FTSE 250 incumbent Future (LSE:FUTR) has seen its share price rally recently. Yesterday it increased handsomely based on excellent full-year results. Should I add shares to my portfolio at current levels? Let’s take a look.

Media giant

Future is an international media and digital publishing firm. It produces and maintains technology and works with leading brands throughout the world to enhance their presence and reach out to their customer bases. Some of its proprietary technology includes website platforms, email delivery systems, and lead generation tools.

As I write, shares in Future are trading for 3,644p. A year ago they were trading for 1,792p, which is a 103% return! The FTSE 250 index in the same time period has only increased close to 13%. Future shares yesterday jumped 15% due to positive results.

Fantastic results continue

Future’s full-year results announced yesterday were extremely impressive. I am not surprised the share price jumped as a result. Future reported revenue had increased by 79% to £606.8m compared to last year. Operating profit increased 127% to £115.3m too. Cash generated grew by a mammoth 115%. From an operational perspective, organic growth was reported in all key territories, which is a good sign.

The good results prompted Future to declare a dividend of 2.8p per share. This is up from 1.6p last year. Shares that pay a dividend and could make me a passive income are usually an attractive prospect. Especially when they seem to be performing well and growing organically, which Future is if these results are anything to go by.

Future also has an excellent track record of performance and growth. I understand past performance is not a guarantee of the future. I tend to review this as a gauge. Revenue and operating profit have both increased year on year for the past four years.

FTSE 250 stocks have risks

I have two concerns with Future. Firstly, in its full-year results, it was confirmed that Covid-19 boosted the business in terms of growth and performance. Could this mean if the pandemic settles down we may not see such levels of growth once more? In addition to this, I have an issue with the current valuation of Future shares. At current levels it sports a price-to-earnings ratio of 56, which is a bit high for my liking. I could add shares at this level but if any negative news knocked the price down, I could lose out.

Overall I like Future as a company and its growth and results are there for all to see. I would consider buying shares for my portfolio but I think I will wait for them to fall a bit. Performance and growth will continue in my opinion but I want to buy shares a bit cheaper than current levels. There are other FTSE 250 stocks that are performing well that are better priced for my portfolio currently.

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.

According to the Office for National Statistics the UK inflation rate rose to 4.2% in October. Demand for oil and gas is pushing up energy bills across the world. Shortages of many goods, because of factory shutdowns due to covid restrictions, are pushing up prices. If this trend continues then we could easily see double-digit inflation next year.

My plan for protecting myself

I believe that high dividend paying shares can be a hedge against inflation. My thinking is simple. These high dividend paying companies tend to be established firms in stable sectors. In times of rising prices, they should be able to increase the prices of their goods or services and maintain or increase their dividends more than the rate of inflation.

For my own portfolio, I’ve always liked ETFs (exchange-traded funds). These are funds that track an index or sector and can be bought and sold like a share through most online brokers. They allow me to invest in multiple companies in a single fund and are usually low cost.

The ETF I’ve been looking recently at is SPDR S&P UK Dividend Aristocrats ETF (LSE:UKDV). This fund tracks the S&P UK High Yield Dividend Aristocrats Index.

This index follows the 40 highest dividend yielding UK firms that have either increased or maintained their dividends for at least seven consecutive years. It also focuses on large businesses since new entrants to the index have to have a market cap of at least $1bn. The companies also have to meet the index’s liquidity requirements.

Companies in this ETF are mostly large blue-chip companies across a variety of sectors such as insurance, mining, and pharmaceuticals. Household names include the likes of Legal & General, Rio Tinto, and GlaxoSmithKline.

The ongoing charge is a very reasonable 0.30%. The current dividend yield is 3.77%

Am I going to invest?

Though it might not appeal to all investors, I like this ETF. It has a high eligibility criterion and is well diversified across sectors.

