and selling stocks.

In terms of losers, those with high debt-to-equity ratios have struggled to post gains. Yet there aren’t any large share price falls so far today from the announcement. As mentioned above, this is likely due to the fact that the hike was relatively small. 

Key takeaways

The volatility in the FTSE 100 on Thursday shows that paying attention to macroeconomic events is very important. Based on the meeting today, I’m considering increasing my allocation to financial stocks, and will check the outstanding debt levels of other companies.

Jon Smith has no position in any share mentioned. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, Lloyds Banking Group, and Standard Chartered. 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.

There’s a lot of uncertainty in the air at the moment. Aside from the annoyance of cancelled plans in the festive season, I think many have the view that we could be in for a tough winter. Omicron is spreading quickly, and could make it hard for the UK economy to operate anywhere near full blast in the coming months. When looking for defensive dividend stocks to help protect myself against another downturn, here are two that are on my radar.

Sweet as sugar

The first one is Tate & Lyle (LSE:TATE). The FTSE 250 food producer currently has a dividend yield of 4.8%. Over the past year, the share price is down 1%.

The company has done well financially, shown in the H1 results released last month. When excluding the discontinued operations, revenue was up 19% and profit before tax was up 20% on the same period last year. 

What appeals to me about the dividend stock is the robustness of performance within the main food and beverage division. Its core ingredients, such as sweeteners, are good base materials for a variety of uses for consumers. Therefore, even if we do see a recession in the UK, I wouldn’t expect demand to fall that much.

In terms of risks, the business is going through a transformation. It’s discontinuing some operations in North and Latin America. I think this could be a good thing in the long term, but a smooth transition with offloading businesses is never easy. This makes it a risk in the immediate term.

An alternative banking dividend stock

When most people look for a dividend stock within the banking space, many choose the FTSE 100 heavyweights. However, there are others that I think sneak under the radar. For example, Investec (LSE:INVP). The Anglo-African bank has a dividend yield of 4.84% and has seen its share price double in the past year.

I think the bank is a recession-hardy option for a couple of reasons. Firstly, it isn’t just concentrated on business in the UK. In the H1 2021 results, the South African arm made adjusted operating profit of £191.9m, contrasting to the UK and other markets at £133.8m. Therefore, if we get a recession in the UK, the business can try to offset this revenue hit from other areas.

Secondly, the banking space has been. able to cope with a pandemic hit. Although it offered short-term pain last year, most banks have bounced back really well. Therefore, I think investors will note this should we see a similar Covid-19-induced crash again.

One point that is worth noting is that I’m not entirely comfortable taking on exposure to South Africa. Although it acts as a good diversifier for revenue, the political and social unrest is something of a concern to me.

Overall though, I’m considering buying the shares of both companies mentioned above. I think the dividend stocks can offer me good income, even if we do see another recession in the UK.

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.

I think the BP (LSE: BP) share price looks undervalued, but it is challenging to determine how much the business could be worth five years from now. 

I think three scenarios could impact the company’s valuation and market value over the next couple of years. 

Three different scenarios

In the best-case scenario, oil prices will remain high over the next half decade. If it returns to $80 a barrel and stays there, the oil major has the potential to generate around $13bn a year in profits. 

This could be enough to support further share repurchases, balance sheet deleveraging, and investment in renewable energy. If this scenario develops, I think the stock could potentially double in value. 

Indeed, the BP share price is trading at a forward price-to-earnings (P/E) multiple of around 6.5. That is around half of the broader market average. If it continues to return significant amounts of cash to investors and invests for the future, I reckon the market will re-rate the stock to a higher multiple. 

In the base-case scenario, oil prices will trade between $50 and $70 a barrel. It has traded within this range for much of the past two years. In this scenario, BP still has the potential to generate billions of dollars in profits every year, but it might not be able to return as much cash to investors as it may like. 

Although it could take longer, I still think the company’s valuation will ultimately rise in this scenario. 

In the worst-case scenario, the price of oil will plunge to its pandemic lows. This scenario could unfold if the global economic recovery stalls, or oil output surges. 

In this situation, I think it is likely BP’s profits will evaporate. The company will struggle to cover its dividend, and future investments in renewable energy will have to be pared back. 

The outlook for the BP share price

I think the most likely scenario for the company over the next couple of years will be something between the best- and base-case scenario.

The price of oil will remain at, or near, recent highs, and I think management will look to return significant amounts of cash to investors. 

Still, there is no guarantee the market will re-rate the stock to a higher multiple. BP needs to convince investors it is preparing for the future with renewable energy assets. That could take longer than a couple of years. On its current roadmap, the group wants to quintuple wind and solar energy generation by 2025.

The market is doubtful the company can hit this target. But if it can, it could be an excellent boost for the stock as the corporation proves it is serious about its green energy ambitions. 

Considering all of the above, I would be happy to buy the stock for my portfolio for the next five years. 

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.