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Inflation in the UK is rising at an alarming pace. Official data today showed consumer price inflation (CPI) hit 5.1% in November, up almost a full percentage point from October. Prices are tipped to keep soaring in 2022 too as product supply issues linger and energy costs soar.

This creates a particularly worrying issue for savers. It means the value of the money they have locked away is diminishing at a staggering pace. And analysts believe that the issue will persist even if the Bank of England acts soon.

“Even if a base rate rise is imminent, any subsequent increase to interest rates on things like simple savings accounts will fall far short of where inflation sits,” says Colin Dyer, client director at abrdn.

He added: “Savers need to consider all options to make sure that their money is keeping pace with, or outpacing inflation. Anything less means their funds will slowly but surely be eroded in real-terms, every day buying that little bit less.”

UK shares to help me beat inflation

This is why I think it’s extra important for me to own UK shares right now. Okay, more cyclical stock sectors like retailers and travel could suffer if consumer spending power is damaged by surging inflation. But I can buy many stocks which allow me to capitalise on rising prices, instead of being a victim.

For example, prices of precious metals tend to rise when inflation jumps. I have an opportunity to exploit this and make decent returns by buying gold and silver producers like FTSE 100-listed Fresnillo. Prices of other non-safe-haven commodities also increase at times like these, which is why buying stocks like copper miner Antofagasta and platinum producer Jubilee Metals could be another good idea.

More rock-solid British stocks

Rising global inflation also often helps profits at banking stocks like HSBC and Santander. This is because these firms can earn more on their lending activities when central banks raise rates to curb price rises. Finally, owning real estate stocks is another good way for me to make money from the inflation boom. This is because property prices and rent levels move higher when broader inflation increases.

I’m confident my stake in warehouse operator Tritax Big Box REIT will therefore help protect me against the inflationary wave. There are many other property stocks I can buy to give me added insulation too, from healthcare facility operator Assura and student accommodation giant Unite to residential property landlord Grainger.

Of course, one advantage of savings accounts is that they provide a guaranteed return unlike stocks. Share prices can go down as well as up. And there’s a broad range of economic as well as company-specific factors that can send prices sinking. Still, I believe there remain many UK shares I think could help me make decent money from the inflation boom. And experts like The Motley Fool can help me to dig them out.

Royston Wild owns Tritax Big Box REIT. The Motley Fool UK has recommended Fresnillo, HSBC Holdings, and Tritax Big Box REIT. 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.

This morning, the UK CPI inflation number for November was released. It was expected to be 4.7%, already a jump from the 4.1% number from the previous month. But the inflation figure beat expectations, showing a year-on-year gain of 5.1%. This is the highest number in a decade, and means that my cash in the bank is being eroded in value. Here’s how I’m planning on investing in stocks to try and reduce the negative drag.

Making use of dividends

One way I can try to beat inflation via stocks is by targeting dividends. When I buy a stock that pays out a dividend, I can calculate the dividend yield. Essentially, this looks at the annual dividend per share relative to the share price when I invested. Using this, I can get a percentage yield, which is a comparable number to other income-generating investments. 

In this case, I can look to invest my spare cash in stocks that offer me a yield in excess of the rate of inflation. Even though the FTSE 100 average dividend yield is only 3.55%, there are some options with yields above 5%. For example, insurance companies such as Aviva and Legal & General both fit the bill. In the world of finance, money managers Abrdn and M&G also offer me a net positive inflation return currently.

So in order to beat the current level of inflation, I can consider investing in such stocks. There are a few risks that I need to be aware of. Firstly, inflation changes each month. It’s been rising over the past few months, so there’s no guarantee that it won’t keep heading higher. In this case, even my dividend yield might not be enough to exceed inflation next year.

Secondly, dividends aren’t guaranteed. If one of the dividend shares that I buy cuts the payout next year, my real return versus inflation could be negative.

Using high-growth stocks to offset inflation

The way I can go is putting my spare money in high-growth stocks. Such companies haven’t performed well over the past month or so. I recently wrote about how some of the top EV stocks have fallen over 30%. Souring sentiment around Omicron and high valuations have unsettled some popular stocks. Although this is an ongoing risk, the potential rewards are also high.

By investing in growth stocks, my unrealised gains from the share price moving higher should enable me to offset inflation in the long run. For example, let’s say annualised inflation stays at 5% for the next couple of years. If I can invest in high-growth stocks that see a share price gain of 10%+ over this period, I’ll beaten the inflation erosion.

I think this second option is more risky than the dividend strategy. However, to spread my risk, I can look to split my money between dividend and growth stocks. That way, I give myself some different angles to try and offset inflation via investing in stocks.