Although, it’s worth me remembering there are risks. Some of these high dividend paying companies will be established, successful firms that are great at generating free cash flows. However, some will feel they have to maintain high dividends to keep their investors happy when the business is not growing. In the long run, companies like these are unlikely to prosper.

Looking at the performance, the one-year return excluding dividends is about 9% and over five years the fund is down about 9%. However, taking the dividends into account, the fund would have provided me with a decent total return over both time frames.

On balance, given that the UK inflation rate could reach double digits next year, I’m seriously contemplating adding this high dividend paying ETF to my portfolio.

Niki Jerath has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.

Some penny stocks have excellent potential for growth in the long term. Despite this growth potential, they also have more risks compared to larger established stocks. I have identified two penny stocks to buy in 2022 for my portfolio.

I would want to buy these soon or early in 2022 as they could offer lucrative returns over the longer term. As the year progresses, their prices could rise higher so I see an opportunity to get in early, while they are cheap and add them to my portfolio.

Definition and risk

Sometimes referred to as penny shares, these are stocks that trade with a share price below £1. The firms also have a market capitalisation of below £100m usually. In most cases, these firms are small, lower-valued businesses. Due to this, there is a higher element of risk involved. The reward can also be higher if things go to plan based on product and services offered and performance. 

It is worth noting some of the general risks associated with penny stocks. Firstly, there is usually scare information available about these firms, as they aren’t followed by many research analysts. I like to do lots of research and due diligence before I buy any shares. Often, these shares either simply don’t have enough information out there or it come from sources that I wouldn’t consider credible. This can be a red flag that puts me off.

Next, penny stocks can often have a lack of history due to the fact they are newly formed. I understand past performance is not a guarantee of the future but I review it as a gauge when reviewing investment viability.

Finally, these shares can often have a lack of liquidity meaning they have little cash for the business to invest into product launches, research and development, and other activities. Penny shares can often be victims of stock price manipulation too. This can happen when someone buys a large amount of stock, hypes it up, and then sells it after other investors find it attractive.

Penny stocks to buy #1

Seeing Machines (LSE:SEE) is a tech stock based in Australia. It specialises in artificial intelligence (AI) tech to help reduce transport-related accidents with real world applications. This tech is applied in automotive, rail, aviation, and off road sectors. Seeing Machines has a global presence already and can count some major names among its customers. These include Emirates Airlines and General Motors.

As I write, the Seeing Machines shares are trading for 11p. At this time last year, the shares were trading for 5p, which is a 120% return. I am a fan of tech stocks generally so when a penny stock is on my radar with new and exciting tech applications, I take a good look at it. So far Seeing Machines looks an exciting prospect for such a cheap price. It seems to be using technology to solve a real problem and save lives.

Seeing Machines released year-end results last week, which made for excellent reading. Revenue increased 18% compared to last year and profit increased by 44%. Net cash also increased, which will solidify its balance sheet. Operationally, it reported its tech was now implemented in further General Motor’s models and new strategic deals were close to being signed off with other manufacturers of transport modes. This will boost performance in 2022.

Seeing Machines also has a decent track record of performance. I can see that revenue and profit have been increasing year on year for the past four years.

All penny stocks have risks. Seeing Machines could be out-muscled by larger tech firms that might decide enter the same space, despite its good progress to date. Furthermore, share prices can be volatile for small caps. Seeing Machines is trading close to all-time highs, so any negative news could cause a major shock to the share price.

Overall I would happily add Seeing Machines shares to my portfolio for 2022. I believe it is an exciting company at a cheap price with some excellent fundamentals to date behind it. I wouldn’t be surprised to see the share price continue to climb in 2022.

Pick #2

Zephyr Energy (LSE:ZPHR) is an investment platform designed to undertake economically attractive gas and oil projects. It is designed to focus on developments in the Rocky Mountain region of the US. Zephyr was formed by individuals with lots of experience in the gas and oil industry. 

