Renewable energy is the future. There’s no two ways around it. While electric cars may be making all the headlines, there is another technology that I think is far more viable. Prime Minister Boris Johnson has announced his hopes that the UK would become the ‘Qatar of hydrogen’.

But what is hydrogen? How is it different and what are its benefits?

Hydrogen fuel

Hydrogen is the simplest atom in existence and it is very, very abundant. However, it is also highly reactive, meaning it usually combines with other elements to form compounds. This is how we get water (hydrogen and oxygen). That reactivity gives it great energy potential, if it can be separated from whatever it’s bound to.

Hydrogen has an advantage over the lithium-ion batteries used to power electric cars. It is far more energy dense, so it can power heavy machinery or industrial manufacturing.

People can also transport it easily without the hydrogen losing energy in the process, unlike electricity sent over long-distance cables.

Renewable energy conversion

Right now, ITM Power (LSE: ITM) is my top pick in this field. The company builds the modular hydrogen electrolysis machines which separate hydrogen from water. The machines are attached to existing renewable infrastructure, producing green hydrogen.

Green hydrogen is any hydrogen produced by a method which does not release carbon dioxide, standing in stark contrast to blue or grey hydrogen, which are both made by reforming methane gas and release CO2 as a by-product.

ITM has a lot of debt right now but has recently raised £250m to fund construction of two new factories and is poised to meet growing demand.

My main worry with ITM is that it has struggled to turn a profit for several years and still isn’t forecast to do so for at least another three. However, I believe that this is because demand for hydrogen has historically been low — fact which is currently changing.

Higher efficiency

Another hydrogen-based company on my radar is AFC Energy (LSE: AFC). This company manufactures the fuel cells needed to turn hydrogen fuel into electricity. What makes AFC special is their patented alkaline fuel cells which are able to run on lower purity hydrogen with the same efficiency.

On the financial side, unfortunately, AFC suffers from many of the same setbacks as ITM power. High debt, low revenue, and it has yet to turn a profit.

But AFC is growing. It increased revenues in 2021 and expects further growth through 2022. On top of that any company that uses its alkaline fuel cells will be able to use cheaper, lower grade hydrogen, giving AFC a competitive advantage.

Conclusion

Hydrogen power still remains untested at a commercial scale and I consider it a riskier investment compared to more established fuel companies.

But the market has a clear desire for hydrogen.

JCB just signed a multibillion-pound deal with Fortescue Future Industries (a subsidiary of Fortescue Metals Group) to import green hydrogen all the way from Australia. 

What I’m betting on is that other firms around the world need access to a low carbon fuel. I fully expect ITM and AFC to have some growing pains, but to ultimately come out on top. This is why I’m adding them both to my portfolio.

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.

Penny stocks can often grow into larger established stocks and generate impressive returns. Before that point, they possess greater risks with their low market capitalisation and lack of information in some instances.

With that in mind, one penny stock I believe could be a good buy for my portfolio in 2022 and beyond is Foxtons Group (LSE:FOXT). Here’s why.

Meteoric rise

Foxtons is an estate agency originally founded in 1981 in Notting Hill, London. It has grown to be London’s leading estate agency with multiple branches throughout the city and it’s website receives approximately 10m visits a year.

Penny stocks trade for less than £1. As I write, Foxtons shares are trading for 40p. A year ago, the shares were trading for 48p, which is a drop of 16% across a 12-month period. It is also worth noting that the Foxtons share price has returned to its pre-pandemic level, which was 90p just before the market crash in 2020.

Why I like Foxtons

Firstly, Foxtons has a strong competitive advantage due its profile and brand recognition. The London property market is very saturated so establishing itself as the leading estate agent in the city is a remarkable achievement in my eyes. It also continues to grow and open new branches throughout the city to capitalise on the current booming market.

Right now, the housing market is booming and Foxtons is benefiting. The government’s stamp duty holiday aided this boost. Foxtons is also shrewd as it understands that buying and selling houses can be profitable, but it is also cyclical. The boom may not last for long or may disappear and re-emerge. To combat this, it also has a burgeoning lettings division. Buying property in London is tough due to high prices, therefore lettings are on the rise. Foxtons can take a slice of rent from lettings properties it manages, which is a guaranteed form of revenue.

