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National Express Group (LSE:NEX) — a well-recognised coach company delivering services in the UK, Continental Europe, North Africa, North America and the Middle East — is flying low, with its shares currently sitting around 230p, more than 50% down from their soaring heights before Covid.

The latest half-year results were ahead of expectations, which is surprising when you consider the UK March lockdown. Profits are not yet back up to pre-pandemic levels but National Express has historically shown resilience, and (largely due to £100m worth of cost savings) it has managed to show a half-year operating profit of £54m. I believe it’s only a matter of time before it demonstrates how recoverable it is, and I believe that end-of-year results will support this prediction. I consider this a potential recovery stock.

The case for

Understanding that the world into which we’re emerging will not be the same one we left behind a couple of years ago, a world into which our increasingly ageing population are travelling more cautiously, and perhaps do not yet feel ready to venture abroad, gives me confidence in National Express shares. Also air flight is environmentally unpopular and will probably never return to what it once was. Maybe this is a good thing (unless you hold shares in the likes of IAG).

The phrase ”staycation“ was pinned to everyone’s lips last summer, and is likely to stay there for a few summers to come, so coach travel may become the preferred option for many.

Merger with Stagecoach

It’s an ambitious company too. Its restlessness in regards expansion is clear, most recently through the proposed merger with Stagecoach Group announced on 21st September. Both companies’ share prices shot up at the time it was announced, but have since drifted. Now a new deadline has been set for 14th December in order to make clear and final their intention to merge. Such a merger has clear advantages i.e. cutting down on duplicate routes, office space and staff, and adding buying clout for future expansion plans.

Case against

There are potential negatives of course. Firstly the upward travel of the price of fuel, which some expect to reach above $100. There is the potential for another lockdown, which would clearly have an impact on all travel companies, including National Express. Then, even without the lockdown, there is still the chance that people are just more reluctant now to travel by shared means, sitting next to strangers.

Aside from my fond memories of student journeys up the M1, getting home for Christmas for under a tenner, I like this share. It’s a safe buy for my portfolio in my opinion, and if the merger does happen it could trigger a good recovery.

Alex Crisp 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 Tesla (NASDAQ: TSLA) share price fell by 6% to $1,000 on Thursday, on the day that CEO Elon Musk sold another $1bn of Tesla stock to meet tax obligations.

Mr Musk’s disposals have now totalled nearly $12bn in five weeks. But the electric car boss still owns around $165bn of Tesla shares, according to my estimates. I’m not worried about his commitment to the business. Indeed, with the shares down by around 20% from their October peak, I’m wondering whether I should be buying Tesla stock.

A world-changing business

Tesla attracts some strong views in the market, not all of them positive. However, I’m not here to bash the company or pick holes in its accounting.

I think there are probably still some rough edges to this business. And I’m a little sceptical about Tesla’s self-driving claims. But overall, I think that what Elon Musk has achieved is very impressive. In my view, it’s probably fair to say that Tesla cars have had a global impact in terms of speeding up the transition to electric vehicles.

In 2016, Tesla produced 84,000 cars. Over the 12 months to 30 September, the company built 804,339 cars. At the same time, the business has become much more profitable. Further expansion is underway, with new factories being built in both Europe and the US.

Here’s what worries me

Back in 2000, internet boom was in full swing. Companies such as Cisco Systems were playing a similar role to EV companies like Tesla today. Cisco was shaking up the markets with game-changing technology. Established competitors (including the company I worked for) were trying desperately to catch up.

While some dotcom businesses have since disappeared, Cisco has been very successful. The network equipment manufacturer’s sales have risen from $19bn in 2000 to $50bn today. Annual profits have risen from $2.7bn to $11bn over the same period.

The only problem is that Cisco’s share price today is still lower than it was when prices peaked in March 2000. Investors who bought near the top and decided to hold onto their Cisco stock have spent 20 years waiting to get back to breakeven. I think there’s a risk something similar could happen to Tesla shares.

Will I buy Tesla stock?

I expect Tesla’s sales to continue rising as demand for EVs increases. I also think that Tesla’s profitability should continue to improve. City forecasts suggest profit margins could rise over 10% next year.

However, Tesla’s share price has risen by 1,500% over the last two years. The company’s revenue has only risen by 100% over this period. 

Broker forecasts now show Tesla shares trading on 130 times 2022 forecast earnings. That’s based on earnings growth of 35% in 2022.

In my view, this valuation is probably already pricing in around five more years of strong growth. Although it’s possible that Tesla’s profits will grow much faster than anyone expects — justifying a higher valuation — I think it’s unlikely. It’s certainly not something I’d stake my own cash on.

I suspect that conventional car manufacturers will become much tougher competitors for Tesla over the next few years. Although I admire Tesla’s achievements, I don’t think the stock’s valuation is justified by fundamentals. For this reason, I won’t be buying the shares today.

