Small-cap stock Joules (LSE: JOUL) fell by over 20% in early trading on Tuesday. The drop was triggered when the fashion retailer warned that profits would be lower than expected this year. Joules’ share price has now fallen by 50% from this summer’s peak, although it’s still up by 5% over the last year.

I’ve been digging into today’s update and crunching the numbers. I reckon this successful retail stock might be starting to look cheap at current levels. Should I add Joules shares to my Stocks and Shares ISA?

Sales rise by 35%

Like most of the UK retail market, Joules has suffered from supply chain problems over the last six months. Despite this, sales rose by 35% to £128m during the six months to 28 November.

The gains were driven by rising store sales as well as online growth. According to the company, in-store sales were only 3% lower than during the same period before the pandemic. This gives me confidence that Joules’ shop portfolio is still performing well, despite the general trend towards shopping online.

The only real disappointment is that supply chain problems have caused delays in online deliveries. Performance during November — including Black Friday — was below expectations.

Will Joules’ profits rise or fall this year?

A profit warning is never good news. But the picture at Joules seems to be better than I thought it might be.

According to the company, adjusted pre-tax profit for the current financial year is now expected to be between £9m and £12m.

This is a wide range, which suggests there’s still a lot of uncertainty. But even at the bottom end, £9m would still be 50% ahead of last year’s pre-tax profit of £6.1m.

Unfortunately, City analysts had even higher expectations for this year. Consensus forecasts before today were targeting a pre-tax profit of £15m this year. That seems unlikely now.

Should I buy this small-cap stock today?

Since its flotation in 2016, Joules’ annual sales have risen from £131m to around £200m. I’ve been impressed by the company’s performance and its ability to keep growing. The company’s country lifestyle vibe seems to resonate well with shoppers. Profit margins look quite respectable to me.

Another thing I like about this business is that founder Tom Joule still owns nearly 22% of the stock and sits on the board. I reckon this should ensure the company is run with shareholders in mind.

The main risk I can see after today’s profit warning is that the group’s recovery will take longer than expected. The combined impact of the pandemic and supply chain issues is hard to predict.

I think the worst is probably over, but I can’t be sure of this. In my experience, the first profit warning is often the start of a company’s problems, not the end of them.

I estimate that after today’s slump, Joules shares could be trading on around 17 times 2022 forecast earnings. At this level, I think the stock could be quite reasonably priced, if management can get growth back on track in 2022/23.

I’m not going to buy Joules today. But if the shares fall much lower, I may consider adding the stock to my portfolio.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Joules 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.

Recently, I have been looking for UK shares to buy today for my portfolio. I have been concentrating on a couple of sectors, which I believe are perfectly positioned to benefit from significant themes in the UK economy. 

These themes include the growing e-commerce industry and housebuilding industry. These sectors are currently experiencing robust growth, driven by rising consumer demand for e-commerce and new properties. 

Here are four companies in the two different sectors that I would buy for my portfolio today. 

Shares to buy for e-commerce

Rather than focusing on individual retailers that may have an edge in the e-commerce sector, I will focus on infrastructure owners. The way I see it, not every company will succeed in the retail market, but every retailer will need a warehouse to fulfil orders. 

With that in mind, I would buy Tritax Big Box REIT. This company focuses on so-called big box retail facilities, which are colossal fulfilment centres used by giant e-commerce retailers. 

Along the same lines, I think FTSE 100 real estate investment trust SEGRO also deserves a place in my portfolio. Like Tritax, the company owns a portfolio of modern warehousing and light industrial property across the UK and Europe. It is larger than Tritax and therefore has more financial firepower to push ahead with new deals. 

These companies benefit from the fact that internet giants do not want to build their own infrastructure, which can be costly and add unnecessary risks. Instead, they lease these properties from corporations like Tritax and SEGRO on long-term contracts that generally have inflation-linked terms. 

This gives these contracts a defensive nature in uncertain times. 

The one challenge these businesses could face is over construction. Money is flooding into the warehouse sector, and there is a chance the market could become oversupplied. This would put pressure on rates and could cause property values to fall. 

UK shares for property 

UK house prices have jumped over the past two years. A lack of supply and rising demand have pushed prices higher. This is good news for homebuilders. These firms are rushing to keep up with increasing demand. 