Foxtons also recently completed an acquisition of smaller competitor, Douglas and Gordon. This will also help boost its revenue. I like when a company acquires a competitor to enhance their profile and offering. This is a statement of intent when it comes to boosting growth and performance, especially for a penny stock with less financial clout.

Speaking of performance, at the end of October, Foxtons released an update for the nine months ended 30 September. These results were positive. Group revenue increased 50% compared to 2020 levels and 24% compared to 2019 pre-pandemic levels, which is impressive. Each of its segments — lettings, sales, and mortgage brokering services — saw increased performance compared to 2020 and 2019 levels.

Penny stocks have risks too

Foxtons is still a relatively small business and the property market is a huge machine with many cogs. A larger competitor with more financial muscle could eat away at its market share if it wanted to do so. Furthermore, the housing market is cyclical as mentioned. Any downturn or negative news could affect performance.

Overall I feel Foxtons would be a good addition to my portfolio in 2022 and I would add the shares to my portfolio at current levels. It possesses a good competitive advantage, has made the most of the recent boom, and is taking steps to grow even more. I would buy the shares and hold them for a long time.

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.

Taylor Wimpey (LSE:TW) is a FTSE 100 stock with a juicy dividend yield that could make me a nice passive income. Should I add the shares to my portfolio? Let’s take a look.

FTSE 100 house builder

Taylor Wimpey is one of the UK’s largest house builders and has operations in Spain too. It operates through 23 regional businesses and has a nationwide presence. The company builds a range of houses from affordable housing to more luxury developments.

As I write, the Taylor Wimpey share price is 168p. At this time last year, shares were trading for 156p, which is a 7% return across a 12-month period. The FTSE 100 dividend yield average is 3%. Taylor Wimpey’s current dividend yield is close to THREE times that at 8.9%, which is enticing. Dividends are by no means guaranteed, however. They are intrinsically linked with the performance of a company and can be cancelled at any time, affecting any passive income I hope to make.

For and against investing

FOR: The current demand for new homes is huge and the government has committed to doing everything it can to boost the numbers. Low interest rates coupled with schemes to help people get on the property ladder add to the notion of a booming housing market. All this will help Taylor Wimpey in its demand for its products, and in turn performance. This performance could then lead to handsome investor returns in the form of dividends, making investors a passive income.

AGAINST: Macroeconomic pressures and the ongoing pandemic worries could dent any progress and investor returns. Rising costs could eat away at margin, linked to rising inflation. Furthermore, supply chain issues are also becoming a concern for firms like Taylor Wimpey, which needs essential materials to build homes. This could affect the bottom line and any passive income I hope to make by buying the shares.

FOR: At current levels, Taylor Wimpey shares look cheap to me. The shares sport a price-to-earnings ratio of close to 10, which is cheap for a quality company with a juicy dividend yield. Performance of late has been positive as well. A trading statement in November pointed to strong sales growth and a bright outlook ahead. Profit for FY 2021 should be achieved based on its initial guidance.

AGAINST: The house building marketplace is very competitive. Other FTSE 100 house builders that are vying for the same market share and customers include Barratt Developments and Persimmon. With such a competitive market and each firm trying to gain the advantage, performance could be affected, which would affect any investor returns.

Passive income opportunity

Right now I would happily add Taylor Wimpey shares to my holdings. At current levels, the shares look cheap to buy. The dividend yield is too juicy to ignore and this would help me make a nice passive income for my portfolio. Despite macroeconomic challenges, the market as a whole is burgeoning and demand for houses is outstripping supply at the moment. Taylor Wimpey should benefit from such favourable conditions, as will other FTSE 100 house builders.

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.

Whenever a FTSE stock announces an acquisition, I am interested to learn more. What’s the reason behind the acquisition and how will it help the company in question? Halfords (LSE:HFD) announced a major acquisition last week that I believe will boost its profile, growth, and performance in the short and long term. Should I add add the shares to my portfolio at current levels? Let’s take a look.

FTSE retail giant

Halfords is the UK’s leading retailer of cycling products as well as automotive products and services. It employs over 10,000 people and has more than 750 locations throughout the country. Halfords claims that 90% of the UK is never more than 20 minutes away from a Halfords shop or one of its auto centres.