Roland Head 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.

Lucid (NASDAQ: LCID) stock has tanked in the past few days. Shares in the company are off 25% since the beginning of the week. Since mid-November, the stock is down by a third. Still, over the past year, the stock is up 270%.

It looks to me as if there are two key reasons why investors have been selling shares in the electric vehicle (EV) company this week. 

Lucid stock headwinds 

The first development is the company’s recent decision to issue $1.75bn of convertible senior notes, debt in other words. The debt carries an interest rate of 1.25% and can be converted into its shares at a predetermined rate. 

Not only will this debt issue incur additional costs for the company in terms of the interest paid, but it could also dilute existing shareholders if converted. With each new share that is issued, existing shareholders’ claim on the business declines. Investors could be selling the stock to reduce their exposure to this dilution. 

This debt issue is important to consider, but I do not think it is the primary reason why investors have been selling Lucid stock over the past week. 

The most pressing reason is the fact that the US Securities and Exchange Commission (SEC) has subpoenaed the company seeking documents related to an investigation.

Although the exact target of the investigation has not yet been revealed, Lucid is telling investors that “the investigation appears to concern the business combination between the Company (f/k/a Churchill Capital Corp. IV) and Atieva, Inc.” 

Atieva was Lucid’s former name before the corporation’s merger with the special purpose acquisition company (SPAC) Churchill Capital Corp. IV. 

The SEC has launched a range of investigations recently regarding SPAC mergers. This seems to be the latest attack on these entities. 

Many of the investigations revolve around whether or not these companies misled investors by providing overly optimistic financial statements. I should clarify that no statements related to Lucid accuse the business of this. The company says it is fully cooperating with the SEC.

Uncertainty prevails 

As of yet, it is unclear what will happen with the investigation. It is also unclear if it will have any impact on Lucid at all. Unfortunately, it does bring an element of uncertainty into the equation. The market hates uncertainty more than anything else. 

This seems to be why Lucid stock has crashed. The uncertain outlook is spooking investors. 

Still, there are some reasons to be positive. The company’s first EV started rolling off the production line earlier this year. The first deliveries went out to customers in November. As production scales up, the group’s revenues should begin to grow, and the market may reflect that in its assessment of the business. 

Despite this positive outlook, I am not a buyer of the stock today. I think Lucid’s outlook is just too uncertain, and the company has a lot of work to do to catch up to market leaders in the EV space. 

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.

With the world once again going into various forms of lockdown to suppress the new coronavirus variant, the outlook for the global economy is becoming increasingly uncertain. Against this backdrop, there is one company that I want to own more than any other in 2022. 

A defensive investment

In my view, Tesco (LSE: TSCO) shares are one of the most defensive investments on the market. Over the past two years, the company has been able to play to its strengths during the pandemic. As its stores were categorised as essential retailers during lockdowns, they were allowed to stay open while the rest of the ‘non-essential’ economy was shut down. 

Thanks to this tailwind, group sales and profits held up relatively well in 2020 and 2021. And as the world has reopened, Tesco has been able to leverage its size in the UK retail market to get around some of the supply chain issues that have damaged other retailers. 

The company was already running trains from Southern Europe before the supply chain crisis, but it has increased its weekly rail shipments to get around bottlenecks at ports.

The group’s extensive distribution infrastructure in the UK has also helped it navigate supply chain issues. Thanks to these competitive advantages, the overall impact on the underlying business has been relatively minimal. 

Still, past performance should never be used to guide future potential. Tesco has been able to navigate the challenges of the past two years, but what does the future hold for the enterprise?

Tesco shares: primed for growth 

I think the company is primed for growth in 2022 for several reasons. First of all, it does not look as if the supply chain crunch will ease anytime soon. Therefore, Tesco should be able to continue to use its competitive advantages to navigate these issues as competitors struggle.

However, this does not guarantee the business will avoid all of the issues around the supply chain crisis. It has already had to hike wages for drivers and warehouse workers, which will undoubtedly have an impact on profit margins. 

Secondly, in periods of high inflation, consumers tend to be more careful when shopping for goods. Consumers tend to become more cost-conscious and trade down to own branded items. 

With its diverse portfolio of own-brand items and low prices, Tesco may benefit from this trend. Granted, the company will have to fight against lower-cost competitors such as Aldi and Lidl. Fighting off competition from these retailers is probably the biggest challenge the group faces today. 

However, it does have some advantages that could work in its favour. These include a broader range of products, its Aldi price-match scheme, and the Tesco Clubcard Prices scheme.

The latter scheme can dramatically reduce the cost of shopping for Clubcard holders. It also generates valuable data for the company. Tesco can then use this to push new offers on Clubcard users. 

