Looking at the performance of the Scottish Mortgage Investment Trust (LSE: SMT) in recent years, its performance is impressive. But can looks be deceiving? When it comes to what happens next, past performance is not necessarily an indicator of the future. I reckon the Scottish Mortgage Investment Trust could be headed for a fall. Here’s why.

Investment trusts as pools of assets

An investment trust is exactly what the name suggests. It doesn’t run its own business and generate profits. Instead, it invests its assets in a variety of other companies. This means that, broadly speaking, the trust’s performance will mirror those of the assets it owns. The correlation isn’t perfect, as investors can value the trust’s shares at a premium or indeed discount to its underlying assets. But the key driver for a trust’s performance over the long term is typically how its underlying assets perform.

At the end of September, I explained why I was bearish on the Scottish Mortgage Investment Trust share price. Between the day that article appeared and the market close yesterday, the shares had a 0% return, although they moved up and down in between. The concern I had in September was about the mixture of assets that Scottish Mortgage owned. That now concerns me even more than it did back then.

Tech holdings

A key reason Scottish Mortgage has performed so well in recent years is the profile of its investments. It has been heavily invested in tech stocks at a time when there’s been a tremendous bull market in tech. It has also had significant exposure to Chinese tech shares. That has paid off well during a period when  demand for them has soared.

Lately though, there has been a sell-off among some leading US tech stocks. Chinese regulation of tech has increased and key companies like Alibaba have seen their share prices fall steeply. Alibaba is one of Scottish Mortgage Investment Trust’s top 10 holdings. Its New York-listed shares have shed 53% of their value over the past year.

Tech trouble ahead?

Regulatory tightening of the tech sector in China looks set to continue. I also think some of the trust’s other tech holdings could be heading lower soon.  For example, Tesla has seen its shares add 63% on a 12-month timeframe. But over the past month, they’ve been moving downwards.

If leading tech names like Tesla continue to lose value, I would expect that to reduce the value of the trust’s holdings. That could harm the Scottish Mortgage Investment Trust share price.

Against that, some optimists think the tech bull market could continue into 2022. The trust has also been investing more in alternative sectors lately, such as pharma. So even if a tech sell-off does gather steam, the trust could be somewhat insulated. After all, it does have an outstanding record when it comes to finding successful investments. Nonetheless, I am concerned that the Scottish Mortgage Investment Trust is at risk of a fall in the coming months. I won’t be buying.

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.

What is it about Warren Buffett that seems to give him the Midas touch when it comes to selecting shares? The so-called Sage of Omaha has been buying and holding some incredible shares for decades. Among his current holdings, there’s one I fancy adding to my portfolio for 2022 and beyond.

Warren Buffett’s biggest holding

The share in question is actually Buffett’s biggest holding. He has over $100bn of the company’s shares at the moment, suggesting he remains bullish about its outlook though he did trim the position slightly last year. Even that move was one he publicly lamented at this year’s shareholder meeting of his company Berkshire Hathaway.

The shares in question are those of Apple (NASDAQ: AAPL). The tech giant had been on Buffett’s radar for years, but it was only in 2016 that he started his position. An initial $1bn was relatively modest compared to what he later put into Apple. But it’s worth remembering that, in 2016 as now, not everyone shared Buffett’s bullishness on the tech giant. Some commentators reckoned that the company had run out of innovative capability and was overvalued. The same concerns can be heard today.

Why Apple for 2022?

There are some grounds for concern that Apple has lost its way when it comes to being a tech innovator. After all, the core product offering has grown only sluggishly in recent years. The key smartphone market also looks more crowded than it did a few years ago.

But Apple’s performance is strong. Last year’s revenue of $365bn was an all-time high. So too was its net income of $95bn. Moreover, those numbers show the sheer scale of the business. Apple made an average of $1bn in revenue every day of the year. Plus it was able to convert that into profits at an attractive margin. I think that shows the wisdom in the company’s strategy of changing its portfolio only a little at a time. Focusing on a limited number of products and services reduces operating complexity. That can improve profit margins.

With its entrenched user base and well-established ecosystem, I reckon Apple will continue to be a money printing machine for years to come. In 2022, if it can prove the continued resilience of its business model as it did last year, I expect sentiment on the shares to stay positive. That could fuel further gains in the Apple share price.

