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The recent increase in volatility in markets has raised the spectre that another stock market crash could be just around the corner.

The emergence of Omicron a few weeks ago sent markets into a tailspin. However, subsequently both the FTSE 100 and the S&P 500 made back all their losses. What drove this sudden reversal was retail investors buying the dip; indeed, a very similar pattern emerged when the Delta variant was first discovered.

Is this a wise move or is it a case of fools rushing in where angels fear to tread?

Will history repeat itself in the event of another stock market crash?

Firstly, to my mind, the likelihood of a stock market crash being precipitated by another lockdown is minuscule. The world is in a totally different place than 20 months ago not only in terms of the vaccines but knowledge about the virus more generally.

Secondly, even if one assumes a worst-case scenario of further lockdowns, I am not convinced that all the same winners will emerge this time around. For example, the incredible run up in the share price of the likes of Peloton and Zoom are, in my opinion, well and truly over. In truth, neither company had an enduring competitive advantage. After all, everyone who wanted a Peloton bike likely already has one; as for Zoom, going head-to-head with the mega-cap Microsoft and its Teams offering was only ever going to result in one winner in the long term in my opinion. As a long-term investor, I am not interested in investing in short-term trends as I am just as likely to pick a dud as a multi-bag winner.

A third difference is rising inflation. In the US, it now stands at a whopping 6.8%, its highest level in 40 years. In the UK, it sits at 4.2%. Inflation tends to build on itself; that is why I personally never believed in the Fed’s transitory notion in the first place.

Most retail investors today have never lived through a period of rising inflation. The last significant bout began in the late 1960s, and during the following decade inflation rose in three separate waves, each peak and subsequent trough higher than its predecessor.

What does all this add up to?

Central banks do not inspire confidence in me in their ability to deal with the rising cost of living. Last month, the Bank of England stunned most economists by holding off raising interest rates. This month, Omicron has given them the perfect excuse, should they so wish, to delay again.

It isn’t difficult to see why the Bank of England and the Fed are reluctant to raise interest rates. With both governments and corporations drowning in debt, the recovery from Covid-19 still at an early stage, and the darling of the stock market, the tech sector, perfectly priced for a near-zero interest rate environment, just the mere hint of a significant rate rise to quell inflation could bring the whole pack of cards tumbling down.

The mantra amongst retail investors that has quelled every single stock market wobble since the Covid crash — “don’t panic, the Fed has got your back” — doesn’t seem to have the same ring to it any more.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Andrew Mackie has no position in any of the shares mentioned. The Motley Fool UK has recommended Microsoft, Peloton Interactive, and Zoom Video Communications. 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 Abrdn (LSE: ABDN) share price hasn’t had a great 12 months. It’s now fallen by 14% over one year as I write today. But really, the share price has stagnated since the end of 2018. The stock also had a rather volatile time during 2020 as the pandemic unfolded, so investors haven’t had much to cheer about.

But is this set to change? I say this because the company announced a large acquisition this month. The signs are that it’s a top quality business too.

Here’s what I think about the prospects for the Abrdn share price now.

The acquisition

On 2 December, Abrdn announced that it was acquiring Interactive Investor for £1.49bn. Previously, Interactive Investor was a private company, so investors couldn’t buy the shares on a stock exchange.

Interactive Investor is a subscription-based investment platform. Its competitors include other listed companies, such as Hargreaves Lansdown and AJ Bell. I view these companies as high quality because they achieve impressive returns on capital. Both are highly cash generative too, and require little in the way of cash investment to maintain the businesses.

Unfortunately, as Interactive Investor is a private company, the amount of publicly available data is sparse. Nevertheless, knowing about Hargreaves Lansdown and AJ Bell meant I had a fair idea of the potential quality of the acquisition here.

Indeed, Abrdn said Interactive Investor has over 400,000 customers who invest around £55bn via its platform. Furthermore, its operating margin was said to have improved from 23% to 34% between 2018 and 2020.

