I already have exposure to UK real estate through the shares I own in Tritax Big Box REIT. I’m expecting demand for its warehouse and logistics buildings to soar as e-commerce clicks through the gears. I’m convinced that the student accommodation property sector could also help me make a stack of cash. It’s why I think Empiric Student Property (LSE: ESP) could be one of the best penny stocks to buy for my portfolio.

A report by the National Union of Students illustrates why the likes of Empiric might be a brilliant purchase for me. A shortage of new beds means that the average rent for purpose-build student accommodation has rocketed 61% over the past decade. An average cost of £7,374 per year in 2021/22 is also up 16% from pre-pandemic levels.

Latest data on student enrolments suggests that accommodation will remain scarce, too, thus keeping rents moving northwards. University clearing service UCAS has earlier said total applications in this academic period are up more than 8% year-on-year.

Profits at Empiric and its peers could suffer if applicants from the EU continue to fall post-Brexit. But all things considered I think the accommodation provider is an excellent penny stock for me to buy.

A golden era?

I think Greatland Gold (LSE: GGP) is another top penny stock for me to buy. Precious metals prices remain in a broad holding pattern but I believe an environment of high inflation could send them spiralling higher. Forecasters at Société Générale think gold will trade at around $1,900 per ounce by the second quarter of 2022. That’s up around 130 bucks from current levels.

With key inflation readings recently surpassing analysts’ expectations, though, I think there’s a good chance gold could perform better than some think. The rate of price rises are already pretty hair raising: consumer price inflation in the US hit 6.8% in November. That’s the highest reading for 40 years.

Another top penny stock I’d buy

I wouldn’t just buy Greatland Gold because of the bright near-term outlook for gold values, though. I’m also encouraged by recent news from the miner concerning exploration work at its Haveiron gold-copper project. Fresh drilling work at the mine in Western Australia revealed “significant” mineralisation in 19 of the 24 drilled holes. A $16m share placing last month gives the penny stock plenty of financial clout to develop the mine as well.

I’m aware that any setbacks with bringing Haveiron online would have a significant impact on Greatland Gold’s revenues. It could also have massive implications on overall costs. Considering that the business isn’t expected to turn a profit this financial year (to June 2022) this could prove particularly spooky for investors and prompt a sharp share price reversal.

Still, it’s my opinion that the potential rewards at Greatland Gold outweigh these risks. The bright outlook for gold prices and the quality of its Australian assets makes the miner a worthy buy in my opinion. Just like Empiric Student Property, I’d happily buy the company today for 2022.

Royston Wild owns Tritax Big Box REIT. 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.

The FTSE 250 index has largely maintained its trading momentum in December. It has closed at 23,000+ levels in at least three sessions this week as I write on Friday afternoon. As always, some stocks have made bigger gains in these past days than others. One of them is the greeting card, flowers, and gifts e-tailer Moonpig (LSE: MOON). 

Moonpig’s numbers ahead of pre-pandemic levels

On Thursday, the stock’s price increased by 4.5% after it released its results for the six months to 31 October, making it among the biggest FTSE 250 gainers. The numbers show that its performance has corrected from the lockdown spurt. Revenues are down by 8.5% and pre-tax profits have declined by 43% from the same time last year. So why is the stock still up? I reckon that is because it has still shown a significant jump from the pre-pandemic numbers of 2019. Revenues are up by 115% and reported profit before tax has doubled. Moonpig has also become more optimistic in its outlook. Revenue for the current year is expected to be “at the upper end of the previous guidance range”. 

What’s ahead for the FTSE 250 stock

I think these numbers are pretty impressive. The fact that it has been able to maintain an edge even after the easing of lockdown restrictions and the reopening of bricks-and-mortar retailers indicates some likely brand value to the company. The big question for me, as I plan my investments for 2022, is whether I should buy the Moonpig stock now.

There is no question that its fundamentals look good right now. And if recovery continues, it is not hard to envision more growth for the company. Times when economic growth picks up are normally quite good for consumer discretionary stocks. These stocks represent companies whose products are ‘nice to haves’ as opposed to say, grocery stocks, which represent companies that stock our ‘must have’ products. 