As I write, Halfords shares are trading for 352p. A year ago, the shares were trading for 260p which is a 35% return over a 12-month period. In recent weeks, positive interim results and the acquisition deal  have boosted the shares. In December to date, Halfords shares are up 10%.

Acquisition and positive performance

On 1 December, Halfords announced it signed a sale and purchase agreement to purchase Axle Group Holdings Ltd for £62m. Axle owns the National Tyres and Autocare, Viking Wholesale Tyres, and Tyre Shopper brands.

This acquisition is a great move in my opinion. Halfords already has its own auto centres where it offers MOTs and services for motorists. Upon completion, Halfords will have approximately 604 garages, 234 consumer vans, and 190 commercial vans. This number will mean it has comfortably surpassed its target of 550 garages. Halfords places a great emphasis on motoring revenue and the National Tyres and Auto Care centres will help grow its motoring revenue stream. 

In November, Halfords also reported positive interim results for FY 2022. It confirmed that revenue, profit, sales growth, and cash generation had increased compared to 2021 levels. Many FTSE stocks in the retail sector have suffered due to supply chain issues. Halfords pointed towards the same problems but was able to leverage its competitive advantage and huge profile to record excellent results.

Risks of investing

Buying Halfords shares does come with risks, however. As mentioned, the current supply chain crisis has meant many businesses are unable to fulfil the demand for some of their products. Halfords has faced this issue in its burgeoning cycling department. If these issues persist, performance could be affected. Rising inflation and costs are a worry too. If these costs are passed on to customers, Halfords could lose customers and market share. This could affect performance and investor returns as well.

Overall, I believe this recent acquisition and the recent positive results will boost Halfords growth trajectory upwards. In addition, Halfords has a good track record of performance which fills me with confidence too. I understand past performance is not a guarantee of the future but I use it as a gauge when reviewing assessment viability. Halfords currently sports a price-to-earnings ratio of just 12, which I consider cheap. At current levels I would happily add Halfords shares to my portfolio.

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.

The late great investor, John Bogle, once said that timing the market is a loser’s game. Bogle, being the creator of the very first index fund, likely knew a thing or two on the subject. His advice is why I don’t worry much about timing the market. I’m more concerned about buying great stocks that I think are trading at a discount to their intrinsic value.

However, I can’t help but look back at what has been an interesting year in the markets and imaging what could have been. Since hindsight is 20/20, here are two top-performing FTSE 100 stocks I would have bought earlier this year if I knew then, what I know now. 

The FTSE 100 leader in 2021 (so far)

Ashtead Group Plc (LSE: AHT) has had quite the run, racking up 94.6% in share price appreciation, year to date. If I had known, I would have bought this stock in early January, when it was trading closer to 3,500p. This company is widely known as the parent company of Sunbelt Rentals, the equipment rental giant in North America and the UK. Sunbelt is a leader in this field with over 800,000 individual assets available for hire to a massive customer base.

In its latest quarterly report, Ashtead updated its expected revenue growth by 2%-5% by the end of the fiscal year. This bodes well for the stock, which has consistently created good returns for investors over the past five years. As a dividend stock, there’s not much to be made here as its current dividend yield is a miserly 0.68%. If I depended on a steady flow of dividend income, this would be concerning. But as an investor with a value orientation, I can appreciate reinvesting earnings. Ashtead has seen free cash flows quadruple over the past three years to almost $2bn.

Betting on the future 

I wrote an article earlier this year about the success of Entain (LSE: ENT), which has flown right in the face of the pandemic. The past year has seen this stock shoot up by 54.97%, and I wish I had been along for the ride. Entain is one of the world’s prime gambling stocks. It benefits from massive brands such as Ladbrokes, Bwin, Party Casino, and a 50% stake in BetMGM. The FTSE 100 company has actually been so successful that it has attracted the attention of the US gambling group, Draftkings. Even though the $20.4bn offer by Draftkings to purchase Entain fell through, it was evidence that many in the market believe Entain is not only a great business but also currently undervalued.

Again, if I were a dividend driven investor, I would be wary about the mere 2.8% dividend yield on this stock. Also noteworthy is the tiny bottom line this company generates considering it consistently has gross profits of over 60%. It did well nonetheless this year, and I expect it to continue to do so in 2022.

