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BT (LSE:BT.A) shares have experienced a roller-coaster ride so far this year. At current levels, the BT share price looks tempting, so should I add the shares to my holdings? 

BT share price roller coaster

The BT share price is currently trading for 166p. At this time last year, shares were trading for 137p, which means the shares are up 21% over a 12-month period. The past six months has seen the shares dip by 19% from 205p in early June. At current levels, BT shares are trading at similar levels prior to the market crash but overall the shares have been on a downward trajectory for a number of years.

I believe the BT share price has been on a downward trajectory in recent years due to poor performance related to restructures, as well as increased competition among other things — but more on that later. At current levels, BT shares sport a price-to-earnings ratio of 17, which could be considered a bargain for a company so crucial to the UK’s communications network.

For and against investing

FOR: BT is currently undergoing a major restructure which will see it return to focus on its core business model. This will involve investing and focusing on its telecom networks and fibre internet connectivity for example. A positive to come from the restructure was the recent addition of Adam Crozier as an independent non-executive director and chairman. He has a history of turning around ailing firms, ITV being a recent example.

AGAINST: BT has tried to restructure and re-focus in the past. Approximately five years ago it decided to try new markets and products which led to the entry into the TV market. An example of this not working so well is its BT Sport model which saw it engrossed in a bidding war for many of sports top attractions. It could be argued it overpaid for some of these TV rights. BT has been in discussions with streaming company DAZN to sell its BT Sports arm. Things haven’t worked out in the past so I must be wary of BT repeating the same mistakes.

FOR: A half-year trading report announced last month showed signs of longer-term recovery. Revenue was slightly down but profit was up. Operationally, BT confirmed it continues to cut costs to save £1bn as part of its streamlining and restructuring. This target has been met 18 months early. Crucially, an interim dividend of 2.31p was declared. This is good news for investors as last year it had to cancel dividends.

AGAINST: The broadband and fibre connectivity market is more saturated and competitive than ever. BT faces a fight on its hands to return to being one of the most trusted telecoms providers in the UK. To make things worse, it has a lot of debt on its books which could hinder progress and performance.

My verdict

I can see the longer term potential in BT’s new direction and refocus on its core business model. The BT share price at current levels is tempting but there are too many negative factors putting me off. Yet another restructure and lots of debt worry me. Right now I will avoid BT shares 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.

2021 has been both good and bad for the stock markets. In the first part of the year, the momentum seen after vaccine development carried the markets along. However, in the last few months, there has been a lot of uncertainty. Still, many stocks have been able to sustain at least some gains from the past year. Unfortunately, the FTSE 250 cinema operator Cineworld (LSE: CINE) is not one of them. The stock is down by a whole 30% from the year before!

What’s up with the Cineworld share price?

After rallying to a high of 122p in May this year, the Cineworld share price has come crashing down back to penny stock levels. It has lost more than half its value from May’s highs and is now trading at 45p. The stock has slid down in value over the months, but the past month has been particularly bad for it. It has lost 34% of its value since!

This drop is unsurprising, though. It is a classic recovery stock, which is hyper-sensitive to any Covid-19-related developments right now. And since the Omicron variant has brought some bad news with it, the Cineworld stock has tanked. In fact, this is true for other recovery stock as well. In another article today, I talk about FTSE 100 travel stocks, which have suffered a similar fate in the past month. 

Why I’m hopeful for the penny stock

But I am quite hopeful about the stock’s prospects for exactly this reason. When a stock fluctuates a lot, it is as likely to run up as to crash. So if the news flow were to turn positive again, I reckon it could rise back up. And I say this as an investor in the stock, with real money on the line here. Of course in the meantime, it is a test of patience for investors like me, because pandemic-related uncertainties have stretched for almost two years now. 

At the same time, I think there is more reason to be hopeful now than not. For one, there are no lockdowns in Cineworld’s biggest markets of the US and UK, at least not yet. Both countries appear more inclined to tackle the latest variant through booster shots than restrictions. So, let us see if there is a hit to the company’s business again. Even if there are lockdowns, they are unlikely to last as long as they did earlier, given both the severity and extent of the situation so far. 

What I’d do now

I also like to check analysts’ forecasts for stock prices to get a better sense of the mood around the stock. And in this case it is unanimously bullish. On average they expect a 93% rise in its share price as per Financial Times data. I have already bought the stock, but if I had not, I would buy some now. There is of course still risk to it, because we do not know how long the pandemic would stretch out. But at the same time, I would invest some being fully aware of the risks, given the potential upside to the stock.

Manika Premsingh owns Cineworld Group. 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.

As some markets have touched record highs in recent months, many investors have become sellers rather than buyers. But I continue to see some shares whose long-term prospects I like so much I consider them potential shares to buy now for my portfolio.