During years of growth pickup, discretionary companies see an outsized expansion in demand and vice versa. This could explain why Moonpig’s sales have stayed relatively strong even post-lockdown. If we add the fact that lockdowns have probably created a lasting structural shift towards online spending, Moonpig could potentially do quite well in the future.

The downside

But Moonpig is also a pricey stock. The company’s price-to-earnings (P/E) ratio is a huge 63 times. Frankly, I find that hard to justify. I can think of many examples of established FTSE 100 companies with lower P/Es that have seen consistent growth over the years. Why would I not rather buy those stocks instead? And I reckon other investors might think the same way. This may be why Moonpig’s share price has fallen some 25% from the highs of June this year. It is also down by 10% from its listing price earlier this year. 

My assessment 

Keeping everything in mind, Moonpig remains on my watchlist. I think there is a case for far more price correction here. I am happy to buy the £1,000 worth of the stock when its P/E reaches more reasonable levels, probably in 2022.  

Manika Premsingh 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.

With £10,0000 to invest, I’d put it in a Stocks and Shares ISA.

For me, it’s no contest. Over the long haul, shares have outperformed all other mainstream asset classes.

Modest percentages, big compounded gains

And there’s a good illustration of the returns possible from stocks in Warren Buffett’s letters to the shareholders of Berkshire Hathaway — the company he runs.

To begin with, Buffett reckons America’s S&P 500 index produced a compound annual gain of 10.2% between 1964 and 2020. That figure includes the returns from dividends.

10% a year looks modest at first glance, although it beats anything a cash savings account will give me right now. But it pays not to underestimate the power of compounding.

I find it astonishing to learn that compounding that 10.2% a year for 56 years led to an overall gain of 23,453%, according to Buffett. But even that’s just a meaningless figure. To understand it, I need to plug in my figures. So, by investing £10,000 in an investment following the S&P 500 in 1964, I’d have theoretically ended up with a sum of around £2.3m in 2020 — wow!

The illustration demonstrates the awesome power of consistent compounding over time. So, it’s best to get on with it sooner rather than later. But how? One way these days would be to simply invest the money in a low-cost passive index tracker fund that follows the fortunes of the S&P 500. And that’s what I’ve done with some of my money within a Stocks and Shares ISA.

But there’s no certainty the index will perform as well in the years ahead as it has in the past. All shares carry risks. And that’s why I’ve diversified by investing in other trackers and managed funds as well. And on top of that, new money goes into those investments every month.

Enhanced gains achieved by picking stocks

However, Buffett achieved a greater return over the 56-year period. His compounded annual gain came in at 20%. But even that looks unimpressive by the standards of some investors. Nevertheless, it’s amazing what the difference between 10% and 20% makes over time when we’re compounding.

Buffett reckons his overall gain over 56 years came in at 2,810,526%. Now, that is an impressive figure! But what would it do my £10K? Investing the money in 1964 and compounding an annualised return of 20% for 54 years would give me the sum of about £271m — my calculator couldn’t cope with that calculation, and I know how it feels. Indeed, the overall return is mind-boggling.

Buffet created his enhanced gains by picking individual stocks and businesses very carefully and buying them at opportune times. His performance — and the comparative performance passive stock investing can produce — keeps me keen to invest in stocks.

However, shares carry risks and positive investment outcomes are not guaranteed. Nevertheless, I’m working hard on my investment strategy, stock watch list, and self-discipline with a determination to keep going.

Kevin Godbold 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.

Okay, UK share markets have rebounded strongly after slumping as concerns over the Omicron coronavirus variant emerged. But it doesn’t mean there are no longer any brilliant bargains available for me to buy today.

There are plenty of top stocks on the FTSE 100 alone that are seriously attracting my attention right now.

For example, these three blue-chip beauties all offer the sort of exceptional all-round value that’s making me consider investing today. Each trades on a price-to-earnings (P/E) ratio either around or below the bargain-benchmark of 10 times for 2022.

What’s more, each of these FTSE 100 shares carries a gigantic dividend yield, north of 8.4%.

Riding the retirement boom

Low interest rates mean it’s difficult for UK savers and investors to get a decent return on their cash. This is playing into the hands of financial services businesses like M&G that provide the advice to help people overcome this problem.

I like this particular operator because of its excellent brand power, a quality that can’t be overstated when it comes to keeping people’s money safe. 