Stephen Bhasera 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.

Penny stocks possess greater risks than more established stocks. Some of these picks can provide lucrative returns in the long term, however. I believe Esken (LSE:ESKN) could be a good recovery play for my portfolio. Should I add Esken shares to my holdings at current levels?

Aviation and energy

Esken is a UK infrastructure company. It has two divisions, which are aviation and energy. Its aviation division helps manage airports and run day to day operations. It currently manages London Southend Airport. Other aviation services include baggage, checking-in, and other logistics solutions. The energy division helps provide fuel to biomass plants.

Penny stocks are those that trade for less than £1. As I write, Esken shares are trading for 14p. This means it is one of the cheapest shares on the FTSE index right now. A year ago shares were trading for 21p. The pandemic has affected the share price. Aviation and travel stocks have had a turbulent 18 months due to restrictions and the pandemic.

For and against investing

FOR: Despite the current issues in the aviation industry, I like that Esken’s business has a diversified offering. Aviation may eventually pick up if the pandemic eases but it continues to operate its energy division, which has seen growth recently. I especially like penny stocks that have a diversified offering and don’t rely on one form of revenue stream.

AGAINST: Aviation is the larger division. The well documented issues that the aviation industry has faced since the pandemic started put me off. With the threat of new variants, which could result in more restrictions and less travel, the aviation industry’s woes may continue for a long time. There is a school of thought that living with the pandemic is the new normal and there will be peaks and troughs of travel.

FOR: A half-year report announced in November for the six months ending 31 August showed me signs of recovery for Esken. It reported that revenues increased by close to 8% compared to the same period last year. This was mainly driven by its energy division and its growth. Furthermore, aviation losses had declined less than the same period last year. Esken also managed to make a profit based on an earnings before interest, taxes, depreciation, and amortisation (EBITDA) basis for the half-year period.

AGAINST: Esken shares are still way off pre-pandemic levels which is understandable but still an issue for me. Furthermore, it was reporting consistent losses prior to the pandemic which is usually a red flag. If aviation woes continue and energy cannot pick up the slack, Esken may not report a profit for some time.

Contrarian penny stock option

Every now and then I like to pick a contrarian stock for my portfolio. This is usually a stock that has potential and is currently dirt-cheap so I am not risking lots of my hard-earned cash.

I place Esken in this contrarian bracket. Despite some credible risks and issues, for 14p per share, I would be willing to buy a small amount of shares for my holdings and keep an eye on developments. I see some potential in Esken in the longer term. If this potential doesn’t materialise, I wouldn’t have lost a substantial amount of money buying this penny stock.

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.

Today is not a great day for the FTSE 250 index, or a particularly bad one, for that matter. As I write, it is down by 0.7% from last week’s close, which is just not a big enough number to take note of. However, some stocks are trading very strong today in any case. One of them is the greeting cards e-retailer Moonpig (LSE: MOON). It is up some 7.2% as I write, an increase second only to Jupiter Fund Management, which is up by an even bigger 8%.

My latest article on Moonpig was published only this Saturday. And in that, I had said that I would refrain from buying the stock right now. My sense was that it was way too pricey for me. Yet, cut to Monday, and it is rallying. What is going on here? And more importantly, was I wrong in deciding not  to buy it?

Why is the Moonpig stock rallying?

First, let us talk about why the FTSE 250 stock could be rallying. I reckon this is directly to the Omicron variant. From my own portfolio of FTSE 100 stocks, I can see the trend among gainers today. These include the likes of AstraZeneca, Ocado, and Rentokil Initial. All three are good defensives against a potential virus-induced market meltdown. 

For instance, AstraZeneca is the Covid-19 vaccine maker and healthcare stock, which is a good safe stock at anytime. The Ocado stock saw its most glorious times last year as we ordered groceries in during the pandemic, and Rentokil Initial, the pest controller and hygiene services provider, saw strong demand for the latter during Covid-19 as well. Similarly, Moonpig also saw a spurt in growth last year, as its bricks-and-mortar competitors were temporarily removed from the game. As virus fears rise again, it is little wonder that investors are betting on the stock again.