All in all, while the retailer does have its challenges, considering the advantages laid out above, I would buy Tesco shares for my portfolio today as an investment for 2022. 

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

The AMC (NYSE: AMC) share price has been sliding over the past couple of weeks. The stock has fallen by 23% since the beginning of November. At the time of writing, it is changing hands at around $29, 53% below its June high of $63. 

Still, despite this performance, the stock remains up by 620% over the past 12 months. 

However, considering its performance in the past few weeks, it looks as if the AMC share price could slide back below $10 as the market sentiment towards the business quickly changes. 

Changing sentiment

Shares in the cinema group jumped earlier this year when the company became the target of so-called Reddit, or meme, traders. These traders pushed the stock up from a price of less than $2 at the beginning of the year, to a multi-year high of $63 in the relatively short space of six months. 

The stock charged higher even though the company’s underlying business performance remained relatively depressed. The one action the corporation did take was to raise new funds from shareholders to pay down debt and cover operating losses. 

As I have written in the past, this strategy did make a lot of sense. By raising money to improve its balance sheet, the quality of the business will improve, which would justify a higher share price. 

Unfortunately, it is becoming harder for the company to issue new shares with the stock falling. This risks a potential downward spiral. If the business is struggling to reduce debt, market confidence will weaken. This will push the stock lower and make it harder for the firm to raise money. 

These factors could be one of the reasons behind the AMC share price decline. Another reason could be management’s recent spate of stock sales. The company’s CEO offloaded $10m of shares this week, taking total management share sales this year to nearly $100m. 

AMC share price outlook

When management is selling, it hardly inspires confidence in the rest of the market. After all, management should have a better understanding of the business than any outside investors. If they are selling, it may be because they think the stock is overvalued. 

All of the above could have an impact on sentiment towards the AMC share price. On the positive side of the equation, the reopening of the US economy is pushing revenues higher. Revenues increased 540% in the fourth quarter, and the company’s losses declined by 80% year-on-year. If this trend continues, AMC’s outlook will improve, and that may help improve investor sentiment. 

Nevertheless, I think it is likely that in the near term, the AMC share price will continue to decline as investor sentiment shifts. The stock might not fall back to $10 if revenues continue to improve, but there is no telling when the selling will stop if management continues to sell its stakes.

As such, I am no longer interested in buying the share for my portfolio. I would avoid the stock. 

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.

I have been looking for dirt-cheap UK shares to buy for growth next year. There is one sector that I believe has enormous potential for the year ahead. This is where I am concentrating my efforts. 

UK shares to buy

The sector I have been focusing on is Oil & Gas. This industry is currently facing considerable criticism for its role in the global climate crisis. However, while it is clearly under fire, it is also clear that the demand for oil & gas around the world is only rising. 

This suggests that these companies will continue to profit for the foreseeable future. As such, I think there is an opportunity here for investors like myself to take advantage of in the market. 

Companies like Tullow Oil (LSE: TLW) and Harbour Energy (LSE: HBR) look cheap compared to their potential over the next few years. 

Even though the price of oil has come off recent highs, both of these businesses are still on track to report strong performances in 2021. 

According to its latest trading update, Tullow’s free cash flow from operations will total $100m. As it has hedged the majority of its production for the next two years, profits and cash flow from operations are relatively predictable. 

This cash generation should enable the group to start chipping away at its debt. This will improve the balance sheet and provide more capital for growth in the years ahead. 

Meanwhile, Harbour Energy is seeing similar tailwinds. Thanks to higher oil prices, lower production costs, and lower capital spending requirements, the company has laid out plans to return $200m per annum to investors with dividends. 

Management also believes that based on current oil prices, the company will be debt-free by 2025. As such, the corporation plans to search for acquisitions to help drive growth. 

Put simply, these two oil producers are now back on track after two years of disruption. And based on their current earnings forecasts, both stocks appear cheap. Harbour is currently dealing at a forward price-to-earnings (P/E) multiple of 6.2. Tullow’s stock is selling at a forward P/E of 4.7. 

Risks and challenges

Despite their attractive qualities, these companies are also exposed to some significant risks and challenges. The largest is the potential for another oil price crash. This could derail growth projections, even though both have hedging schedules in place. 

Additional costs and challenges linked to climate change could also hit growth plans. This industry is particularly susceptible to new climate change rules and requirements. The carbon footprint of the oil & gas industry is a flashpoint for climate campaigners. 

Still, despite these risks and challenges, I think both Harbour and Tullow look incredibly attractive as cheap UK shares to buy. That is why I would acquire both stocks for my portfolio today.

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.

Buy-to-let remains a very attractive investment class for many Britons. As does investing in UK shares that specialise in residential rentals. Looking at latest rent data from Zoopla it’s not difficult to see why.

