As an owner of housebuilder shares I find the steady stream of news coming from the homes market very exciting. Halifax claimed on Tuesday that property prices in the UK leapt at their fastest rate since 2006 in the three months to November. It’s perhaps no surprise then that builders like The Berkeley Group (LSE: BKG) have been busy hiking their earnings predictions recently.

In fact, that Halifax report suggests that Berkeley — which specialises in building homes in London and the South East — could be a particularly attractive housebuilder to buy. It showed that price growth of apartments is outpacing that of houses right now. Between September and November the average flat price jumped 10.8% year-on-year, while the average detached property gained 6.6% in value.

This bodes well for developers like Berkeley that build apartment blocks in the congested capital city. In fact, the FTSE 100 housebuilder’s latest financials illustrate how strong the London market is today.

Profit forecasts hiked again

Berkeley said on Wednesday that revenues leapt 36.3% in the six months to October. They clocked in at £1.22bn versus £896m in the same 2020 period. This in turn propelled pre-tax profit to £291m, up 26% year-on-year from £231m reported previously.

Berkeley said it’s benefiting from “a resilient sales market” and from its decision to concentrate on London and the South East, regions it describes as “the country’s most under-supplied housing markets”. The FTSE 100 firm also lauded the earnings visibility that its portfolio of 64 ‘live’ building projects provides.

As a consequence, Berkeley lifted its profits predictions once again. It reckons earnings for the financial year to April 2021 will now beat its earlier forecast by 5%. Berkeley added that it expects pre-tax profits to grow 5% each year over the following three financial years. This will be delivered by the company increasing build rates by 50% versus pre-pandemic levels, it said.

BIG FTSE 100 dividend yields!

Berkeley’s share price has risen 4.5% in midweek trade following the release. Broker commentary around the results has matched the upbeat reception from investors too.

Steve Clayton, manager of the HL Select UK Growth Shares fund, pointed  out that Berkeley is “sounding confident” and noted that the business is stepping up its land-buying efforts accordingly. He noted that “historic investment into land acquisition, at times when others have been wary or unable to commit, has left the group with a clear growth runway ahead… built around the predictable delivery of future developments at attractive margins”.

I share the Hargreaves Lansdown man’s positive take on today’s news. Though I’m also wary that businesses like Berkeley face considerable margin headwinds as building product and labour shortages push up costs.

All things considered, I think Berkeley is a highly attractive buy. And especially as additional earnings upgrades could be around the corner. Today the builder trades on an undemanding forward P/E ratio just below 13 times. It also sports a mighty 5.5% dividend yield at today’s price around £48.40. I’d buy this FTSE 100 stock today and look to hold it for years.

Royston Wild owns shares of Barratt Developments. The Motley Fool UK has recommended Hargreaves Lansdown. 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 Centrica (LSE: CNA) share price has risen by more than 40% so far this year. The owner of British Gas is finally starting to win back investor confidence.

Centrica shares are still more than 65% lower than they were five years ago. But I think there are good reasons to be confident about the outlook for the business over the next few years. I’ve been taking a fresh look at Centrica to see where I think the stock could be in five years’ time.

British Gas is set for growth

Chief executive Chris O’Shea took charge of a business with too much debt and too many moving parts. These problems have now largely been fixed, with the sale of the Direct Energy business in the US and the company’s North Sea oil fields.

The main part of the business remaining is British Gas, which has a strong focus on UK consumers. The last few years have been tough for the UK’s largest energy supplier, as it’s been undercut by smaller rivals offering cheap fixed price deals.

However, the failure of more than 20 of these rival suppliers over the last year has changed the picture. British Gas has picked up more than 400,000 new customers from failed firms. I think its prices will be more realistic and competitive in the future, as unsustainably cheap deals have been removed from the market.

Alongside this, I expect British Gas to increase sales of services such as boiler replacement, air source heat pumps, home emergency cover and smart security products. These services are generally more profitable than selling electricity and gas, so they should help to lift Centrica’s profits.

Centrica share price: where next?

Centrica shares traded at over 200p five years ago. But Mr O’Shea’s changes have left the group a smaller business than it was. Some problems remain too — not least the company’s £1.5bn pension deficit, which will require £175m in annual payments from 2021 to 2025.

