I’m searching for the best cheap UK shares to buy for my shares portfolio. Here are two bargains I’m thinking of buying right now.

Playing the online retail boom

The spread of Omicron poses a threat to stacks of UK shares as we move into 2022. Urban Logistics REIT (LSE: SHED), on the other hand, is a stock that could benefit as e-commerce growth rates might receive an additional boost. Analysts at courier Parcel Hero reckon online Christmas spending by Britons will likely match last year’s £35.3bn as people grow more cautious about visiting shops. It’s even possible that new restrictions (or even lockdowns) in the weeks ahead could propel expenditure well past these levels.

Urban Logistics provides the essential warehouse and distribution properties that keep e-commerce moving. So it’s well placed to benefit from any rise to online shopping activity. Rents are soaring in this part of the property market as supply fails to keep up with demand. I’d buy Urban Logistics even though weak consumer spending levels could pose a threat to profits growth.

At a current price of 172p per share, Urban Logistics trades on a forward price-to-earnings (P/E) ratio of 22.2 times. I don’t think this is an excessive valuation as rapid e-commerce growth appears to be here to stay. Besides, a chunky 4.4% dividend yield for this financial year (to March 2022) helps to take the sting out.

6.4% dividend yields

I haven’t stopped championing the wisdom of buying housebuilding stocks like Taylor Wimpey (LSE: TW). Fresh housing data this week revealed how strong trading conditions remain for such businesses.

According to Nationwide, average property prices in the UK rose 0.9% in November from the prior month. This was up from growth of 0.7% reported in October. A perfect blend of low interest rates, massive competition in the mortgage market and financial support from Help to Buy is keeping housebuyer activity ticking along nicely. And I see no end to this trend either. It’s why I already own shares in this particular homebuilder (along with Barratt Developments).

Indeed, Taylor Wimpey has continued hiking its profits forecasts in recent months in light of this bright industry outlook.Demand for homes in the UK continues to outstrip supply by a wide margin, a phenomenon I think will take many years and much hard work by government to solve.

City analysts think Taylor Wimpey’s earnings will rise 7% next year. This leaves the builder trading on a P/E ratio of just 8.5 times. Furthermore, at current prices of 162p Taylor Wimpey carries a mighty 6.4% dividend yield. 

There are risks. Concerns over the strength of the housing market have grown following the full restoration of Stamp Duty. Shocking HMRC data, for example, showed home sales more than halved month-on-month in October as people’s tax liabilities rose. But I feel Taylor Wimpey’s value is hard to ignore. It’s why I’m thinking of increasing my holdings in the business today.

Royston Wild owns shares of Barratt Developments and Taylor Wimpey. 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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When I started my first office job (temping during university holidays in 1987), I think my hourly wage was at most £3. Thus, in a 35-hour week, I would make £105 before tax. After paying rent and other expenses (and partying!), I had precious little money left. Even so, I tried to put some aside, even just a few pounds a month. My goal was to build an investment portfolio so large that the passive income it generated would allow me to retire rich.

Fast-forward to today: my wife and I are both 53 and could retire immediately, should we wish. But we both enjoy our jobs — and I really love sharing my knowledge accumulated over 35 years as an investor. Therefore, let’s say I were to start out from scratch today with just £20 a week. Here’s how I would aim to replicate (and even beat) our investment success.

Building passive income from scratch

In order to start building passive income, first I need to start saving money to invest. Therefore, if I were starting out again now, the first thing I would do is invest directly from my pay. Instead of investing what’s left at the end of each month (usually nothing), I’d transfer out a monthly sum every payday. This is what’s known as ‘paying myself first’ and it’s a really powerful tool for saving. Second, to minimise my investing expenses, I’d put aside my £20 a week and invest it occasionally as larger sums. £20 a week works out to just over £1,040 a year, but I’ll round that down to £1,000. Hence, perhaps four times a year, I’d invest £250 into a single holding, aiming to hold it for the long term.

Where wouldn’t I invest?

Given that I only have around £1,000 a year to invest, I’d immediately reject several investment options. First, cash is out. As one old Russian saying goes, “He who takes no risks drinks no Champagne.” Keeping all my money in cash at near-zero interest rates won’t make me rich. Second, property is also out, because UK real estate is so expensive that it isn’t worth me investing £1,000 a year in bricks and mortar. Third, I’d also reject bonds: government and corporate IOUs that pay fixed rates of interest. After a 40-year bull (rising) market, global bonds are as expensive as they’ve ever been. Also, with coupons (interest payments) so low on bonds, they don’t generate enough passive income for my liking.

I’d buy cheap shares for extra income

With my £20 a week/£1k a year, I’d steadily build up a balanced portfolio of quality stocks and shares. In the UK, cash dividends from listed companies are expected to exceed £84bn for 2021. Hence, I’d start to build my passive income by grabbing my share of this torrent of cash. However, I know that company dividends are not guaranteed and can be cut or cancelled at any point. Therefore, I’d diversify my shareholdings, spreading my money around to reduce concentration risk.