What’s even better about this acquisition is that it’s expected to be double-digit earnings enhancing in its first full year after completion. This is a positive sign in my view.

Abrdn’s other businesses

If I were to buy Abrdn shares, I’d have to be comfortable with its other businesses. The company offers a range of investment solutions across asset management, investment platform technologies and financial planning. As it stands, Abrdn manages and administers £532bn of assets for its clients. This is impressive scale, and means the company can generate significant profits on its asset base.

However, City analysts are forecasting net profit to decline by 28% this year. And in 2022, net profit is expected to rebound by only 7%. This isn’t great, so Abrdn’s management maybe views the acquisition of Interactive Investor as a way to boost growth.

Are Abrdn shares a buy?

I think the acquisition here is a good move for Abrdn. Interactive Investor shows signs of being a quality company. The fact that it should be earnings accretive in the first full year suggests it’s good deal for Abrdn too.

However, acquisitions can go wrong if they aren’t integrated well. There’s some risk mitigation here, though, as Interactive Investor’s current CEO will continue to lead the business. It will also operate as a standalone company within Abrdn, so there should be little disruption.

I’m going to see how the acquisition is integrated before I buy Abrdn shares. I think there are better options for my portfolio right now.

Dan Appleby has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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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I doubt I’m the only investor thinking that the last few weeks have been akin to wading through treacle. But on a positive note, it’s worth remembering that times like these can be the lifeblood of long-term Foolish investors looking for cheap UK shares to buy. Accordingly, here are two examples I’d have no issue adding to my portfolio today.

Lockdown beneficiary

In retrospect, the time to pick up stock in online casino and gaming operator 888 Holdings (LSE: 888) was just before Boris Johnson announced the first national lockdown. Back then, the share price was around 80p. A couple of months ago, 888 achieved a 52-week high of 494p. 

Unfortunately, I didn’t act on my own bullish call in 2020, due to the sheer number of attractively-priced options out there during the market crash. Even so, I’d still be prepared to buy now, especially as 888’s valuation has now fallen back below the 300p mark.  

Aside from general market skittishness, some old-fashioned profit-taking is probably behind this selling pressure. Some investors may have taken the 15% reduction in business-to-consumer betting revenue in Q3 as a sign that trading momentum is now slowing. A more likely catalyst, however, is the recent legal shake-up in the Netherlands that requires online betting firms to obtain a licence. In response, 888 has ceased to operate there — a decision that’s expected to hit profit by $10m. 

I’d snap up this cheap UK share

Since this is a temporary measure, I think the fall may be overdone. Shares in 888 now trade at just 14 times forecast FY22 earnings. That looks great value, considering 888’s agreement to buy William Hill’s non-US assets could put a rocket under profits in time. What’s more, the stock comes with a potential 12p per share dividend next year (or 4.1% yield at the current share price).

All this before we’ve even considered the increase in business 888 could see if there’s a fourth national lockdown.

Buy the dip?

Another cheap UK share I’m interested in buying would be commercial and domestic lighting firm Luceco (LSE: LUCE). Despite staging a brief comeback in November, shares in the mid-cap were back to 337p by last Friday. That’s a significant drop from the 52-week high of 513p it hit back in September. 

This fall leaves Luceco’s forecast P/E at a little under 16. This may not look like a screaming bargain initially. However, this number should never be looked at in isolation, especially if the company scores well on quality metrics.

While past performance is definitely no guide to the future, Luceco has long generated high returns on invested capital. It’s this, according to UK top fund managers like Terry Smith, that plays a significant role in great long-term returns. Luceco could therefore prove to be a steal at current levels.

I must emphasise the word could here. There is a chance that recent cost pressures may not peak in early 2022 as the company expects. The fact that less than half of the company is available to buy on the market (i.e. a low ‘free float’) may also mean the share price lurches rather than drifts lower.