Part of my bullish stance on Zephyr stems from oil and gas demand. The demand for both is high right now and a small cap like Zephyr could capitalise. Oil demand may be declining in the very long term but for now there is lots of demand, especially as the world recovers from the pandemic.

As I write, shares in Zephyr are trading for just over 6p. A year ago shares were trading for less than a penny, at 0.63p. That equates to a return of over 800%. Penny stocks can often experience huge share price increases in a short space of time so I am not getting too excited.

This year has been a particularly fruitful one for Zephyr. A re-brand and new management team have renewed focus and strategy since 2020. It has also made significant drilling progress in some of its prominent sites, especially one in Utah for which it has a lot of expectations. At the site drilling operations had been completed, it hit primary and secondary targets, and there were signs of natural gases and oil. A further update since points to the finalisation of well design so things are looking good.

Zephyr does come with risks. Like Seeing Machines, it is a very small fish in a large pond and could easily be out muscled and outmanoeuvred by a larger firm if they entered the same space geographically. Finally, Zephyr’s progress is based on projections to date rather than tangible results, which is a credible threat to any investor returns.

Overall, for 6p per share, I would happily add a small amount of shares to my portfolio. I would expect the share price to rise in 2022 and beyond. I believe my investment could grow and offer me a return in the long term, especially if some current projects begin to yield tangible results by way of oil and gas.

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.

When it comes to investing, following the herd instead of doing my own analysis is dangerous. I can end up buying a dud that costs me a fortune. I can also miss a sparkling investment opportunity that the broader market has missed.

That’s not to say that observing the trades of hedge funds and institutional investors is a bad idea, of course. The decisions of these heavyweight operators are backed by bucketloads of experience and considerable financial clout.

I’ve looked at shortracker.co.uk to root out the FTSE 100 shares that have attracted the most amount of short selling from these sorts of investors. Shorting involves borrowing and selling shares one doesn’t own in order to to rebuy them at a lower price later on. This allows the shorter the chance to make a meaty profit.

Here are two of the most-shorted stocks on the FTSE 100 today. Should I give them short shrift or buy them for my Stocks and Shares ISA?

J Sainsbury

As I type, around 3.5% of J Sainsbury (LSE: SBRY) shares are currently shorted, putting it second on the list of most-shorted FTSE 100 stocks.

To me this doesn’t come as a surprise. Worries over supply chains and the prospect of half-empty shelves over the critical Christmas period might be grabbing the headlines today. The biggest threat to J Sainsbury, however, comes from the intensifying competition it faces from discounters Aldi and Lidl, online-only players like Amazon and established operators such as Tesco.

Sainsbury’s has invested huge amounts in its online channel to capitalise on the e-commerce boom and take the fight to its rivals. However, the supermarket has a heck of a fight on its hands to stop losing market share as its competitors steadily expand. The risks here remain considerable.

IAG

Around 3.2% of International Consolidated Airlines Group (LSE: IAG) shares are currently shorted. This puts it third on the list of most-shorted FTSE 100 shares. And I don’t think it’s a surprise why: the fast-spreading Omicron virus has raised the prospect of fresh lockdowns that could batter the aviation industry’s recent recovery.

There’s a lot I like about IAG. I like its leading position in the lucrative transatlantic market. I also like its rising presence in the rapidly-expanding low-cost segment (though a competition probe into its planned acquisition of Air Europa could scupper its plans here). These qualities could help deliver significant earnings growth in the years ahead.

However, it’s also true that IAG faces a number of significant risks. The threat posed by the ongoing Covid-19 crisis isn’t the only danger. I’m also concerned about the prospect of elevated fuel prices as crude prices soar. Then there’s the issue of intense competition that IAG has to find a way to overcome.

IAG had net debt exceeding €12bn as of June. In the long term this could significantly hamper its ability to invest in its operations for future growth. In the short term it could prove catastrophic if IAG has to ground its planes again en masse.