In addition, to keep my dealing charges low, I’d invest via a low-cost online stockbroker with low minimum entry levels. And, from experience, I’d try to avoid over-trading (buying and selling share too frequently). Finally, I’d protect both my share gains and passive income from the taxman by investing inside a tax-free Stocks and Shares ISA wrapper!

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

Passive income is one of the most appealing uses for investing in dividend shares. As long as I’m on the share register with enough time to spare, I can simply wait until the payment date for the dividend to be received to my account. If I can build up a portfolio of several dividend stocks then this allows me to get a stream of money coming in over the course of the year.

Points I need to think about

I’ve got one eye on next year already and so I want to plan ahead to try and see how I can generate decent passive income. The starting point for this is deciding how much I can afford to invest. This will tell me if I’m being realistic or not in my thinking. After all, I can’t expect to make four figures next year if I can only afford to invest a few hundred pounds over the course of the 12 months.

The other point that will dictate if I can reach my aim is my risk tolerance. As a general rule, the higher the dividend yield of a stock, the higher the risk. One reason for this is that the share price of the company might be falling. With the dividend per share staying the same, a lower share price will boost the dividend yield. Yet the risk is that the price is falling because the firm is struggling. It could see the dividend cut next year as a result.

This doesn’t mean that I need to look for the lowest yield possible. I’d really struggle to hit my goal in that case. So a balance is needed here in picking stocks with some risk involved, but not an excessive amount.

More passive income from being patient

The current average FTSE 100 dividend yield is 3.55%. The highest yield offered right now is 13.39%, with several stocks offering a 0% yield. I think there are some good dividend stocks that I can buy that sit in the 5%-7% range.

For simplicity, I’m going to assume each month has four weeks, meaning that my £100 per week adds up to £400 a month. This means that by next year, my investment pot will be valued at £4,800. With a 6% yield, this will have made me just over £140 in passive income.

This amount might be enough for what I was looking to achieve. However, from my point of view, I’d want to be seeing more than this. What I’d be happy to do is sacrifice some passive income from next year if it means that I can have a lot more a few years down the line.

For example, I’d be happy to reinvest the money I make next year back into dividend shares. If I did this for four years, I’d have a pot worth around £21,800. Then in year five, I could enjoy the passive income, which would work out at just over £100 a month.

Overall, I can make passive income next year with just £100 a week. Yet, I’d much prefer to invest for the longer term to enjoy greater benefits down the line.

Jon Smith and The Motley Fool UK have no position in any share 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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Rhodium is a precious and very rare metal. The main use of it according to the Royal Society of Chemists is in catalytic converters for cars. This accounts for approximately 80% of its use, where it can offset harmful nitrogen oxides in exhaust gases.

Over the last few years tightening emissions standards across Europe and elsewhere (most notably China and India) have led to an increase in demand.  These stricter requirements mean more rhodium is required in catalytic converters to control greenhouse gas releases.

Additionally, the supply of the metal is largely restricted as it’s difficult to process due to its high melting point.

In this kind of scenario, where there’s increasing demand and tight supply, prices are generally strong.

The ETC I am looking at

I am able to invest in rhodium through an ETC (Exchange Traded Commodity). This is a fund that tracks the price of a commodity but trades like a share that I can buy from most online brokers.

The fund in question is db Physical Rhodium ETC (LSE: XRH0). It’s a small fund, being less than $100m in size. I also think it’s quite expensive, with a management charge of 0.95%.

That said, the price chart is where the numbers really get interesting. Over five years, this fund is up over 1,400%.

The price of rhodium started to increase very rapidly at the start of 2020. This jump in price led to all sorts of consequences, including a rise in the theft of catalytic converters. 

Yet during Covid, there was a fall in demand for cars and therefore lower rhodium demand from carmakers. However, a reduction in supply due to the strict Covid restrictions in South Africa (where the majority of rhodium is mined) kept prices strong.

It’s also worth noting that from the middle of this year, the price has dropped significantly.

There are two reasons for this. First, on the supply side, increasing output as mining levels have normalised has pushed down prices. Second, though car demand has been picking up, it hasn’t been matched in the output of cars. Supply-side shortages in other vehicle parts, most noticeably semiconductor chips, have stifled production.

Since carmakers are the biggest buyers of rhodium, it’s no wonder that demand for this precious metal has fallen.

Am I going to buy the ETC?

I’m not comfortable buying this ETC just yet. The five-year price action is certainly attractive, but I’m not confident about adding it to my portfolio.

With an eye to the long term, I think that the production and popularity of electric and fuel-cell vehicles will probably grow. These don’t require catalytic converters.

I can’t see clearly whether demand for this precious and rare metal ETC will increase over the long term, therefore for the moment I’ll keep looking at other investments.

Niki Jerath has no position in db Physical Rhodium ETC. 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 possibility that the Covid-19 crisis will worsen considerably due to Omicron is something that I as a UK share investor need to consider carefully.

I’m not just thinking about how my stocks portfolio could suffer in the short-to-medium term, however. I’m looking at stocks that I could buy to help offset weakness elsewhere. There are plenty of UK shares for me to buy whose services should remain in strong demand if the public health emergency persists. Here are two top stocks I’d buy if the battle against the pandemic begins to look shaky.