I think Berkeley Group is one of the best UK shares to buy today to invest in this theme. The company focuses on the London market and has a strong balance sheet. It plans to return substantial sums to investors over the next few years with dividends and share repurchases.

While Berkeley’s output is relatively modest, with less than 2,000 homes produced in the first half, Bellway produces more than 10,000 homes a year.

Its mass-market approach is the reason why I would also buy this stock alongside Berkeley. I believe this method of buying a builder at the high and low end of the market is the best way to build exposure to the homebuilding sector overall. 

The most considerable risk facing these companies is that of a housing market slowdown. This could hit property prices and force corporations to decrease output to match demand, reducing overall profitability.

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

I think the Legal & General (LSE: LGEN) share price is all too often overlooked by investors. The life insurance company is hardly the most exciting business, although it is one of the oldest corporations in the FTSE 100. Against high-flying tech stocks, the company looks like a throwback to a different time. 

But I think it would be silly to disregard this enterprise simply because it is not as exciting as its peers. Life insurance and pension management is a vast and growing business. As well as these business lines, the company is also one of the largest asset managers in Europe, a significant private equity investor, and has a growing homebuilding division in the UK. 

Legal & General share price opportunity 

Managing pension assets is not a business many firms can (or want to) get into. It is a highly regulated industry, which requires a lot of capital and oversight from regulators. 

On top of these challenges, companies have to gain consumers’ trust. I do not want to entrust my pension savings to a business with no track record. Legal has been a pension manager for ell over 100 years.

While past performance should never be used to guide future potential, this track record certainly gives me confidence that the company knows what it is doing. 

Moreover, the corporation manages more than £1trn of assets for clients across the world. And this asset base is growing every day. It provides a solid backstop to support the group’s operations. The funding also gives me confidence that the corporation has the financial resources to manage any situation that presents itself.

This significant asset base also provides economies of scale, further reinforcing the company’s competitive advantage and position in the UK pension market. These are the primary reasons I think the company is a great business.

Valuation opportunity 

The Legal & General share price also currently looks attractive from a valuation perspective. Indeed, the stock is trading at a forward price-to-earnings (P/E) multiple of 8.8. Further, it offers a prospective dividend yield of 6.4%. This is one of the highest dividend yields in the FTSE 100. 

Unfortunately, the payout is by no means guaranteed. As the firm manages the life savings of tens of thousands of consumers, regulators keep a close eye on its dividend. 

If they think the firm could be at risk of financial stress, regulators will almost certainly force it to cut the payout. Policymakers could also introduce additional rules and regulations, which may increase group costs and impact the company’s profitability. 

Despite these potential challenges, I would be happy to buy the stock for my portfolio today. Considering its competitive advantages and current valuation, I think the Legal & General share price looks incredibly attractive at current levels.

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.

Whatever happens with a pandemic over the next few weeks and months, I think 2022 will be a crucial year for the Carnival (LSE: CCL) share price.

After nearly two years of disruption, huge losses, and emergency cash calls, the group needs to get itself firmly back on track. Unfortunately, there is no guarantee it will start rebuilding in 2022. 

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

Carnival share price scenarios

In the best-case scenario, the economy will continue to reopen in 2022. Consumer confidence will return. The company will report a significant increase in bookings as well as occupancy on its cruises. 

The company may also benefit from a decline in stringent Covid testing requirements. These have added considerable costs to its operation. When these costs are removed, profit margins will increase, helping the group’s recovery and cash generation. 

In the base-case scenario, and the one that I think is most likely for the year ahead, bookings and occupancy will continue to increase from last year’s depressed levels. Although the recovery will be relatively slow compared to the best-case scenario, it will provide much-needed cash flow for the company to start chipping away at its debt pile and substantially reduce losses. 

There could be a return to March 2020 conditions in the worst-case scenario. For the first few quarters of 2020, Carnival’s revenues plunged to zero. It went from earning around $5bn a quarter to nothing almost overnight.

As a result of this collapse, management had to pull out all the stops to try and raise funding to keep the lights on. It nearly failed. If the US Federal Reserve had not stepped in to provide funding for the global capital markets, it is unlikely the company would have survived the initial shock in the first half of 2020. 

Company outlook

As I noted above, I think the base-case scenario is the most likely outlook for the Carnival share price next year. Considering how much disruption the first set of lockdowns caused, it seems unlikely the world will shut down again. 