I won’t be buying Sainsbury’s or IAG shares for my ISA today.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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As fears around the Omicron Covid variant temporarily pulled down markets late last week and early this week, investors scrambled to pick up undervalued shares. Unfortunately for some, it seems that the flash crash is over. However, there are still many great UK companies that continue to be undervalued by the wider market.

JD Sports Fashion (LSE: JD) has had a phenomenal 2021. The sports clothing retailer opened a further 600 stores around the world. And it increased its revenue to a new all-time high of £3.8bn. It also nearly tripled the pre-tax profits made in 2019, going from £158m to £439m. Yet right now, the share price is trading at 222p, down from 234p on November 18 (but up from 146p this time last year).

Risks and rewards

Everything seems to be going well for JD but all is not perfect. It has been ordered to sell Footasylum, one of its subsidiary chains, over competition concerns. While it owns more than 50 brands, Footasylum is a very recognisable part of its business, bringing in an additional £232m in revenue in the 2021 financial year, even though this was down 6.8% from FY 2020 due to the pandemic.

Naturally being forced to sell a chunk of its operations isn’t ideal for a business, and I believe that concerns about how this will affect next year’s profits are keeping the share price down.

But JD remains a buoyant company with fingers in many pies in the UK and further afield. That includes sportswear, gyms, outdoor clothing and several other shoe brands. I think that its store expansion seen this year will continue to increase its earnings in 2022 and am more than happy to add it to my portfolio.

A lot to like

Wise (LSE: WISE), formerly known as TransferWise, is a UK-based financial technology company that allows its users to send money around the world quickly and cheaply, while offering some of the most competitive exchange rates on the market.

Wise first went public early this year and has naturally lost some of its value, falling from 880p in July down to 777p in early December. This is fairly common after an IPO as the market takes time to determine the true value of a share.

There’s a lot I like about Wise. As a tech company the majority of its operations take place online, resulting in lower overheads. It also earns cash by taking a small cut of each exchange, allowing the business to scale with user volume.

Customer numbers surged this year resulting in a 43% jump in revenue in Q1. Earnings have also doubled from 2020, although the margins have shrunk. Wise’s management decided to expand operations, develop new products and enter new markets. One of best products it offers is the borderless account and debit card, which allows people to spend money anywhere in the world, converting currencies at real-time exchange rates.

Its current market cap is £7.7bn but the share’s price-to-earnings ratio is uncomfortably high at 352.55. Investors clearly believe in the company but it’s still something that concerns me.

I think that the shares may be overvalued in the short term, but undervalued over the long term. Once more people learn of the borderless account, I think its user base will skyrocket. I definitely want to be owning Wise shares when that happens.

James Reynolds 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 International Consolidated Airlines Group (LSE: IAG) share price fell by 20% in November. Shares in the owner of British Airways are now trading more than 15% lower than a year ago, despite a widespread return to flying over the last 12 months.

What’s gone wrong? The obvious explanation is the Omicron virus, which has triggered a raft of new travel restrictions in Europe and elsewhere. However, IAG’s share price slide started back in the summer. As I’ll explain, I think there’s more to this situation than the new variant.

Reality check

Last month’s slide picked began after IAG published its third-quarter results on 5 November. I think one reason for this is that the Q3 numbers reminded investors that the airline business is still a long way from returning to pre-Covid levels of performance.

IAG’s airlines carried 43% of 2019 passenger numbers during the Q3 and 73% of 2019 cargo levels. These activities resulted in an operating loss of €452m for the three-month period.

Looking ahead, IAG hoped passenger numbers would rise to 60% of 2019 levels during the final quarter of the year. 

These numbers shouldn’t have been a surprise. But they seem to have provided a reality check for some investors, judging from the market reaction to the results.

Too high, too soon?

My concern is that IAG’s current performance is at odds with the group’s valuation. By the end of the summer, IAG had a higher valuation than it did at the end of 2019.