Share price risks

That doesn’t mean there aren’t risks, though. Supply chain issues could hurt Apple like other semiconductor users, threatening revenues and profits. An economic tightening in many markets could lead to falling demand for the company’s costly products.

Additionally, the shares have already seen significant price increases in 2021. Over the past year, Apple shares have put on 40% at the time of writing this article late yesterday. That could suggest that the shares are overvalued. But given Apple’s strong brand, established ecosystem and favourable economics, I think it will maintain substantial pricing power into the future. I would consider buying it for my portfolio now and holding it in 2022 and beyond.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. 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 might sound dramatic, but growth stocks in the US are having a torrid time right now. I certainly don’t think these businesses are going to fail, but is growth investing finally going to end its long run of outperformance?

Let’s dig a bit deeper.

Defining growth stocks

It’s best to start with a quick definition of a growth stock. They’re generally companies that are expected to grow significantly in the future. They may not generate much in the way of profit (many are actually loss-making), and they usually operate in new and expanding industries.

Valuing such companies is tricky because most of their profit generation is expected to be in the future. Therefore, the valuation based on a price-to-earnings ratio is normally very high.

US growth stocks are crashing

I started to question if it is the end of the long run of outperformance for growth investing when I was screening for US stocks. I noticed just how many typical growth stocks were down this year, and down by a lot. It’s just not immediately clear because the S&P 500 index is still up an impressive 27% over 12 months.

I’ll name a few examples and their share price returns over one year: Peloton -64%, Zillow -46%, Teladoc -50%, Zoom -54%, Pinterest -42%, Roku -20%, and Docusign -36%.

There’s a bit of a pattern here. Many of these companies benefited because of the lockdowns associated with the pandemic. Zoom, Peloton and Docusign are certainly examples of this. Zillow did decide to shut down its house flipping business after suffering heavy losses. But in general, these businesses performed very well in 2020, and are now crashing.

Then there’s Cathie Wood’s ARK Innovation ETF, a fund that targets long-term growth in capital by investing in “disruptive innovation”. Now, any company that’s disrupting a sector, by its nature, will likely be a growth stock. This highly successful ETF rallied a huge 149% in 2020, but is down 17% over one year as I write.

But why isn’t the S&P 500 down this year when many growth stocks are crashing? This is because the index is dominated by the mega-cap stocks: Apple, Microsoft, Alphabet (Google’s parent company), Amazon, and now Tesla. The share prices of these companies are all up this year. And aside from Tesla, they generate significant profits and cash flows. If these mega stocks started to decline, it would drag the S&P 500 lower.

Is it the end?

There’s no doubt to me that sentiment towards US growth stocks has declined. This is particularly pronounced in the companies that have benefited over the pandemic. I don’t think this will end any time soon, particularly if central banks start to raise interest rates next year.

Having said this, I also don’t think it’s the end of growth investing. But I do think valuations are beginning to matter more now than they perhaps did last year. With this in mind, I won’t be adding any sky-high-valued US stocks to my portfolio unless I have high conviction on the growth rate.

So I’ll be sticking to my investing principles, which is buying and holding quality companies, while aiming to pay a fair price.

Dan Appleby has no position in any of the shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), Amazon, Apple, DocuSign, Microsoft, Peloton Interactive, Pinterest, Roku, Teladoc Health, 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 Deliveroo (LSE: ROO) share price has been having a rough time of late. It’s down almost 30% over three months, and has fallen 20% at the start of December alone.

The company listed on the London Stock Exchange via an initial public offering (IPO) back in March. However, the first trading day was one to forget as the shares plunged over 26%. It’s safe to say the share price has been rather volatile ever since.

Has the recent price fall created a buying opportunity for me? Let’s take a look at the potential investment.

The bull case

The first thing I like about Deliveroo is its network of partner restaurants and users on its online food delivery platform. This is operated through its 150,000 riders who deliver the food. Network effects can be a very powerful economic moat for a business as it stops competitors from taking market share. A really good example of this is Auto Trader. Therefore, it would be very difficult for a competitor to replicate this if Deliveroo is able to keep building its network of partner restaurants and users.

I’m also attracted to the company’s growth rate as revenue is forecast to grow by 56% this year. The company also operates in a truly global market, which may boost growth further in the years ahead. For example, Deliveroo already has 7.5m users across 11 markets worldwide.