Robust fundamentals

Moreover, as I pointed out in my article, its performance is still pretty decent. It might have declined after the lockdown boom, but compared to 2019 it is strong. This could bode well for it in the future as well. This is especially since we are still quite hopeful of recovery next year, which is a good time for discretionary consumer spending.  

But even if the latest variant sends us back in to lockdown or makes us cautious about going out, I reckon that the Moonpig stock could stand to gain like it did last year. In other words, this is one stock that could be a winner either way. 

Should I have bought the FTSE 250 stock earlier?

So was I wrong in saying that I would not buy it?

The fact is, I still believe the stock is too pricey. In fact, the latest update price-to-earnings (P/E) number is 143 times. I think that is an eye-watering number, and I can think of multiple FTSE 100 stocks that could give me good returns at lower relative prices. Also, with rising inflation, I think consumers could cut back on discretionary purchases going forward. I maintain, that for now it is just too risky for me to buy the Moonpig stock.

Manika Premsingh owns AstraZeneca, Ocado Group, and Rentokil Initial. The Motley Fool UK has recommended Jupiter Fund Management and Ocado Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It’s not always possible for people to put large amounts of money into setting up passive income streams. But I think the good news is that even with a relatively modest amount, I could aim to start earning extra money without having to work for it. Here is how I would do that by investing in dividend shares, in three simple steps.

1. Putting aside a regular amount

Putting aside £5 a day would give me £35 a week in investment capital with which I could start to try generating passive income. And £5 a day is what many people spend on a fancy drink, or a couple of coffees. It’s not a negligible amount, but with financial awareness I would be able to put it aside each day without thinking too much about it.

What is critical is that I actually start, rather than just thinking about doing it. If I set up a regular bank transfer, or had a savings jar at home into which I put a £5 note each day, I would actually start to see the money add up. That is something I don’t need to wait to start doing.

That £35 a week would add up to over £900 in just six months. My patient regular saving would mean I soon had some capital I could invest in dividend shares.

2. Choosing the shares

But on its own, the money wouldn’t earn me much, if any, income. That’s why I’d want to put it into dividend shares.

But I wouldn’t do that from day one, for a couple of reasons. First, most share-dealing accounts have some charges. So saving up my daily fiver until I had more funds to invest could help me reduce the percentage of my money eaten up by such charges.

Secondly, in order to reduce my risk, I would want to diversify across shares in different companies. That would be easier to do after a few months, when my money had grown. The good news is that I could make good use of this period of waiting before investing. It could allow me to research different shares and companies and find out which might be most suitable for my personal investment objectives.

To start with, I’d try to focus on large, established companies. Then I’d zoom in on their prospects of future free cash flow. I think that’s an important thing to look at in this situation as it is cash flow that is used to fund dividends. From Unilever to National Grid and Legal & General to BP, there is no shortage of such companies I would consider. But each faces specific risks as well as having its own business prospects. So I would look carefully into the company before making my first investment.

3. Setting up the passive income streams

After that I’d be ready to start buying shares.

I would buy them with an intended holding period of years. My passive income plan is about long-term investment, not speculation. After that, I would sit back and wait for dividends to be paid. They are never guaranteed. But by carefully selecting companies and diversifying across a few, over time I would be confident my passive income streams could start generating some extra cash for me.

Christopher Ruane 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.

Tesco (LSE:TSCO) shares are among the most popular income investments to own here in the UK. While dividends have fluctuated, the payment dates remained consistent over the past five years. And even with the pandemic acting like a bull in a china shop, the company continues to pay out today.

But does this popularity make it a good investment? And if not, then which company would be a better play for my portfolio?

Inspecting the returns of Tesco shares

Tesco is the UK’s largest supermarket retailer. Beyond retaining a dominant market share, the company is actually the 16th most valuable retailer in the world. That certainly sounds like a stable business, especially since the demand for food isn’t likely to fall. With that in mind, its popularity as an investment does make sense. But has it managed to deliver wealth-building returns?

Over the last five years, Tesco shares have climbed by an impressive 46%. That figure jumps to just over 60%, including the passive income from dividends. That means a £2,000 investment in December 2016 would now be worth around £3,200.

That’s considerably more than any savings account would have generated. And compared to the mediocre 3% gain achieved by the FTSE 100, Tesco has proven itself to be a market-beating stock to own in recent years. And that’s despite rising competition from discount retailers such as Aldi and Lidl.