Still, I’m not concerned with trying to time the market exactly. What’s more important to me is buying a decent business at a sane price and holding on. I remain bullish on Luceco.

Paul Summers 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 Cineworld (LSE: CINE) share price fell more than 5% on Friday. Over the past 30 days, the shares have fallen 29%. Broadening the horizon, things look even bleaker for the firm, with the share price falling over 45% in the past six months.

The primary reason behind the short-term fall is the Omicron variant and the threat it poses to the leisure sector. This sector was hit extremely hard by the pandemic, with lockdowns leading to customer numbers plummeting. However, does this drop present me with a buying opportunity? Let’s take a closer look.

A good opportunity?

Although the Omicron virus does present a risk for Cineworld, it looks as if its impact won’t be as bad as first expected. If this is the case, we could expect cinema capacity to keep climbing back towards pre-pandemic levels. This is something the firm has almost been able to achieve already, with its most recent report showing that capacity for October had reached 90% of the same period for 2019. If the firm is able to enhance its customer capacity throughout 2022, revenues will begin to recover. This could be a real positive for the Cineworld share price.

Assessing Cineworld shares’ value, they do look very cheap to me. Pre-pandemic, the shares were trading at around 180p. They’re now sitting at just 47p. In addition to this, the firm’s price-to-earnings ratio is just 2.5 times. For context P/E ratios below 10 are considered very good value.

Cineworld share price risks

Of course, the Cineworld share price being cheap makes sense. The firm’s most recent results were pretty appalling. For the six months up to June 2021, revenue came in at just $292m, down from over $700m in the same period in 2020 (which was itself very weak). In addition to this, debts have climbed to $4.6bn. Shrinking revenues and growing debts are a red flag for any firm.

The current economic environment also worries me. With inflation on the climb, many investors are expecting a rise in interest rates. The next Monetary Policy Committee meeting will be held on 16 December, where a potential rate decision will be made. If they do rise, it’s likely to magnify the large debts the firm has amassed throughout the past 18 months.

In addition to this, as my fellow Fool Royston Wild pointed out, the number of shares held in short positions has been growing substantially over the past few months. Around six months ago, just over 3% of the shares were ‘held short’. This number has since climbed to 9.4% of total floated shares. The fact that institutional investors are betting on the stock falling doesn’t fill me with confidence.

The Verdict

In my opinion, the risks for the Cineworld share price outweigh the positives. The Omicron variant poses a large risk to the wider retail leisure sector. In addition to this, poor results coupled with large debts worry me. Although the shares do look cheap, I’m not willing to take the risk for my portfolio just yet.

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.

GlaxoSmithKline (LSE: GSK) has been a relatively poor investment over the past decade, however attractive the Glaxo share price has looked. According to my research, including dividends paid to investors, the stock has produced an average annual return of 5.5% over the past decade. That is compared to the FTSE All-Share Index yearly total return of 7.3%.

Over the past year, the company’s performance has picked up, although not by much. The stock has produced a total return of 19.4% over the past 12 months. That compares to 15.2% for the FTSE All-Share Index. 

However, I think the next 12 months could be a transformative period for the Glaxo share price. That is why I would buy the stock for my portfolio for this year and beyond as the company rebuilds for the next growth phase. 

Glaxo share price restructuring

For as long as I can remember, investors and analysts have been calling for the company to break itself up. They have argued that the enterprise does not make sense in its current form. The slower-moving consumer healthcare business does not fit well alongside the faster-growing vaccines and drug development business.

Slow and steady consumer companies also tend to attract lower valuations than fast-growing drug development corporations.

Glaxo laid out its plans to break up in 2020, and the split is finally set to take place next year. Investors will be given shares in a new consumer healthcare company, while the pharmaceutical and vaccines business will stay as one. 

The company will be passing on the majority of its debt to the consumer business. This makes sense because consumer healthcare is more predictable than pharmaceuticals. Unfortunately, this debt switch, coupled with the pharmaceutical arm’s requirement for reinvestment, will mean a dividend cut.