The bear case

There are still risks to consider here. For one, the company has struggled with corporate governance issues. Large asset managers shunned the stock at the IPO due to how they perceive the company’s riders are treated. On Deliveroo’s website, it states that global rider satisfaction is 84%. I note that this is quite high, but it could certainly be improved.

There’s also the European Union’s planned change to the gig economy industry in which Deliveroo operates. This will mean some workers, such as the company’s riders, will be classified as employees, rather than being self-employed as they are now. This will give the workers more rights and benefits, which seems like a positive step to me. However, Deliveroo has said that this will impact its business and increase uncertainty.

The company is already loss-making, and I expect this change to add further operating costs to the business. The forecast for this year alone is a net loss of £225m.

Deliveroo share price: is it now a buy?

I like what Deliveroo is trying to build here in terms of its growing network of partner restaurants and users.

However, weighing everything up, I view the shares as too risky for my portfolio as it stands. I’m in favour of the upcoming change to the gig economy, but I want to see how it will impact Deliveroo’s business first before I invest. The fact that the company is loss-making only heightens the risk.

So for now, it’s staying on my watchlist. I think there are better shares I could buy today.

Dan Appleby owns shares of London Stock Exchange Group. The Motley Fool UK has recommended Deliveroo Holdings Plc. 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.

After taking a bit of a hit in the past few days, the stock markets have returned to fine form now. Consider the FTSE 250 index, which returned to 23,000+ levels at yesterday’s close. As I write this article today, it looks very likely that the index will close even higher. This is good news considering that the index had fallen below the mark in late November, when updates about the Omicron virus were getting increasingly worrisome. 

One of the biggest gainers from today’s buoyant markets is the otherwise utterly beaten-down cruise operator Carnival Corporation (LSE: CCL). As I write, its share price is up by 4.6% from yesterday’s close. And this rise is second only to the media company Reach, which is up so far by 6.4%. I think there are two reasons why this just happened. 

Buying the FTSE 250 stock on dip

The first has to do with the recent sharp recent decline in its share price. On November 26, the stock fell a huge 16%, as the FTSE 250 index itself dipped by a non-trivial 3.2%. This is hardly surprising. Travel has already been impacted by the appearance of the new virus, with new restrictions being put in place to stem its spread. And leisure travel is likely to be even more impacted, because it is not essential consumption, but a discretionary one. So, if it can be avoided, chances are that it probably will. Not to mention the fact that it could potentially face even bigger restrictions if the variant starts getting out of hand. So clearly, investors sold this particular stock far more in panic than the others. 

But as is often the case, when a stock price has corrected too much, it becomes an opportunity to buy. This is exactly what we at the Motley Fool keep saying. We always buy during stock market crashes! And even the mini-meltdown of late November has been seen as a reason for investors to step in and buy the Carnival Corporation stock. It has now recovered most of its value lost since 26 November, and is up by over 14% since. 

Return of investor bullishness

There is a more fundamental reason than just investor psychology behind it as well, though. There is a reason that stock markets have picked up in the last couple of days. I think that has to do with the fact that incoming company results continue to be healthy, the variant is still largely controlled, and might not even be as severe as some of the earlier variants, and there have been no other adverse developments to create market scares either. This bodes well for travel stocks, which could stand to gain big if the recovery continues unabated. 

What I’d do

However, that does not mean Carnival is a buy for me yet. In the past year, its share price has declined by 10%. And its financials are still badly impacted by the pandemic. It is on my watchlist, but I need more proof of its turnaround before considering buying the 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.

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I’m largely optimistic about the FTSE 100 going into 2022. The UK has one of the largest economies in the world and one of the highest Covid vaccination rates. In October, the IMF projected that UK economic growth would be 5% in 2022, which is among the highest in the developed world. This sets the backdrop for what could be a good year for the FTSE 100.

The flagship UK market index has underperformed many others in the developed world. However, with a low price-to-earnings (P/E) ratio and good dividend yield, 2022 might be time for the Footsie to surge.

Within the FTSE 100 there’s exposure to some world-class companies across several sectors. I think in particular pharmaceuticals and energy are likely to see a boost next year. For example, GlaxoSmithKline has had a good year in 2021. It is up around 15% year-to-date and 13% year-on-year. 