I’m also thinking about buying M&G because its Pru retirement services division will put it in the box seat to exploit Britain’s rapidly-ageing population.

Government statistics suggest 24% of the population will be aged 65 and above by 2043. That compares with 19% in 2019. Today, this FTSE 100 stock offers a mammoth 8.9% dividend yield. I’d buy it even though the highly-regulated nature of its operations poses a constant threat to future profits.

Another FTSE 100 dividend hero

The possibility that inflation could continue rocketing in 2022 creates a layer of risk for housebuilders like Persimmon. Theoretically, it could prompt a tsunami of interest rate hikes by the Bank of England that affect homeowner affordability. But, for my money, I think overall trading conditions should remain supportive for the FTSE 100 housebuilder and its peers.

It’s my belief that even if interest rates do rise markedly, they will still remain below historic norms. Besides, the ultra-competitive mortgage market means that lenders will help offset this pressure with generous loan products.

Ongoing Help to Buy support for first-time buyers should also keep demand for Persimmon’s homes rising nicely. This share also carries an 8.4% dividend yield for 2022.

9.2% dividend yields!

I also think FTSE 100 mining giant BHP Group could be a top dividend stock for me to buy. That’s even though economic cooling in China and a possible property market collapse in the Far East threatens profits. In recent hours, real estate mammoth Evergrande missed key bond payments, raising chatter over a property crash still further.

But, as a long-term investor, there’s a lot I like about BHP. I think demand for its broad range of commodities could soar as infrastructure and housing investment steps up across the globe.

I also think profits could soar as the electric vehicle revolution supercharges demand for the copper it pulls from the ground. Today, BHP carries a mighty 9.2% forward dividend yield.

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

A number of UK stocks started 2021 well. But somewhere along the way, many have seen their share price rally peter out. So when I came across one that has seen a near consistent increase through the year, I had to update myself on its story. The stock in question is the FTSE 250 sporting goods retailer Frasers (LSE: FRAS). 

The rise and rise of Frasers

The stock’s price crashed, like all others, in last year’s market meltdown. But notably, it started rising from there in fits and starts even before the broad-based stock market rally of November 2020. But come last November, and it really took off. By December of last year, it had reached its pre-pandemic levels and recently, it reached highs not seen since late 2015. Through the year, the the Frasers’ stock has been reaching new five-year highs and yesterday was yet another day when it did so. 

Strong results update for FTSE 250 stock

This latest jump followed the release of its latest results this week, leading to a 4.2% rise in stock price. For the half-year ending 24 October 2021, the company reported a 26% increase in revenue, compared to the same six months of last year. Its post-tax profits increased by 70% and its cash inflow also rose by 69%. Some increase was to be expected, considering that last year, retailers were hamstrung by the lockdowns. Still, it is good to see the expectations of performance affirmed by the company. 

Also, given the recovery underway, its outlook is positive. It expects its profit before tax for the current year to be in the £300m-£350m range, and this is when it is being conservative. This means there is a good chance that the momentum acquired in the first half of the year could continue in the second half as well. And it could end the year with a near doubling of its first-half profits. 

A note of caution

As positive as this sounds, there are notes of caution here too. The company has warned, as it says, of “well publicised macroeconomic headwinds on the horizon”. In this vein, it mentions cost pressures, supply chain issues, and a potential reduction in consumer spending power, presumably due to high inflation. It also says that the headwinds are “not limited to” these factors only. Besides these, of course there is the emergence of the Omicron variant. Travel restrictions have been put in place and the UK government is asking us to take measures to reduce the spread of the virus as well. These could slow down consumer demand again. 

My assessment  

All-in-all, I do like the stock. And just today, the latest UK growth update has shown an improvement in wholesale and retail trades, even though the overall economy has not really grown. I am cautious, however, going by the latest developments on the coronavirus and the fact that the Fraser share price has climbed a lot during the past year. In this situation, I am not sure how much higher it could climb. If, however, the share price were to drop, say due to a stock market crash, I would buy the FTSE 250 stock. 

Manika Premsingh 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 end of the year often brings extra costs. It’s at moments like these that some passive income streams could come in handy. Putting aside just £3 a day, starting today, I could hopefully already have passive income streams in place by the time December rolls around again next year. Here’s how.