What might Centrica shares be worth in five years’ time?

Broker forecasts suggest that the group’s free cash flow — a surplus cash produced each year — could rise to around £700m over the next couple of years. My guess is that progress might slow after this, but if Mr O’Shea’s plans are successful, I reckon a figure of £750m looks reasonable by 2025.

The last time Centrica produced this much free cash was in 2018. At this time, the share price was around 150p. I think that’s a reasonable estimate today.

However, one risk I’d flag up is that the company’s reduced dividend could hold back progress. Back in 2018, dividend cover had fallen to just one times earnings. This resulted in a tempting 7%+ dividend yield.

Mr O’Shea is expected to keep dividend cover at around two times earnings. This is a sensible move, in my view, but it means that payouts will be smaller, even if profits return to historic levels.

As a result, the dividend yield is likely to be much lower. This might deter some investors, but even so, I think Centrica shares could do well over the next five years. I’d certainly consider buying the shares for my portfolio at current levels.

Roland Head 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 is no doubt about the fact that some some sectors have fared far worse than others during the pandemic. One of them is hospitality. Covid-19 restrictions meant that bars and restaurants were open only for a limited amount of time. As a result, many of them are yet to see their financials get back to pre-pandemic levels. But this restaurant group, which also happens to be a penny stock, is an exception. 

Fulham Shore’s impressive results

I am talking about the AIM-listed Fulham Shore (LSE: FUL), which owns brands like Franco Manca and Real Greek. The UK based company owns 74 restaurants at present and in its latest results statement, has mentioned that it has plans to open up 21 more. This in itself is an achievement, in my view, at a time when many restaurants are still struggling. And there is more to like about it. 

The company’s performance for the six months ended 26 September 2021 was impressive. Its revenues more than doubled from the same period in 2020. And it even swung back into post-tax profit, compared to a loss suffered last year. I find this particularly encouraging considering that 2021 has also been a hard year for restaurants. As Fulham Shore said, it operated with no Covid-19 restrictions for only 10 of the 26 weeks of this latest half-year. Further, even if we consider that 2021 has still been comparatively better than 2020, the fact is that despite restrictions, its revenues are still 10% higher than the same six months in 2019. 

The company also has a positive outlook and it has seen revenues in October and November higher than those during the corresponding months in 2019. It now expects to perform ahead of both management’s and market expectations for this year. And it has expansion plans for the next year too. 

Strong share price performance

Its share price performance so far has also been encouraging. Even though recently it has moved sideways, over the past year, the stock is up almost 70%. Much of the increase was seen starting with the stock market rally of November, 2020. And the stock was broadly rising until September this year. But I reckon the fact that the last few months have been a bit challenging for broader stock markets has impacted it too. I think there is a possibility that after its good results, the company’s share price could start inching up again. 

My takeaway

Of course the spread of the Omicron virus could slow down the upward climb. It has created much uncertainty, which is more likely to impact the likes of restaurant stocks than others. Also, the company has not been consistently profitable over the past few years, which is something to be cautious about. Still, for now, it appears to be in a good place. And if the recovery continues, I feel this would be among the penny stocks to make a good portfolio addition for me in 2022. 

Manika Premsingh 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.

When I am looking for FTSE 100 shares to buy for growth, I focus on companies that are benefiting from significant industry tailwinds.

These could be anything from technological change to shifting consumer sentiment. Or, in the case of Berkeley Group (LSE: BKG), an undersupplied UK housing market. 

Shares to buy for growth

The country needs to build more houses, and Berkeley is rising to the challenge. It wants to increase its housing output by 50% for the 2024/25 financial year.

To this end, the group has some 7,000 plots on sites it is currently advancing that it anticipates will come into land holdings by the end of the next financial year. On top of these existing plots, these new developments take the company’s overall estimated future gross profit from land holdings to £7.5bn. 

As well as jacking up its output, the company is also increasing returns to investors. It is looking to return £2.52 per share annually until September 2025. It has also been repurchasing shares and will continue to do so until September 2022. 

Based on the company’s growth plans and cash return potential, I would be more than happy to buy this FTSE 100 homebuilder from my portfolio today. 

Challenges it could face as we advance include rising costs and planning constraints. These could limit the group’s ability to hit its output targets and reduce profitability on homes constructed if costs rise significantly. The supply chain crisis could also delay the development of new properties. 