Let’s imagine I had £20,000 to put to work in the stock market today. If I was looking for a mixture of growth and income potential from blue chip names, here’s how I might do it. I would diversify across five sectors to reduce my risk, putting £4,000 into shares of a leading company in each one.

Digital giant: Alphabet

One of the ways I sometimes first become aware of businesses I could invest in is through using them as a customer.

Like many people, one company I interact with many times a day as a customer is Alphabet (NASDAQ: GOOG), the parent company of Google. The internet giant is ubiquitous in many people’s daily lives. From search to email, Google is the front page of the internet for hundreds of millions of users worldwide.

I think that has helped it build a level of customer loyalty that should help Alphabet remain profitable for decades to come. Its business model of selling targeted adverts is highly lucrative. But Alphabet has evolved into a diverse set of revenue streams, so that it is not purely reliant on ad income. With profits last year of $72bn, it is hard to remember that the company is little over a couple of decades old.

I like Google shares as an idea for my portfolio because I see them as a sort of royalty on future internet use. In the long term, I expect internet use to keep growing substantially. With its huge user base and proprietary technology, Google is set to continue being a key beneficiary. If profits continue to rise over time I expect the shares to do well, even if there are bumps along the road.

There is a risk that Google could become less popular with younger users as some social networks have done, which could hurt revenues and profits.

Banking shares to buy now: Lloyds

I think a recent pullback in the Lloyds (LSE: LLOY) share price offers a buying opportunity for me.

Over the past year, the shares are up 27%, at the time of writing this article earlier today. I still think there is a long-term growth story here, though. As the UK’s leading mortgage lender, the company is well-positioned to benefit from ongoing strength in the housing market. It is also looking to expand its business lines. For example, it has set out ambitions to grow its own letting property portfolio. I think there is a risk that could distract management from its core business. But if it works out, it could well add to the company’s profitability.

I also expect good news on the company’s dividend in 2022. It has a growing cash surplus, at least some of which could be put to use by boosting the dividend in line with Lloyds’ progressive policy. But dividends aren’t guaranteed and any downturn in the economy is a risk for the bank. Higher borrower defaults could hurt profits.  

Consumer goods leader: Unilever

With an eye on the long term, another name on my list of shares to buy now for my portfolio is Unilever (LSE: ULVR).

The consumer goods company owns popular brands from Dove to Hellmann’s. I like its broad portfolio of premium brands, which gives it pricing power. I also like the fact that it is highly exposed to a full gamut of markets. It does a lot of business in developing markets like India and Indonesia, as well as developed ones. That brings a risk that when there are economic downturns, revenues may fall. But it offers the benefit that, as more people worldwide increase their disposable income, Unilever can benefit from some of their spending.

For several years, the company has underwhelmed investors. In the past year, for example, the Unilever share price has slipped 8%. Some of the reasons for underperformance remain as risks. For example, rampant cost inflation could lead to lower profit margins. But I see the price fall as an opportunity to pick up a quality blue chip company for my portfolio at a more attractive price than before.

Energy titan: ExxonMobil

There’s a lot of discussion about future energy demands. No matter what may happen, one of the companies I reckon should keep doing well is energy giant ExxonMobil (NYSE: XOM).

I don’t think oil demand will disappear any time soon. In fact, unlike many commentators, I don’t even expect it to decline. While some customers may switch to alternative energies, the global customer base keeps increasing with population growth. I think that will compensate for some customers abandoning oil. With its huge operations and recent efforts to lower production cost per barrel, Exxon should keep pumping profits from its oil wells for decades. It also has a large natural gas business which I think has a promising future.

On top of that, if alternative energy really does become a big thing, I think the company’s expertise will stand it in good stead to develop a strong market position.

Energy pricing is cyclical, so the Exxon share price can be volatile. I like its income prospects, though. Having raised its dividend annually for over three decades, the iconic company currently offers a 5.7% yield.

High yield tobacco: British American Tobacco

I’d also buy British American Tobacco (LSE: BATS). The owner of famous tobacco brands including Rothmans, Camel, and Pall Mall pays a yield of 8%. That makes it one of the juiciest income shares right now in the FTSE 100.

There’s clearly a risk here. As cigarette use declines in many markets, it could hurt both revenues and profits at the company. But I think the yield helps to compensate me for that. The company has been developing non-cigarette products, including vaping and heated tobacco. They could help it grow revenues in coming years. Last week, it guided the market to expect revenue growth of over 5% for the year, adjusted for currency fluctuations. With its broad portfolio and iconic brands, BAT makes my list of five blue chip shares to buy now for my portfolio and hold for the long term.

Christopher Ruane owns shares in ExxonMobil, British American Tobacco and Lloyds Banking Group. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), British American Tobacco, Lloyds Banking Group, 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.

Legendary investor Warren Buffett is known for his outstanding investment track record. But unlike rivals at top investment firms, he doesn’t have hundreds of analysts working for him. Buffett doesn’t use complicated algorithms to identify shares to buy for his portfolio.