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

There aren’t nearly as many tech companies listed in the UK as there are in the US. So an investor looking for UK tech shares to buy now doesn’t have a big choice.

One popular UK tech stock, accounting software firm Sage (LSE: SGE), has seen its share price increase more than 40% over the past year, at I write. I’m not surprised by that. Back in July, I explained why I would consider investing £1,000 in Sage. If I had done so the day that article was published, my stake would now be worth £1,175.

But would I still invest today, given the steep increase we’ve already seen in the Sage share price?

Why I like Sage

I continue to like the economic characteristics of Sage’s business.

It supplies accounting software to small and medium-sized firms. Many such businesses are fairly reliable customers. They are required to keep books from one year to the next. Having set up a piece of software to help them do so and trained staff on it, there would be switching costs and other inconveniences if they moved to a different supplier. That gives a company such as Sage pricing power. In other words, it is able to keep raising its prices over time. That can help support profit margins even in the face of inflation.

I also like the company’s focus on small and medium-sized enterprises. Many software firms focus on large customers like multinational firms. Sage’s focus allows it to develop the right solutions for a user group that has budget to spend on this type of software but doesn’t always feel valued by tech giants.

Is the Sage share price undervalued?

Just liking a company doesn’t mean that I would buy its shares, though. Whether or not I would purchase Sage for my portfolio depends on its valuation.

After its recent rise, the Sage share price is trading close to the levels at which it peaked in 2018 and again in 2019. The only time in its history it’s traded substantially above its current level was over 20 years ago in the dotcom boom.

The current price-to-earnings ratio for Sage is in the 30s. That means that if I bought the shares today it would take over 30 years for the earnings per share to add up to the current purchase price (if the firm’s earnings stayed static throughout that  period). Like their American counterparts, UK tech shares often trade at a high P/E ratio. But Sage is not a start-up business with dynamic growth prospects. It is a well-established, profitable B2B supplier with decent but modest growth prospects. Earnings per share this year, for example, were actually lower than three years ago.

In the absence of a compelling new growth story, I do not see Sage shares as undervalued at present.

My next move

On top of that, there are some risks with Sage. A broad-based tech sell-off could drag down the share price. A move to cloud computing has added costs at the company and dissatisfied some customers too. That could hurt profit margins in the short term.

So although I like the Sage business, I would not add its shares to my portfolio at the moment.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage 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.

Consumer goods giant Reckitt (LSE: RKT) has had a challenging several years. Like its competitors, it has been wrestling with input cost inflation, which continues to threaten profit margins. But it has also been dealing with some problems of its own making, notably its ill-fated acquisition of an infant formula business a few years ago. The Reckitt share price has fallen 4% over the past year, as I wrote this article earlier today.

But just last year, these shares traded above £77. Could they get back above £70 in the coming year?

Understanding the Reckitt share price fall

To consider where the Reckitt share price is going, it is instructive to reflect on where it has come from. The reason for its fall in 2020 was fairly simple. Investors were concerned that mounting cost inflation would hurt its profit margins. They also continued to have concerns about the long-term impact of the infant formula business on Reckitt’s results.

I think inflation remains a risk. But the company owns in-demand brands such as Dettol. That means it doesn’t necessarily need to compete on price alone. That gives it pricing power, which can support profit margins. In its most recent quarterly trading statement, the company maintained its guidance on profit margins. In other words, it seems to have the inflation challenge under control – for now at least.

I also think the company has been making the right moves when it comes to its infant formula business. It took a massive writedown on its book value last year and has since exited a large part of the business, notably in China. That has been painful and casts a shadow on the judgement of previous management. But looking forward, it suggests that those infant formula woes should no longer dog the company.

So, I think both the key drivers for the share price fall are being well handled.

Upside price drivers

But is that enough to push the Reckitt share price further upwards in 2022?

For that, I think the company needs not only to show that it is managing its challenges but also that it is producing growth. Again, I think the company’s strong recent performance gives grounds for optimism here. In the parts of the business that it is keeping, the company saw growth in all of its operating areas in its third quarter. That is despite high demand the prior year making for a tough comparative baseline.

With its health and hygiene focus, I think the company is well-positioned to capitalise on long-term concerns brought about by the pandemic. That should help both revenues and profits.

Getting to £70 in 2022 would require about a 14% increase from today’s Reckitt share price. Drivers for that could include sales growth, continued good news on profitability or a shift in investor sentiment back in favour of defensive stocks such as consumer goods companies. If there is an economic downturn, I see that as possible.

On that basis, I do think the Reckitt share price could hit £70 in 2022 and I would consider adding it to my portfolio now.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Reckitt plc. 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.