FTSE 100 retailer

Over the past two years, Ocado (LSE: OCDO) has really come into its own. Demand for the company’s services has exploded as consumers are shopping online more and more. 

According to its latest trading update, customer acquisitions hit a record of 64,000 in the 13 weeks to the end of August. Orders per week increased 22% although, due to tough comparisons with last year, overall revenue declined marginally by 1.8%.  

It has also benefited from its agreement with Marks & Spencer. Demand for the retailer’s food through Ocado’s platform has exceeded expectations, providing a windfall for M&S and its joint venture partner. 

One of the biggest challenges the company has had to deal with in recent months is a fire at its warehouse. This took a significant chunk out of revenue, as the group could not process 300,000 customer orders. This kind of infrastructure disruption is the most significant risk to Ocado’s growth. It is something I will be keeping a close eye on going forward. 

Even after considering this factor, I am incredibly encouraged by the group’s recent growth and forward growth potential.

Management has been working flat out to increase capacity to meet the rising demand for Ocado’s services. These expansion efforts are expected to deliver strong revenue growth in 2022. On that basis, I would buy the company for my portfolio of FTSE 100 recovery stocks. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado 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.

The stock market has enjoyed a bit of a rally these past few days as new data shows existing vaccines should be effective against the Omicron variant.

However, with infection rates trending to all-time highs, speculation is emerging of another round of UK lockdowns in January next year. If that were to happen, the recent stock market rally could quickly be reversed.

Early 2020 serves as a good preview of what 2022 lockdown restrictions could mean for investors. But assuming the worst comes to pass, which stocks are the best to buy now to protect my portfolio?

I’ve spotted one business that might not only be able to survive the storm but also thrive in it. Let’s take a look.

Takeaway ready and waiting

Despite being stuck at home last year, it seems a large portion of the British population weren’t too keen on cooking their own meals. This is evident when looking at the various food takeaway services which saw massive spikes in order volumes throughout 2020.

After restrictions started loosening, more people ventured back into pubs and restaurants. But the demand for takeout has remained elevated. And now that the probability of a January lockdown is on the rise, takeout may once again become the go-to dinner option.

One stock in particular that has caught my attention is Domino’s Pizza Group (LSE:DOM). This franchise chain profited from some significant tailwinds during the early days of the pandemic. While there were some initial disruptions, the company shifted its customers from collection-based ordering to delivery.

As a result, like-for-like system sales grew a respectable 10.3% by the end of the year, with net debt falling by around £61m and underlying profits also on the rise. Now with a Covid-ready operational structure in place, should the January lockdowns become a reality, Domino’s might be able to thrive even more than before. At least, that’s what I think. And it’s why Domino’s is on my best-stocks-to-buy list.

What could go wrong?

Even if a January lockdown doesn’t happen, Domino’s may still be able to thrive. Its continued strong performance throughout 2021 serves as evidence of that. However, just because it might be one of the best stocks to buy doesn’t mean it’s a risk-free investment.

The company is certainly not the only takeaway option. In fact, many restaurants deployed a takeaway service last year to get some revenue flowing when table dining was prohibited. And with more options available than before, Domino’s may struggle to attract a rapid rise in order volumes. Needless to say, this potential loss of market share would be bad news for its share price.

Best stock to buy for a January lockdown?

Despite the risks Domino’s faces, I remain optimistic about its share price potential. And having enjoyed its pizzas during last year’s lockdowns, I think it’s likely I’ll be doing the same in January, should restrictions return. Therefore, I am considering this business as a potential new addition to my portfolio.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Dominos Pizza. 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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Whatever happens with the pandemic over the next few weeks and months, 2022 will be a crucial year for the IAG (LSE: IAG) share price. After two years of disruption, rising losses and cost-cutting, the British Airways owner needs to get itself firmly back on track. Unfortunately, there is no guarantee the company this will happen. 

I think three different scenarios are likely to dictate the stock’s performance next year. 

Three different scenarios

In the best-case scenario, the global aviation industry will bounce back to 2019 levels next year. If traffic recovers to, or exceeds, 2019 levels, management will be able to start looking forward. It will finally be able to concentrate on rebuilding the business after the pandemic. 