In fact, the investor uses a couple of techniques to find investments that I think anyone can use when looking for shares to buy. That includes me.

Asking people for suggestions

Over the years, Buffett has repeatedly asked people for suggestions about shares or businesses he ought to buy.

That comes out in his annual shareholders’ letters, where he lays out specific criteria he considers when looking for businesses to buy. Buffett has even included a specific request for people to contact him if they are selling a business they think meets his criteria. It has also informed his approach when it comes to repurchasing shares in his company, Berkshire Hathaway. Again, Buffett has appealed directly to potential sellers of large stakes to contact his company directly.

In other words, Buffett is not too humble to ask for others’ help in finding things to buy. In fact, one might say that he actively encourages it.

As a private investor, how can I apply a similar approach? I can ask other people for suggestions on shares they think are worth looking at. Now, that doesn’t mean that they will be good for me. Other investors’ criteria and needs may be different to my own. But eliciting investment ideas from other people could help broaden my own thinking. Even if I don’t end up investing in any of them, it could help me deepen my knowledge of the market. That would enable me to keep re-examining my own investing ideas from a fresh perspective.

Warren Buffett reads a lot

One of the main ways Buffett has come across investment ideas over his long career is through reading. From investment articles to financial reports, Buffett reads – a lot. In fact, reading is the activity that takes up most of his working day.

How does that help him get investment ideas? It fills gaps in his knowledge and inspires him. Buffett sometimes reads about companies for decades without investing in them. That means that, if he does decide to buy their shares at some point, he is doing so with a very deep knowledge of the company’s historical performance. These days it is easier than ever to read a lot of financial information online, often for free. I am applying Warren Buffett’s approach to my own hunt for investment ideas, reading widely and regularly.

Applying the lessons

I may never have the investing success Warren Buffett has enjoyed. But that doesn’t mean I can’t benefit from applying some of the principles of his approach.

Looking for more information on investment, especially from a diverse range of viewpoints, could help me become a more considered investor. Whether it’s staying in touch with other investors about their ideas, or reading about companies in which I have some interest, I think Buffett’s approach could helpfully inform my own.

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.

There are lots of passive income ideas. Not all are created equal – or even vaguely equal. One of my favourite passive income ideas is investing in dividend shares. But not everyone understands dividend shares, or their potential to generate extra money for their owners. Here are three reasons I like them.

1. World class businesses

If I put money into a bank account, I basically receive the payment the bank is getting from other customers to borrow it, minus the bank’s cut. In a competitive financial services market with low interest rates for now, that means that my likely passive income will be fairly meagre.

By contrast, investing in dividend shares allows me to benefit from large, well-established businesses generating substantial profits. An example is British American Tobacco. One of the leading tobacco business globally, its shares currently yield 8%. In other words, if I invested £1,000 today, I would expect to receive £80 in dividend income annually.

Now, there’s a risk that won’t happen. Dividends aren’t guaranteed and as cigarette use falls, so might profits at British American Tobacco. But by diversifying my passive income streams across a number of shares, I seek to benefit from the business expertise of successful companies. I expect that to offer greater possible returns than bank interest.

2. In and out

I am an investor, not a speculator. So I don’t try to move in and out of shares quickly. Instead, I aim to choose companies I think have strong long-term potential. I then buy them in my portfolio to hold.

However, that doesn’t mean I never sell. Of course, circumstances can change and a company’s outlook can vary from one year to the next. If I set up my own business to generate passive income, moving in and out of it might not be so easy. Even if the idea was truly passive, it would likely take me time and effort to establish it. Then, if I wanted to exit it, I would need to find a buyer if I wanted to try and recoup my investment. 

With shares, by contrast, the start-up time is minimal — and that’s also true when I decide to end my investment. I can put funds into a share on the same day I decide I like it. Equally, when I think it’s time to sell, I can move to action immediately.

3. Passive income and business education

Owning dividend shares enables me to get income without working for it. But that doesn’t mean I never spend time developing my passive income ideas.

I tend to take time to read up on companies’ performance when assessing what the right opportunities for me as an investor might be. Over time, that reading can help me learn not just about the specific firm. It can also give me a growing education in business and finance generally. It’s not an MBA, that’s true. But it’s still a free, practical education based on real-life businesses. For my personal development, I think that can be very helpful.

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

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Share prices have inevitably had to weather a number of storms during the Covid-19 pandemic, and this has been particularly true whenever new variants have developed. In recent weeks, news stories have revolved around the new Omicron variant. While it is possible that this variant is milder, it does appear to be more transmissible and it has certainly dented share prices. As the Omicron variant progresses, I hope that these three cheap UK shares will help me weather the storm. 