Many top FTSE 350 shares pay dividends to shareholders year in, year out. Indeed, it can be a great way to create additional income and I have found this a useful strategy in recent years. Unilever (LSE: ULVR) is one of the top dividend shares that has paid consistent dividends to shareholders. A leader in the fast-moving consumer goods (FMCG) market, Unilever has an average dividend yield of 3.04% over the past five years, although this has declined slightly since 2019.

If I had £10,000 to invest, what amount of dividend payments would I have received from 2016 to 2020 from Unilever shares? In total, I would have received £1,520 in dividends over those five years – equivalent to 15.2% of the original holding itself. This, together with any growth in the share price, tells me that this is a low-risk investment. Personally, I would not be directing £10,000 to Unilever shares, because I think I can get better returns elsewhere. With a much larger sum of money, however, this dividend yield becomes a more attractive option. If I were considering a £100,000 investment, for example, Unilever may be one of the better destinations. 

If this level of dividend yield is not attractive for me, where else could I put my £10,000? Instead of focusing on income, I could find a smaller-scale accumulation stock with big potential. Molten Ventures (LSE: GROW) is a FTSE 250 stock that gives investors exposure to private tech companies. This company does not pay a dividend and instead retains its earnings. These retained earnings may be found in company annual reports and Molten Ventures figures show impressive growth over the last five years – about 77.2% year-on-year. Together with other fundamental factors, retained earnings may give clues about how well an accumulation stock is actually growing. Essentially the main question to consider is whether a stock like Molten Ventures is putting the earnings to good use or is it preferable to have this money paid out of the stock to shareholders.

If I decided to choose an accumulation stock, I would first need to ask myself a number of questions. Am I confident in the company’s leadership? Is the leadership following through on promises? Is the company growing? In Molten Ventures’ case, only two years ago the then-AIM 100 listed company publicly stated its desire to enter the FTSE 250, which was achieved this year. Furthermore, a number of private companies funded by Molten Ventures have gone public, including Cazoo, Trustpilot and UiPath. For me, both these factors are strong indications that Molten Ventures is deploying retained earnings effectively and I think my £10,000 would be better invested in this stock rather than in Unilever for its dividends. My decision might be different if the amount available to invest was much greater, when I might deem the dividend yield to be significant.   

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.

Lucid (NASDAQ: LCID) stock exploded after the company was made public via a SPAC (special purpose acquisition company) earlier this year. But the share price has crashed by over 25% in December alone. I want to revisit the investment case here now that the company’s market value has fallen by so much.

Is Lucid stock now a buy for my portfolio? I still don’t think so, and here’s why.

EV boom: Lucid’s investment case  

Before I get to Lucid itself, I recognise how exciting the electric vehicle (EV) market is today. Indeed, sales have surged in 2021, and I expect this to grow further from here.

There are going to be many opportunities for investors to benefit from this sector. Lucid may well be a good way to gain exposure to the growth in EV numbers. It’s not the only way, though. I wrote about a ‘picks and shovels’ approach to the EV market here.

Lucid released its third-quarter results ending 30 September last month, and there were some positive signs. Firstly, customer reservations for its EVs rose to 13,000 in the quarter, which represents sales of approximately $1.3bn. Reservations increased further to over 17,000 by the time the results were announced, which would mean sales reaching $1.7bn.

The company also said vehicle production started in the third quarter. This is vital if Lucid is to meet customer demand for the 17,000 EVs that have already been reserved.

Why I’m still not buying Lucid stock, yet

The results release wasn’t all positive. For one, revenue was only $232,000 and missed analysts’ expectations of $1.3m. The loss was also 43 cents per share, and investing in any loss-making company is always higher-risk, in my view.

However, I’m not so concerned about the financial results as it stands. It’s well understood that Lucid’s investment case is all about the potential for its EVs in the (hopefully) near future. Therefore, it wasn’t likely to generate significant revenue in this quarter.

One reason I’m not buying Lucid stock today though is its high valuation. If it generates the expected $1.7bn of revenue next year, the share price today is valued on a price-to-sales ratio of 39. I think this is a sky-high valuation. Lucid is going to have to execute flawlessly to make those sales, and there’s no guarantee it will.

The next reason is the announcement that Lucid is being investigated by US regulators over its forecasts it made when it listed via the SPAC. At this stage, it’s difficult to know if this will amount to anything. But at the very least, it makes a potential investor like myself question the validity of forecasts in the quarterly earnings releases. Until I know if the US regulator is satisfied with Lucid’s projections, I’m staying away.

So, for now, I’m going to keep Lucid stock on my watchlist. There could be huge potential here, but I feel there are better shares to buy today.