For IAG, which relies heavily on the lucrative transatlantic and long-haul travel routes, a recovery in international travel will be the most crucial development for the company. 

While the number of travellers on domestic routes in the US and Europe has recovered substantially from pandemic lows, traffic on international routes is still underwhelming. In the best-case scenario, traffic on these routes will recover, which should power an earnings recovery. 

And if this happens, I think the market will re-rate the stock to a higher level if the company’s outlook improves considerably.

In the base-case scenario, the number of travellers will remain depressed at around current levels. As  IAG shares are already priced for this scenario, I think the reaction from the market to such an outcome would be relatively modest. 

Finally, the worst-case scenario is a return to March 2020 conditions. Government travel bans will force the aviation industry back into cold storage. If this happens, IAG may have to look to its investors and creditors to provide additional financing to keep the lights on. 

In this scenario, I think the stock could fall further in value. The overall decline will ultimately depend on the company’s financial position and if it has to raise additional capital. 

The outlook for the IAG share price

I think the base-case scenario is the most likely outlook for the stock next year. I think it is unlikely the world will shut down again, considering how much disruption the first set of lockdowns caused. 

However, this does not mean governments will do away with travel bans. It seems likely that these will remain the key tool in controlling the pandemic for the foreseeable future. While this might be good for the domestic hospitality sector, it is terrible news for international travel. 

As such, I am not expecting much from the IAG share price in 2022. Therefore, I would not buy the stock today. I think there are plenty of other opportunities in the FTSE 100 that offer better growth prospects. That is considering the challenges of the pandemic and growth prospects for the economy next year.

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.

After two years of disruption, many investors, including myself, will be wondering what is next for the Cineworld (LSE: CINE) share price in 2022? Indeed, I recently changed my opinion on the company after data emerged showing that consumers were flocking back to cinemas. 

Unfortunately, the company’s recent share price performance does not reflect this positive development. As such, I am wondering if the market will start re-evaluating the company next year. 

The outlook for the Cineworld share price

The way I see it, three possible scenarios could play out next year. The first is the most bullish, based on the continuing recovery of the UK economy and consumer confidence.

If the trends that have played out over the past couple of months continue into 2022, I think Cineworld will be firmly on the way to recovery. Rising sales and profits will allow the group to start chipping away at its debt, which should dramatically improve investor sentiment towards the enterprise. 

In the mid-ground scenario, the company will continue to bumble along at current levels of activity. The organisation will reduce losses, but profits will not be enough to make a meaningful dent in debt.

Without reducing debt, there will always be a risk that the business will have to tap shareholders for additional cash. Until the company deals with this risk, I think the stock will remain under pressure. 

The final scenario is the worst. Here, the economic restrictions that were in place at the beginning of the pandemic return. Cineworld is forced to close its theatres around the world again and rely on government aid to keep the lights on. 

I think there is a genuine chance the business could collapse in this scenario. Creditors are generally only prepared to support any company for a short period. If there is no end in sight to the restrictions, they may decide to pull the plug altogether. 

Moving forward

I think the most likely scenario for the company is somewhere between the most bullish and the base case. As I noted at the beginning of this article, data shows that consumers are returning to cinemas. However, I think it is almost certain that rising coronavirus cases will hit consumer sentiment.

Therefore, Cineworld’s growth, which was accelerating in October and November, may slow over the next few weeks. Sentiment may begin to improve again if cases decline in the first few months of the new year. 

As such, I am cautiously optimistic about the outlook for the Cineworld share price. That is why I would acquire the stock as a speculative purchase for my portfolio today. If consumer confidence continues to build in 2022, I think the company can make a good start at reducing debt and moving on from the pandemic.

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

In August, short-seller Boatman Capital launched an attack on the Argo Blockchain (LSE: ARB) share price. The short-seller criticised the company’s decision to pay $17.5m for 160 acres of land in Texas to construct a new Bitcoin mining operation.

Boatman argued that using a formal appraisal process and comparing the property to other blocks of land in the region, a more appropriate valuation would have been $168,000.

This week, Boatman has published another report. Since the initial statement was published, it claims other issues have come to light that raise further questions about Argo’s business strategy and corporate governance. 