Looking back to the Alpha and Delta variants and the impact on the market, however, I believe I can purchase shares that will limit downside risk to my portfolio. Just Eat Takeaway (LSE: JET), the food delivery company, is an option whenever there is a remote chance of tighter restrictions – because people will have to order food to the house instead of going out to dinner. This is reflected in the order growth from 2020 to 2021, increasing 66% in the UK and 41% overall. Technically, the JET share price benefits from lockdown news and retreats when lockdowns come to an end; JET stock dropped 12.8% when the first lockdown ended in June 2020. However, New York City has capped commissions since August 2021 and the share price has been continually trending down. For me, this company is not without its risks, but the low price is why I think this is a good addition to my portfolio.

Another stock I’ll be watching closely is Fresnillo (LSE: FRES), the silver mining company operating in Mexico. The Q3 report showed lower silver and gold production and highlighted the possibility of mining being impacted by Covid-19, thus demonstrating that operations may be interrupted at certain times in the future. Nonetheless, interim earnings were up 59% and the dividend was increased in August 2021. I am also interested in this stock because silver can be a safe haven in times of crisis, reflected in the share price that has retraced 76.4% from its Autumn 2020 highs during arguably the toughest part of the pandemic. Recent price action shows a tentative uptrend support line, which will need to hold the price at a future point to be confirmed. 

Finally, Scottish Mortgage Investment Trust is an interesting stock to consider for wider exposure to tech companies. Its performance during pandemic times is nothing short of extraordinary, with around a 300% increase in share price since April 2020. This is a reflection of how well the tech sector has performed, but I will be looking in detail at its holdings before I make any purchases. While the holdings are geographically diverse, spanning the US and China, there are certain stocks included in the Scottish Mortgage Investment Trust that I will be checking out to make sure they do not negatively impact the share price, like Tesla and Meta.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Andrew Woods owns shares in Just Eat Takeaway. The Motley Fool UK has recommended Fresnillo and Just Eat Takeaway.com N.V. 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 Paypal stock price has tumbled 40% from its July $310 high. Notably, this is the largest drop the fintech company has suffered since going public in 2015.

While many growth stocks have suffered similar trends this year, the Paypal stock is standing out for me as an intriguing buying opportunity. So should I add the stock to my portfolio today?

How the bears took control

What’s behind the Paypal stock price almost halving? Primarily, the company’s third-quarter earnings report was disappointing. Not only did it miss on revenue and earnings expectations, its guidance for FY2022 was underwhelming.

The company, long synonymous with eBay, is in a transition phase. This almost two decade long partnership has come to an end. Indeed, this is one reason for revenue and earnings growth slowing. Additionally, management cited fiscal stimulus ending and global supply chain issues as factors impacting the top and bottom line.

Another bearish element revolves around the growing ‘buy now pay later’ (BNPL) market. This year, Amazon and Affirm have partnered, giving Amazon customers the opportunity to split up the cost of applicable purchases into multiple payments. In addition, Block (formally Square) rocked the fintech world when it agreed to acquire ‘buy now, pay later’ provider Afterpay. Add to the mix Klarna aggressively growing its footprint in North America and Europe. Consequently, Paypal’s BNPL product is merely one of many.

But the Paypal stock price has never had a period quite like this and the chart below puts the last few months into perspective.

Paypal stock bull case

I sympathise with the bear case. Indeed, thinking short term, I would expect a bumpy ride and potentially more pain for Paypal shareholders. However, long term I see a lot to be excited about.

Firstly, Paypal may have split from eBay but it has expanded and deepened a number of exciting partnerships. Teaming up with Amazon to enable US customers to pay with Venmo at checkout is particularly exciting. Its also built relationships with Walmart, Booking.com, and Asos. There may be concerns over growing competition but Paypal boasts to be the most accepted digital wallet. Impressively, over 75% of the top 1,500 largest North American and European merchants offer Paypal at checkout.

Secondly, and unlike Square, Paypal didn’t need to make a big purchase to release its BNPL offering. Instead, it built it in house, making it available in Australia, France, Germany, the UK, US, Spain, and Italy. It has, however, made an interesting acquisition of Paidy to try to crack Japan, the world’s third-largest e-commerce market. There is huge growth potential here and not only because of its size. In Japan, 70% of digital commerce is still paid for by cash upon delivery.

Weighing it all up

While I don’t consider Paypal stock to be cheap, it has history of growing revenue and monthly active users. With the deals and relationships made over the last year, I expect growth to continue. Paypal could even be an inflation hedge as higher prices should increase revenues from processing payment volumes. I’m also interested to see how Paypal’s moves into cryptocurrency and rumours of a stock-trading platform acquisition develop. All things considered, I see this as an alluring long-term opportunity for my portfolio.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Nathan Marks owns Amazon. The Motley Fool UK has recommended ASOS, Amazon, Block, Inc., and PayPal Holdings. 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.