But Tesco may soon start struggling to maintain this performance thanks to inflation. With food prices on the rise, and profit margins too tight to absorb the increased expenses, shoppers may look to cheaper food retailers to save money. And there’s another company giving Tesco a run for its money. 

Optimising online grocery retail

Tesco might be dominating as far as consumers are concerned. But the lockdown restrictions in 2020 forced many consumers to rely on online grocery deliveries. While the pandemic will eventually (and hopefully quickly) come to an end, the increased reliance on online shopping might not.

An investigation by McKinsey & Company found that around half of the people surveyed who began ordering food online in 2020 intend to continue doing. This decision is most likely due to convenience. And this has created quite a favourable environment for Ocado (LSE: OCDO).

The online grocery retailer has achieved some pretty stellar returns over the last five years, despite its bumpy ride in 2021. So much so that a £2,000 investment in December 2016 would now be worth £10,736!

That’s over three times more than what Tesco shares have managed to deliver over the same period. And with the group also deep into supplying warehouse automation for other grocery retailers, including Morrisons and Kroger, this could just be the start of snowballing returns. In fact, there are even rumours that Ocado might focus entirely on its higher-margin automation technology, eventually disposing of its online grocery operations to its existing partner Marks & Spencer.

In the meantime, it has to face off against the likes of Tesco, which, of course, has its own online shopping venture. Meanwhile, Waitrose is now offering 20-minute online order delivery, thanks to its partnership with Deliveroo. Needless to say, that’s a challenging competitive environment for Ocado to operate in.

But I think the potential gains are worth the risk, making it a more exciting investment proposition for me than Tesco shares. At least, that’s what I think.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado Group 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.

For a while, Argo Blockchain (LSE: ABR) shares were on fire. Even now, they’re still up 860% in a year, despite losing 63% of their value since February, at the time of writing today. The question I face now as an investor considering the company for my portfolio, is whether the Argo Blockchain share price is likely to recover – or could the price plunge be permanent?

Why the shares fell

After its strong performance at the start of 2021, I think some investors have taken their profits off the table by selling shares. That has taken away some support for the Argo Blockchain share price.

But the key driver for the recent fall has probably been a declining Bitcoin price. Given its crypto mining operations and holdings, Argo is seen by some investors as a proxy for the key cryptocurrency. Its price has tumbled in recent weeks. I think there is more to Argo than just its Bitcoin mining potential, but many investors see Argo as close to a pure play on Bitcoin.

Positive signs at Argo

One thing I think the share price fall obscures is the dramatic improvement in Argo’s business performance over the past year.

Consider last month as an example. Argo reported a monthly mining profit of £7.1m. The mining margin was 86%, compared to approximately 57% last November. Last month, it mined 185 Bitcoins or their equivalent. That is a big improvement over the 115 mined in the same month last year.

Meanwhile, the company has been raising funds to gear up for expansion. Last month it issued $40m of debt, part of which it plans to use on building and kitting out a new mining facility in Texas.

Ongoing risks

While Argo’s improving business performance is encouraging, I continue to see risks in the stock. The volatile nature of cryptocurrency pricing continues to impact the share price. That could drive it up but it could also push it down, depending on which direction crypto prices move.

While the debt could help the company grow, it also adds risk. Indeed, the high interest rate of 8.75% suggests that many debt investors see risks in the company. Servicing debt in future will eat into company profits. I think that lowers the chance of a dividend in coming years.

My move on the Argo Blockchain share price

Argo Blockchain’s chief executive spent just over £100,000 buying shares on the open market last month. He bought US depositary receipts of the UK shares at a point when they were changing hands at around £1.32. Just a month later, I can now pick Argo shares up at over a 25% discount to what the chief executive paid. Should I?

I do think the business is moving in a good direction. I like the fact that the chief executive has backed up his moves with his own money. But I continue to see Argo as closer to speculation than investment. It has taken steps to decouple from crypto pricing, for example by selling some of its holdings for cash. But the link remains fairly strong. That means that even strong business performance might not help the Argo Blockchain share price, if crypto pricing falls. So, for now, I will remain on the sidelines and not add the company to my portfolio.

Christopher Ruane 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.