What’s more, most of Carnival’s voyages set sail from Florida. This state has stayed away from imposing the sort of severe restrictions some countries have employed around the rest of the world. As such, I think the group will likely continue to see rising demand for its offer.

Therefore, I think the company will continue to recover in 2022. This could be good news for the Carnival share price. As sales and earnings rebound, the stock should reflect this growth.

Still, some investors may continue to give the business a wide berth until there is more certainty about the outlook for the travel industry.

Considering the risks outlined above, I would buy the stock, but only as a speculative position for my portfolio. 

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.

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Many UK investors will have heard of Purplebricks (LSE: PURP) and seen its TV ads or signs outside homes for sale. But why did Purplebricks shares lose around a quarter of their value yesterday?

What happened?

The online estate agency has revealed that it expects to make a provision of millions of pounds – potentially up to £9m – because it didn’t properly serve legally required documents to tenants explaining that their deposits had been put into a national protection scheme. Its failure to inform tenants within 30 days means they should be able to claim back up to three times the value of the deposit, up to six years after the event.

The Daily Telegraph reported on the blunder first, leading to a response from the company. The paper said the figure could theoretically be as high as £30m.

Overall, the debacle gives the impression of a company that’s cutting corners and doesn’t have the systems in place to do the basics that are legally required of it. No wonder the shares fell. Investors will be fretting about the immediate cost but also what it says about management’s competence. It also makes me wonder what other skeletons might be in the closet.

Is Purplebricks stock now a good buy?

But does the price fall means Purplebricks shares are cheap enough for me to buy? I don’t think so. This latest mistake was avoidable and follows on from an already poor share price performance. The shares are down more than 70% in the year to date.

A trading update in November warned that despite a strong period for the UK housing market in 2021, buoyed by the stamp duty holiday, the six months to 31 October 2021 were more challenging.

The online agency has more recently said the UK housing market is set to be closer to “normal” in 2022, following a “hectic” last 18 months. New business is slowing down already. 

This isn’t the only issue the firm faces. Hundreds of current and former Purplebricks agents are pursuing legal action against the company. They claim they’re entitled to benefits such as holiday pay, pensions and national insurance contributions. The company has moved from self-employed agents to employing staff directly. Similar moves at companies like Provident Financial have been bad news for shareholders as costs have risen.

Competition in online-only, or hybrid agency models is another issue for management and investors and one that’s no doubt having a negative impact on Purplebricks shares.

On the brighter side perhaps the shares are now poised well for a contrarian gamble? They detianly have fallen a lot. Purplebricks does also have strong brand awareness. 

Better options

I hold shares that are connected to the property market. The first is Property Franchise Group. It manages around 55,000 properties and is also involved in house sales. Between 2015 and 2020 its revenue went from £7.1m to £11m. It’s a high-growth share on an undemanding valuation. I also like — and own shares in — housebuilder Persimmon. It has best-in-class margins and a lot of cash on the balance sheet to pay the dividend and buy more land.

I much prefer to hold Property Franchise Group and Persimmon over Purplebricks shares – though both could fall if the property market slumps. I fully expect the latter’s share price to keep falling.

Andy Ross owns shares in Property Franchise Group and Persimmon. 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.

Berkshire Hathaway lists two S&P 500 ETFs in its holdings. SPDR S&P 500 ETF and Vanguard 500 Index Fund ETF. It’s true that they represent a tiny fraction of Warren Buffett’s company’s holdings at around $40m, but nonetheless, I find it interesting. Especially, when the Oracle of Omaha so often mentions the benefits for regular investors in holding such funds. 

I’ve already invested in an equivalent London-listed ETF for my own portfolio, but with 2022 approaching, I’m revisiting this ETF strategy again.

S&P 500 ETFs

The S&P 500 is widely considered the most important index in the US. It contains 500 large companies that are selected by a committee. Firms must have a big enough market cap, at least 10% of their shares outstanding and meet liquidity and profitability requirements.

It includes big-name companies such as Microsoft, Apple and Amazon. In terms of industries, the index includes a variety of sectors such as technology, retailers and banking.

As such an important index and essential barometer of US stock market health, it’s no surprise that there are lots of ETFs available.