Abingdon Health

Penny stock Abingdon Health (LSE: ABDX) makes rapid lateral flow tests that diagnose whether or not an individual has contracted Covid-19. It therefore serves an essential role in helping prevent the spread of the virus and in keeping the world turning during the pandemic.

Abingdon launched its BioSURE Covid-19 IgG Antibody Self Test over the summer, a kit that can detect infection from a drop of blood within 20 minutes. The company has embarked on massive investment at its manufacturing sites in York and Doncaster to meet strong demand. It also makes other medical products to detect infection. And more recently it has been undertaking work that could see it mass produce antigen tests for Avacta and Vatic Health. All this bodes well for future revenues.

The marketplace for coronavirus testing kits is huge, sure. And a high-profile failure of its testing kits could prove catastrophic for future business wins. But I’m encouraged by the reliability of Abingdon’s technologies so far and think its huge investment programme could deliver mighty returns for its shareholders.

Bunzl

Support services firm Bunzl (LSE: BNZL) is the perfect pick for me in uncertain times like these, I feel. It sells a huge range of essential products and services to a variety of end markets across the globe. This allows profits to remain stable during the good times and the bad.  And so it could be the perfect pick as the Omicron variant threatens the global economic recovery.

This strength-through-diversification is the reason I added the FTSE 100 firm to my shares portfolio several years back. But this isn’t the only reason I’m considering adding to my holdings today. This is because Bunzl’s revenues have actually risen as a direct result of Covid-19. Turnover rose 9.4% year-on-year in 2020 as demand for its masks, gloves, disinfectants and other protective products soared.

Bunzl shares trade on a P/E ratio just above 19 times for 2022. I think such a premium valuation is deserved given its long-term record of growing annual profits, whatever the weather. I plan to hold my Bunzl shares for a long time. That’s even though poor execution of its acquisition-led growth strategy creates notable risks. Failures on this front could have a particularly serious impact if they forced the firm to dial back its ambitious M&A drive.

Royston Wild owns shares of Bunzl. The Motley Fool UK has recommended Bunzl. 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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When I last covered Warren Buffett-owned cloud computing stock Snowflake (NYSE: SNOW) around a year ago, I said that I was going to leave it on my watchlist instead of buying it. In hindsight, that was a wise move, as over the next six months, Snowflake’s share price fell by around 50%.

Recently however, Snowflake’s share price has been moving up again. Today, it’s up more than 10%. So, what’s behind this big share price jump? And should I pull the trigger and buy this Buffett-owned tech stock for my portfolio?

Why Snowflake’s share price just popped

The reason Snowflake’s share price has jumped today is that the company’s third-quarter fiscal 2022 results, posted last night, were very strong and ahead of Wall Street’s expectations.

For the quarter ended 31 October, revenue came in at $334.4m, up 110% year-on-year and well ahead of the consensus forecast of $305.6m. Meanwhile, remaining performance obligations – which is deferred revenue plus the backlog – were $1.8bn, up 94% year-on-year.

During the period, Snowflake managed to grow its customer base by a healthy amount. At 31 October, the group had 5,416 total customers and 148 customers with trailing 12-month product revenue greater than $1m. By contrast, at the end of Q2, it had 4,990 total customers, and 116 customers with revenue over $1m.

“Snowflake saw momentum accelerate in Q3,” commented CEO and Chairman Frank Slootman. “Our vertical industry focus is an important evolution of our selling motion and Snowflake continues to see broad industry adoption,” he added.

What the market really liked here was the Q4 guidance. Looking ahead, Snowflake expects product revenue for Q4 of between $345m and $350m. That would represent growth of 94% to 96%. Going into the results, analysts had been expecting product revenue of around $316m for the fourth quarter. So, this guidance was well above estimates.

“The upbeat guide for Q4 product revenue helps illustrate that the trends in the business are durable and why Snowflake remains one of the really unique hyper-growth stories in software,” said analysts at Evercore.

Should I buy this Buffett stock now?

Snowflake is a really interesting company, in my view. One thing that stands out to me is the growth the company is generating. For the 2022 fiscal year (ending 31 January 2022), product revenue is expected to grow by around 103%-104%. This is after the group posted product revenue growth of 116% last fiscal year. This level of growth suggests to me that Snowflake has a very good offering.

Another thing that stands out is the investor base. Warren Buffett isn’t the only big-name investor here. Some names in the top 10 shareholder list include BlackRock, Vanguard, Morgan Stanley, Altimeter Capital, Sequoia, and Tiger Global. These are some of the biggest players in the investment world, which suggests that this company is the real deal.

I still have a few concerns over the valuation, however. At the current share price, Snowflake has a market cap of around $102bn. This means the forward-looking price-to-sales ratio (there’s no price-to-earnings ratio as it’s not yet profitable) is in the 80s. That’s very high. At that valuation, I’d expect the stock to be very volatile at times.

Given the high valuation, I’m going to keep Snowflake on my watchlist for now. At present, the stock is just too expensive for me. That said, if we see another big pullback here, I may take a small position.

Edward Sheldon 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.