Boatman’s accusations

The short-seller raised nine points in its report explaining its view on the company. In my opinion, the most important observation is that the firm has seen four of its five board directors quit this year. And the fact that its CEO is currently also interim chairman, which is a breach of UK corporate governance guidelines. 

Boatman also points out that the company has been leaning heavily on shareholders to fund ongoing business costs. The group has diluted shareholders by 52% this year. It has also relied on funding from junk bonds and a Bitcoin-backed loan (with an interest rate of 11.5%). 

Issuing new shares to fund capital spending projects is not that unusual. Many smaller companies follow this approach if they cannot fund spending from operations. 

But the downside of this approach is that it dilutes shareholders. For every new share issued, existing investors’ claim on the underlying business (and its profits) declines. 

Interestingly, Argo is asking investors for cash when it reported a mining profit of $9.6m in November. It also owned 2,317 Bitcoin, or Bitcoin Equivalent at the end of the month. 

The outlook for the Argo Blockchain share price

I think it is worth taking Boatman’s views on the company into account. It explains why the market is placing such a low valuation on the stock.

Despite reporting a mining margin of 86%, the stock is trading at a forward price-to-earnings (P/E) multiple of just 8.7. Peers in the sector command multiples of 20 or more. 

Whenever I have covered the company in the past, I have always made it clear that I believe the market will continue to view the business with scepticism until Argo can prove its worth. 

With profits growing and its mining expansion underway, I think the corporation is doing just that. 

As such, despite the accusations from Boatman, I would continue to buy the stock for my portfolio as a speculative investment. I think the company is one of the best ways to invest in the cryptocurrency sector, mainly due to its strong balance sheet and probability.

However, I will be keeping an eye on the risks outlined by Boatman. These could cause me to change my opinion of the business if they become problematic. 

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.

The world of penny stocks can be exceptionally alluring to investors. Watching a business’s share price explode by triple, or even quadruple, digits in a matter of months can lead to a substantial fear of missing out. Of course, this emotional trap probably ranks as one of the top catalysts to making poor investment decisions. But is there a way for me to filter out the duds?

Over my near-decade of investing experience, I’ve spotted two common traits that could indicate a stock price is on the verge of collapse.

Penny stock trap #1: undiversified revenue stream

As with any business, a better-than-expected earnings report is often a driver for explosive growth. This effect is only amplified as the market capitalisation gets smaller. Typically, securing new customers or contracts can be responsible for impressive returns. But while most investors are too busy getting excited by the hype, I sit back and ask a simple question – where is the money coming from?

All too often people focus on whether or not the top line is expanding and then end their enquiry there. But just because revenue is climbing doesn’t mean it’s sustainable. Take Novacyt as an example.

This young medical diagnostics firms hit the motherload when the pandemic reared its ugly head. By being the first company to produce a Covid-19 rapid testing kit, its revenues jumped 900%. Unsurprisingly, the share price followed suit, and the stock was up nearly 3,000% within nine months!

But for anyone who invested at that peak, their position currently has a -75% loss because the penny stock has since collapsed. As impressive as the surging revenue was, the vast majority came from a single contract with a single customer that later terminated its relationship. Since then, Novacyt has made good progress in slowly replacing lost income with new clients. And over the long-term, it may even return to its short-lived glory. But that may be little comfort to those nursing big paper losses on the shares.

Penny stock trap #2: the one-trick pony

Beyond needing a diversified client list, I look for businesses with multiple sources of income. Why? Well, suppose a penny stock’s current or future revenue depends on a single project. In that case, all it takes is for that project to fail, and the company could collapse. Investors of Helium One Global know this all to well.

This young mining group operating out of Tanzania focused on extracting helium. With demand for the element rising from the medical and aerospace industries, investor hype was on the rise after the firm announced it may have found up to 138 billion cubic feet of the stuff.

Between March and August earlier this year, the penny stock surged over 300%, only to collapse by the end of the month. Once again, late investors suffered a giant red mark in their portfolio.

What happened? This serves as a perfect example of a single-asset risk. Despite releasing promising early data, the firm discovered that the gas was of poor quality when drilling began. And, consequently, this flagship project became unviable. That’s understandably disappointing, but there remains a chance of a potential comeback. The group did discover reservoir potential in an unexplored region that may allow Helium One to continue its mission to become a global helium supplier over the long term.

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.