Analysts are forecasting a reduction of 31% overall. The payout is likely to remain lower for the consumer business as it reduces debt. 

Still, for the pharmaceutical side of the enterprise, operating profit growth will average more than 10% a year. Vaccine production and development, as well as speciality medicine sales, will contribute to growth. 

Higher valuations 

Considering all of the above, I think the stock is cheap, considering its potential. Investors will be willing to pay more for the pharmaceutical and consumer healthcare businesses, despite the lower dividend. 

The simplicity of the consumer healthcare business may attract a different class of investor that is willing to pay more for stability. At the same time, the growth side may attract growth investors, who could also be willing to pay more. 

Of course, there is no guarantee this scenario will play out. Trying to predict if a stock will be worth more or less in a year than it is today is almost impossible. The group could have to deal with additional costs and even extra regulations that could upset the demerger. This is something I will be keeping in mind. 

Nevertheless, overall, I think the Glaxo share price is extremely attractive as an investment for 2022. 

Rupert Hargreaves 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.

I have been looking for dirt-cheap FTSE 100 shares to buy for my portfolio in 2022. I am concentrating on these cheap equities because I think they can produce better returns for my portfolio as the economy begins to rebuild.

They may benefit from both earnings growth and an improvement in market sentiment. This double tailwind could produce handsome profits for my portfolio. With that in mind, here are three FTSE 100 companies I would buy right now as recovery and value plays.

FTSE 100 value stocks 

The first on my list is the real estate investment trust (REIT) British Land (LSE: BLND). Shares in this company are currently trading at a significant discount to its book value. The book value is calculated by using the value of the firm’s property minus its debt. Therefore, the market capitalisation of the REIT is currently below the value of the property it owns. 

This is an exciting situation. I think many investors would jump at the chance of being able to buy a house for less than it is worth. However, it does not look as if the market is willing to take the same risk with this REIT. 

I can understand why. The corporation owns a portfolio of commercial retail and office properties. Both of these markets are facing pressure as the pandemic reshapes the retail industry and office market.

Still, for the most part, the valuations of these assets have held up relatively well. At the beginning of the pandemic, the FTSE 100 company struggled to collect all the rent due from its tenants. It now looks as if this issue is behind the enterprise.

It is also reshaping its portfolio to capitalise on the evolving property market trends. Management has bought in more flexible office space, and the group has been investing heavily in open-air retail parks. 

Of course, there will always be the risk that this strategy will not yield the desired results. That is probably the biggest challenge the company faces right now. Trying to change with the market can be pretty hit and miss. Its balance sheet could also face pressure from rising interest rates.

Overall, I think British Land is changing for the better. That is why I would capitalise on its current valuation and buy the stock while it looks cheap. 

Shares to buy for growth

When it comes to undervalued FTSE 100 stocks, I believe ITV (LSE: ITV) takes the crown. Shares in the company plunged at the beginning of 2020, as the pandemic effectively shut its production business and led advertisers to pull spend.

The firm has recovered almost all of its lost revenue nearly two years on. In a recent trading update, ITV’s management said the company is on track to report a record performance in 2021. Booming advertising revenue and growing demand for its studios business have helped the corporation return to growth. 

Despite this recovery, the stock continues to trade below the level it started 2020. This is the main reason why I would acquire ITV for my portfolio. The market seems to be overlooking the group’s recovery. It is also planning to restore its dividend, and management is looking for new growth initiatives. 

In one of these initiatives, the company is taking stakes in smaller businesses, which it thinks has growth potential. ITV is taking a stake in these enterprises in return for advertising time on its network, a strategy that seems to be working for both partners. 

The elephant in the room here is the company’s competitors. Deep-pocketed American streaming giants are fiercely fighting for market share, and ITV cannot compete with these operations.