Dan Appleby 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.

Yesterday, after weeks of negotiation, it was announced that National Express (LSE: NEX) has agreed a share-based takeover of Stagecoach. Here, Stagecoach shareholders will get 0.36 National Express shares for every one they own, meaning they will own around 25% of the combined company. This will bring together two of UK’s largest public transport operators, provided that the Competition and Markets Authority doesn’t have any objections. I feel that this acquisition makes perfect sense, and this is why I’d buy the FTSE 250 stock today.

Why am I so optimistic about the acquisition?

Firstly, the merger is likely to create significant synergies, which is expected to lead to cost savings of around £45m. This is higher than the original estimate of £35m. These costs savings will be achieved through sharing depots and around 4o job cuts from head offices and corporate departments. 

Further, the acquisition values Stagecoach at £470m, and I think that this undervalues the company. Indeed, even in the face of multiple lockdowns, Stagecoach still made revenues of £928m last financial year. Partially due to the government support that it received, it also made statutory pre-tax profits of £24.7m. Things have further improved in the first half of this financial year, with operating profits totalling £32.9m and revenues totalling nearly £600m. As such, with it valued at just £470m, I think the company seems like a bargain. This makes it a very shrewd acquisition for National Express.

By acquiring another FTSE 250 stock in the transport industry, I feel this is a sign of major optimism from National Express. This is because it shows a genuine belief that the transport industry can recover from the pandemic. I’m hoping that this optimism can pay off in the long term.

Risks for the FTSE 250 stock

Despite these signs of optimism, things still seem very uncertain in the travel industry at the moment. This is particularly true considering the rise of Omicron in recent days. There is a possibility that this could provoke a new lockdown, which would have devastating consequences for National Express, as travel would be halted.

While this seems like a worst-case scenario, the new variant is likely to cause more wariness among consumers. This may prevent many from travelling. As such, there is a risk that the recovery will be hindered. This must be taken into consideration.

My consensus

Despite these risks, I still feel that the strengths of this FTSE 250 stock are too strong to ignore. In fact, in addition to the company’s presence in the UK, which should be bolstered through the recent acquisition, National Express has a strong presence in both North America and Spain. Accordingly, I believe that the transport operator is well-positioned for the future. This will hopefully allow it to be at the forefront of the post-pandemic recovery. Therefore, I’m very tempted to add some more National Express shares to my portfolio.

Stuart Blair owns shares in National Express 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.

The Avacta (LSE: AVCT) share price has been languishing for the past couple of months. Since the beginning of August, the stock has declined by around 13%. Over the past year, shares in the testing and diagnostics group have increased by just 1.6%. 

The stock has underperformed even though its published a robust set of results for the period ending 30 June at the end of September. The company reported an increase in revenues to £2.3m and a cash balance at the end of the period of £37m. 

The firm has also announced that its antigen lateral flow test has performed strongly when testing to identify SARS-CoV-2. 

First sales 

The first sales of its flagship AffiDX SARS-CoV-2 antigen lateral flow test occurred after Avacta’s first-half results were published. As such, it looks as if investors will have to wait and see what sort of an impact these deals will have on the group’s top and bottom lines. It will also be interesting to see how much of an impact these sales will have on cash flow. 

Running out of cash is usually the main reason why small businesses fail. Even though Avacta is not a small business by conventional standards, with a market capitalisation of £283m, the group is still tiny compared to its international testing and diagnostic peers. Some of these companies have multi-billion-pound market capitalisations. 

Avacta has enough cash to sustain its losses for around a year, so there is no immediate pressure on the balance sheet. Still, I am sure the company’s shareholders would rather see profits than losses. 

I think this is one of the main reasons why the Avacta share price has struggled over the past couple of months. It seems to me as if the market is waiting for the company to report on the sales of its flagship testing product. This testing product could produce a significant revenue stream for the group, which has been losing money consistently for years. 

Without a turnaround, the corporation may continue to report losses and, sooner or later, it will have to raise new funds. Some investors may not be willing to back the company with additional fundraising. They may be staying away from the business until there is more clarity. 

Avacta share price catalyst 

However, Avacta is far more than just a testing business. It recently began the first stage of testing for its AVA6000 drug. This is part of the company’s preCISION chemotherapies and Affimer immunotherapies slate of treatments, which have the potential to transform cancer therapy. 

These treatments may have potential, but it could be years before they reach commercialisation. In the meantime, the company will have to find funding from somewhere. Its testing division could provide this capital. 

So overall, it looks to me as if the market is waiting for further news from the business before buying into the stock. I would use the same approach. I am not willing to buy the shares today but might reconsider my position if and when the company is starting to produce cash flow. 

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.