A colossal shortage of these properties pushed the average private rent in Britain 4.6% higher year-on-year in September, Zoopla said. This represented a 13-year high. The property website said that supply of buy-to-let properties is currently running at 43% below the five-year average.

Zoopla expects private rents to rise 4.5% in 2022 too.

Why I’d ignore buy-to-let

Investing in buy-to-let used to be a lucrative way to get money working. And as the data above shows, rents in the UK continue to strengthen at breakneck pace. Residential property prices also continue to rocket, giving me the possibility of making big profits if, or when, I eventually decide to sell. Halifax data this week showed homes prices rising at their fastest pace for 15 years.

But I don’t believe that becoming a landlord is a good choice for me today. I’m reluctant to jump on the buy-to-let bandwagon because of the significant costs that landlords now face. It’s not just the 3% Stamp Duty levy introduced in 2016 that I’d have to worry about. The Tenant Fees Act introduced in 2019 has heaped more costs onto investors’ shoulders too.

Moreover, a swathe of new regulations related to improving property standards and safety are taking an extra bite out of landlord profits.

3 UK shares I’d rather buy

It’s my belief that things could get increasingly difficult for buy-to-let to make a profit too, as the government take steps to free up homes for first-time buyers. So I’d be happier to invest in UK shares, which would take the sting out of property rental for me. And there are stocks that can give me exposure to property rental.

The PRS REIT, Grainger and Residential Secure Income are three London stocks that specialise in letting out properties. Not only do they allow me to avoid the costs that buy-to-let investors have to face. Their scale means that investing in residential rentals is also much more cost effective.

On top of this, by buying these shares I don’t have to stump up colossal sums of money to get started. I don’t have to worry about Stamp Duty, property deposits, conveyancing fees and the like.

These UK property shares also give me a good chance to generate a decent passive income. Their forward dividend yields range from 1.9% at Grainger through to 5% at Residential Secure Income. The good thing about the PRS REIT and Residential Secure Income, too, is that they’re officially classified as real estate income trusts (or REITs). This means that they’re obligated to distribute at least 90% of annual profits to shareholders by way of dividends. 

Such stocks would help me exploit soaring UK rents and property prices without much of the cost and all of the effort that day-to-day property management entails. This is why I think buying them would be a no-brainer for me.

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.

The goal of any investor is to find cheap businesses and add them to their portfolio. This seems easy enough and it’s the key to billionaire Warren Buffett’s investing strategy. Very little is known about how the new Covid variant will affect our lives. But fears around it have caused markets to slip everywhere around the world. Not one to sit on the side-lines, I’ve been taking this opportunity to find the best cheap UK shares I can.

Undervalued, not cheap

While cheap may be the word we all like to hear, there is a difference between it and undervalued. Something that is cheap may simply not be worth that much. What I want is to find shares that cost very little, but that I also think are worth more.

How much has a company made over the past few years? What are its profit margins? Does it need to pay down huge sums of debt or keep investors interested with large dividends? All of these factors are important in my decision making under ordinary circumstances, but they’re vital when markets are falling. How else can I predict which shares will regain their value?

Biggest losers

While it is tempting to simply buy the shares that have fallen the most, I’m choosing not to do this. Many of the worst effected companies are ones hurt by lockdowns and travel restrictions. EazyJet and IAG have fallen 18% and 23% respectively since November.

These companies, and others like them, were already struggling through the pandemic. Under ordinary circumstances, budget airlines like eazyjet operate on very small profit margins anyway. The pandemic forced them to take on large amounts of debt to stay afloat, which, with those aforementioned small profit margins, will take decades to pay back.

Great companies

To find a share that is truly undervalued, I need to think of a company whose businesses have thrived over the last few months, but has still been affected by the overall market downturn.

If this was March 2020, I would have said Amazon or Google. Tech companies have few overheads and allow us to do things from the comfort of our home. Unfortunately, the world seems to have learned this now. Google’s share price only fell by 5% over the course of November, but has since recovered.

If we do enter another lockdown then my top British company is Naked Wines. Naked Wines is a wine delivery service which offers customers affordable access to high quality wines from around the world. The company often has exclusive access to wines and is able to offer even greater affordability through its ‘angels’ subscription service. Naked Wines saw a year of unprecedented growth over the 2020 lockdown period and, while growth has slowed in recent months subscriber numbers remain strong and it has been able to pay down a lot of its debt.

There is a risk of course that the novelty of home delivered wines may wear off, especially once the pandemic is in the rear-view mirror. The share price has already fallen 22% since September. However, I personally I think this one has a lot of staying power. I’ve grown fond of the service and intend to remain a customer in the future.

The share price has been fallen by about 10% since November and trades for about 660p, making this company a no-brainer buy for me.

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.