The funds I’m interested in for my own portfolio are the ones listed on the London Stock Exchange. These allow me to easily and cheaply buy shares in an S&P 500 ETF using GBP. Most, if not all, of the major investment companies offer such an ETF and there’s just so much choice.

The largest one listed in the UK is iShares Core S&P 500 UCITS ETF at over £40bn. The cheapest one is Invesco S&P 500 UCITS ETF with an ongoing charge of 0.05%.

There’s also the question of dividends. Some of the ETFs pay out dividends, some don’t. Personally, I like the income stream.

For my own portfolio, I’ve previously chosen Vanguard S&P 500 ETF (LSE: VUSA), as this seems to sit in the middle in terms of size ($47m) and costs (0.07%). The Vanguard fund has a current yield of 1.12%.

It’s no secret that over the last two years, the S&P 500 has performed well. This is reflected in the returns of the Vanguard ETF. At the time of writing, the share price is up over 30% for the year with a similar return over a 12-month period. The five-year performance is even better with a return of around 100%.

Should I still invest?

Despite the fantastic returns, looking ahead to next year, there are no guarantees of how the ETF will perform. Questions about inflation, government policy and potential Covid lockdowns are all on the horizon.

One downside of buying the ETF is that I limit my returns to those of the index. I could be wrong, but it’s possible that an uncertain market creates opportunities. By picking individual stocks I might be able to outperform it.

Also, this fund and the index itself only include US companies. Yes, many of these companies have revenue streams from outside the States, but the percentage has been falling over time.

However, on balance, going into 2022 I’m still comfortable including an S&P 500 ETF in my holdings as part of a diversified portfolio.

Niki Jerath owns shares in Vanguard S&P 500 ETF. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon, Apple, and Microsoft. 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 recent months, the UK retail grocery sector has been ripe with acquisitions. Two of the ‘big 4’ supermarkets – Asda and Morrisons – have been bought by private equity (PE) firms. This has largely been spurred by the sector’s resilience during the pandemic.

The interest in Morrisons led to its share price rocketing. It was purchased by CD&R for just under £10bn, including debt. This equated to a 287p per share offer, over 60% higher than the pre-acquisition announcement price.

M&S (LSE: MKS) has proved itself as one of the hottest FTSE 100 stocks this year, delivering over 80% year-to-date returns. In mid-August, on the Morrisons news, the M&S share price jumped over 25% as investors saw it as another potential target. If this did occur, I think we could see the share price of the FTSE 100 stock explode.

Acquisition case for M&S

In my opinion, there are three key factors that highlight M&S as an attractive investment opportunity for a private equity firm.

The first is strong cash flows. The PE model rests on using large amounts of debt to fund an acquisition (called a leveraged buyout). The aim is to pay down this debt using the cash flows produced from the acquired company, building the PE firm’s equity stake in the company. The company can later be sold and the difference in starting and ending equity value is the return on investment. In order for this model to work, the company needs strong, stable cash flows. M&S has just that, delivering £296m cash in 2021.

Them there’s its large property value. One thing that’s particularly attractive about M&S and many retail grocery firms is the large amounts of property they hold. For example, at present, M&S has an estimated £1.8bn worth of property. This is attractive for PE firms because this property can be sold to help fund transaction costs.

The low-interest-rate environment is a broader factor that makes PE investment very attractive. This makes raising capital and sustaining debts very cheap. This is critical for PE firms as their whole acquisition model relies on using large amounts of debt.

Potential risks

Although the above factors highlight the attractiveness of M&S shares, there are still risks that must be considered if I were to consider a purchase. One such risk is the fact that although current interest rates are very low, many investors are expecting them to rise very soon to combat rising inflation. If this is the case, then it will make it harder to raise capital and PE investment will be less attractive.

M&S has already increased its online delivery presence through its 50% stake in Ocado. The pandemic has vastly accelerated the shift to online grocery shopping. While this is encouraging, it also means that M&S will have to compete with a much wider range of grocery delivery firms moving forward. It will have to successfully navigate this competitive landscape if it wants to carry on delivering good results. 

I think M&S is one of the most attractive FTSE 100 stocks for a PE acquisition that could drive a steep share price rise. But acquisition talk aside, I think M&S’s strong results and online presence could make it a great investment opportunity for my portfolio as an independent company. Those features that make it attractive to PE firms, make it attractive to me too!

Dylan Hood 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.