Even today, the airline group has an enterprise value of £16.5bn. That metric — which represents net debt plus the market value of the group’s shares — is almost exactly the same as at the end of 2019.

This doesn’t make sense to me. Broker forecasts suggest it will take two more years for the group’s profits to return to 2019 levels. In the meantime, IAG is unlikely to pay a dividend and could still face further challenges.

I reckon IAG’s share price got ahead of itself earlier this year. What we saw in November was simply an overdue correction, in my view.

IAG shares: will I buy?

I’m confident that IAG will make a full recovery over time. Now that the share price has cooled, should I consider adding a few to my portfolio as a turnaround play?

What concerns me is that IAG’s net debt has risen by 60% to €12.4bn since the end of 2019. As a result, the company’s equity value has fallen from €6.8bn to just €0.9bn. As a reminder, equity is simply the difference between a company’s assets (such as aircraft) and liabilities (such as loans).

In my view, buying IAG shares today means betting that the group’s airlines will be able to pay off their loans quickly and without further problems. This should restore equity value — and dividends — to shareholders.

This could happen — I do believe flying will recover. But it’s not a bet I’m comfortable with. Lenders’ requirements always come ahead of shareholders’ hopes. Any new problems could see the stock fall further. For me, IAG shares are too speculative at the moment. I’m staying away.

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.

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Cineworld Group (LSE: CINE) investors are enduring a wild time at the minute. Confidence in the UK leisure share is shaking wildly as developments surrounding the Omicron coronavirus variant come in. Today, news surrounding the variant hasn’t been as scary and so the Cineworld share price has leapt 7.5% in Wednesday trade.

2021 hasn’t been kind to the Cineworld share price. Since closing at peaks of 122p in March, it’s more than halved in value to current levels around 50.5p. Cineworld is now trading 21% cheaper than it was at the beginning of the year.

So would I buy? In the case of high-risk shares like Cineworld, I think it’s especially important to get a range of opinions from other investors before buying.

Short stuff

Even the most experienced traders can get it wrong. But I think it’s worth gauging the views of hedge funds and institutional investors on Cineworld’s share price.

According to shorttracker.co.uk, a worrying 9.4% of Cineworld shares are currently being shorted. That’s up from 9.1% around a month ago and puts the leisure share clear at the top of the ‘most hated’ list.

News surrounding the Omicron variant has encouraged further short-selling. But the increased shorting of Cineworld’s share price began long before mid-November. Just 3.3% of its shares were being bet against six months ago.

Reasons to be cheerful

So where does the Cineworld share price go next? It’s not outside the realms of possibility that it will stride back towards March’s highs in the not-too-distant future. Studies showing that Omicron isn’t as dangerous as previously feared — a scenario that would vanquish fears that cinema’s could be closed en masse again — would be the most obvious near-term driver.

Cineworld could also leap again if box office stats from the US and UK continue to impress. Movie lovers have been returning to theatres in their droves since Covid-19 restrictions were relaxed earlier this year. Capacity at Cineworld’s sites in October clocked in at a reassuring 90% of the level in the equivalent month in 2019, latest financials showed.

Why I worry for Cineworld’s share price

All that being said, I’m afraid I won’t be taking a risk on Cineworld shares any time soon. My main worry over this UK share is the huge amounts of debt it still carries on its balance sheet ($8.4bn worth as of June). This could prove fatal if Omicron (or indeed any other Covid-19 variation) forces its theatres to close. At best, it casts a shadow over the company’s ability to invest in its operations for future growth.

This is particularly concerning given the rising popularity of Netflix and other streaming platforms. These companies are investing billions every year in content and technology to win viewers from other media.

Cinema operators will have to also keep splashing the cash on an enormous level to remain relevant and keep pulling in the punters. I think Cineworld’s share price could remain weak and possibly plummet, even if it manages to survive the Covid-19 crisis.

Royston Wild 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.