The power of regular saving

Putting aside a set amount on a regular basis would help me develop personal discipline. So when other things came along on which I could spend that money — as they always do in life, sooner or later — I would already be accustomed to sticking to the regular saving habit.

Three pounds a day soon adds up. Within a year, I would have saved over £1,000. But having that money piled up in a drawer won’t earn me passive income. I’d need to do something with the money I was saving. One option would be to put it in a bank account. But an alternative I prefer for income generation potential would be to use it to buy shares I think might pay me a dividend.

What are dividend shares?

Dividends are a portion of a company’s profits paid out to shareholders. Dividends are never guaranteed. But some companies typically pay them while others don’t. Often a company has a stated dividend policy in which it sets out its plans for dividends. That is a good place to start when looking at whether a company might pay dividends in future, although that will still depend on the decision of the company’s directors.

I look at how much free cash flow a company is expected to generate in future. That gives an indication of its likely ability to pay dividends, just as its dividend policy sets out its will.

Why I like dividend shares as passive income ideas

With a few pounds a day I need to be realistic about what I can do to generate passive income. Buying shares even on a small scale can give me direct exposure to large companies such as BP, HSBC, National Grid, and Direct Line. So I can benefit from their established business, management expertise, and business models. Each currently pays a dividend, as do hundreds of other listed firms.

That means I can sit back and do nothing at all other than keep putting aside my three pounds each day. Even the best run company can run into unexpected difficulties, though. So I would reduce my risk by diversifying across a number of companies in different sectors. With £3 a day, I would have enough funds to invest a bit more than £250 each quarter. So if I started today, I could already hold a portfolio of dividend shares in four different companies a year from now.

I’d start today

Some people try to time the market and buy shares at their lows. But that’s difficult to do in practice. If my objective is passive income, I would simply invest regularly and build up my earning streams.

So while I might not always buy shares at their lowest prices, I’d be putting my money to use and hopefully start earning passive income in short order. Rather than waiting, I’d start by taking action and putting aside a few pounds today. 

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. 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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The FTSE 100 index is on a roll this week, as it continues to stay above the 7,300 mark. However, I am not feeling terribly confident that the stock markets will remain bullish. In fact, after looking at the latest numbers for the UK economy, I am beginning to think that we might just have a stock market crash on our hands soon. 

The UK economy slows down

In October, the UK economy grew by a minuscule 0.1% from the month before. It also slowed down considerably from a 0.6% increase in September. The numbers are particularly disappointing right now, because growth was expected to pick up after the the easing of restrictions. And clearly, that is not happening quite as fast as was hoped. 

With the Omicron variant resulting in some travel restrictions and possibly even making us cautious about being in public places again, some more weakness could build into the economy. This in turn could have a sentiment impact on the stock markets and even show up in company’s results going forward. 

Is a housing market crash likely?

I also think that the rollback of government support to segments like real estate might have impacted the pace of recovery. Construction, which can be seen a loose proxy for property markets, actually saw a decline in October. It fell by 1.8%, the biggest fall since, wait for this, April 2020, which was very early in the pandemic. And one of the biggest contributors to this was the decline in the private new housing segment. 

Considering that there are a handful of property developers in the FTSE 100 index, this does not sound good for the markets. Even though they have reported growth in order books recently, I think the first signs of a slowdown in the housing market are here. And if there is a sudden crash in the segment, I reckon the FTSE 100 index as such could weaken.

What I’d buy in a stock market crash

However, there is reason to look on the bright side as well. Even if the broad weakness in the economy were to add to conditions that could result in a stock market crash, I think today’s report also indicates the best stocks to buy in that case. As we at the Motley Fool keep saying, a stock market crash is a buying opportunity. The latest numbers from the economy show that the services sector is doing well. It is back to its pre-pandemic levels, racing ahead of the overall economy.

One of the big contributors to its October growth is wholesale and retail trade. And considering that there are a few retailers among FTSE 100 and FTSE 250 constituents, I think these might make good buys for me. I reckon that especially those that either are e-commerce businesses or have significantly ramped up their online operations during the lockdowns could do quite well irrespective of the state of the recovery.  

Manika Premsingh 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.