So far, it has been able to hold its own. The group even produces some programmes on behalf of the streamers. However, there is no guarantee this trend will continue. The company does not have the financial clout, nor the global reach of these corporations. 

Even after considering this risk, I still think the company is an attractive investment for 2022. That is why it features on my list of the best FTSE 100 shares to buy for next year. 

International expansion

The final FTSE 100 company I would acquire for my portfolio as an undervalued growth investment in 2022 is Prudential (LSE: PRU). After splitting its US and UK businesses over the past few years, the company is now a pure-play-Asia growth enterprise. Hong Kong accounts for the vast majority of its sales, although an increasing percentage comes from other markets across Asia, including Vietnam. 

The stock is trading at a discount of around 11% to the level it began 2020. This does not make much sense to me. Thanks to strict virus control measures, many Asian economies have performed better than their Western peers throughout the pandemic.

These regions also have tremendous scope for growth in the financial space. Most have a low-level penetration for products such as life insurance and pensions. In some markets, the rate of penetration is a fraction of the level in the UK. 

This suggests companies like Prudential have an extremely long runway for growth in front of them. Therefore, its brand is already well known across the region, and it has a high level of customer loyalty. These qualities should help the business capitalise on the market opportunity. 

That said, the FTSE 100 company is not the only financial institution in Asia. It faces fierce competition from local operators, some of which have more capital and connections. These competitors may be able to grab market share from the group if it takes its position in the market for granted. Prudential needs to stay on its toes and keep advertising to keep fending off the competition. 

Even after taking these competitive forces into account, I think the stock has tremendous potential for the year ahead, and beyond.

Rupert Hargreaves owns ITV. The Motley Fool UK has recommended British Land Co, ITV, and Prudential. 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.

Hargreaves Lansdown (LSE: HL) looks to me to be one of the best FTSE 100 shares to buy now. There are a couple of reasons I like this online stockbroker as an investment for the next five to 10 years.

Hargreaves Lansdown’s top qualities 

First of all, it has carved out an established niche in the market. Even though the online trading market is incredibly competitive, and there are companies that offer a better level of service for a lower cost, Hargreaves is still drawing a huge amount of business, thanks to its size and footprint across the country.

Indeed, many investors do not want to put their money in a smaller, unproven broker when they can choose a large blue-chip stock like Hargreaves.

The company has to report its financial position to the market twice a year. Any investors can view this report, and analyse its financial strength. That is not possible with all brokers, especially some of the smaller start-ups that have emerged in recent years. 

The FTSE 100 group also invests heavily in developing its product offering. Several surveys have shown that investors are willing to pay more for a user-friendly service. As someone who is familiar with the Hargreaves platform, I know it is quite easy to use. Compared to some other brokers, the difference is like chalk and cheese. 

The one downside of using the platform is its high cost. There is a 0.45% annual management charge for holding funds on the platform as well as dealing fees. Some brokers do not charge holding fees and dealing fees are a fraction of those charged by Hargreaves. 

The challenge posed by these lower-cost brokers is probably the biggest issue the group will have to overcome going forward. It has been able to pull ahead by investing heavily in marketing and the platform, but this edge could disappear quickly if the firm starts to take its market share for granted. 

Still, for the time being, consumers seem to love its offer. It added 23,000 new clients in the quarter to the end of September. These customers bought with them £1.3bn of new business. 

FTSE 100 growth stock 

I think consumers will continue to flock to the company as its presence in the financial services market grows. There has also been a general increase in the number of consumers investing over the past two years. Hargreaves has benefited from this trend and I think it will continue to do so.

Consumers may have started their stock market journey on a trading platform, but they may choose to shift to a broker like Hargreaves as they start taking a more long-term approach.

If interest rates continue to languish at current levels, the company may also benefit from a customer influx as investors look for ways to make their money work harder in an inflationary environment. 

These are the reasons why I think the company is one of the best FTSE 100 shares to buy in 2022. I would be happy to add the stock to my portfolio today. 

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