BP has had a strong year too, seeing a rise in its stock of over 36% and 27% year-on-year. I can see oil prices rising in 2022, which could lead to a further uptick in BP’s shares.

The ETF

I like these shares, but I’m aware that individual stock picks always come with risk. For my portfolio, I prefer to diversify to try to reduce that risk and invest in the FTSE 100 via an exchange traded fund (ETF). An ETF is a fund that tracks an index or sector, is usually low-cost and can be bought and sold like a share through most online brokers.

Most, if not all, of the major investment companies offer a FTSE 100 ETF and I’m spoilt for choice. I look at making my choice based on three factors: fund size, expense ratio and whether I want dividends or not.

The fund I’m interested in is iShares FTSE 100 (LSE:ISF). By size, it’s the biggest,at over £10bn and it’s the cheapest too, with an ongoing charge of 0.07%.

Although there’s a choice of whether to have an accumulation option (where my dividends are reinvested) or a dividend-paying option with this ETF, I prefer the income stream of the latter. Currently, the yield is 3.71%.

It’s also worth mentioning that this fund is consistently one of the most popular ETFs by trading volume in the UK. 

The risks

There will continue to be lots of risks in financial markets in 2022. A new Covid variant could easily cause a downturn as we briefly saw with the Omicron variant. A rise in interest rates could be a further catalyst for a crash.

Also, by investing in iShares FTSE 100, I’ll only get the market performance of the index, rather than the chance to outperform the market by picking individual stocks.

However, I hope that if I include this exchange traded fund in my holdings as part of a balanced portfolio, I can get good rewards next year. 

Niki Jerath owns shares in iShares FTSE 100. 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.

As a veteran investor, I rarely invest in collective funds. Instead, I make my own asset allocation decisions and pick my own stocks. However, since spring 2020, I’ve kept a close eye on one particular US exchange-traded fund (ETF). An ETF is a collective investment with listed shares that trade just like other stocks. This fascinating ETF is the ARK Innovation ETF (NYSE: ARKK), run by Cathie Wood, ARK Investment Management’s star fund manager. But the ARKK unit price has taken a nasty turn since mid-February. So, is Cathie Wood’s star fading, or is it set to skyrocket again?

The rise and rise of Cathie Wood

Since launching on 30 October 2014, New York-listed Ark Innovation ETF has been managed for over seven years by Cathie Wood. Wood invests in high-tech firms that offer ‘disruptive innovation’. These include pioneers in DNA sequencing and genomics, automation and robotics, green energy, artificial intelligence, and fintech (financial technology). Hence, her top 10 holdings include many of the US’s most exciting tech prospects, dominated by #1 holding Tesla.

In recent years, Cathie Wood has delivered enormous returns to ARKK shareholders. Since its launch, ARKK units have almost quintupled in value, rising 390%. Over five years, the ETF is also up 390%, while it has soared by 140% over the past three years. However, after an excellent start to 2021, ARKK has declined steeply over the past 10 months.

ARKK sinks

On 19 February 2020, before Covid-19 crashed global markets, ARKK’s unit price hit $60.37. It then collapsed and, by 18 March 2020, stood at $34.69 — down 42.5% in a month. But then the unit price went absolutely nuts, ending 2020 at $124.49. At first, this massive surge from spring 2020’s lows continued into 2021. On 16 February, ARKK’s unit price hit its all-time intra-day high of $159.70. That’s 4.6 times its 2020 low, an unbelievable return of 360% in 11 months. Wow.

However, this stratospheric ETF has since come plunging back to earth. As I write, it stands at $100.93, down almost $59 from its February peak. That’s a collapse of almost two-fifths (-36.8%) in under 10 months. So, has Cathie Wood turned into Cathie Woodford, or would I back her inspiring vision today?

Why this ETF is not for me

I don’t own any ARKK units and I wouldn’t buy at current price levels. Why? Simply because the ETF doesn’t fit my risk profile as an older, income-seeking investor. This ETF is aimed at growth investors with a high tolerance for risk and volatility.

Also, although this fund has net assets of almost $21.4bn, it remains highly concentrated. Although Cathie Wood aims to have 35-55 stocks in her fund, the top 10 account for more than half (51.5%) of total assets. Furthermore, as these major holdings are almost all US tech/growth stocks, the fund has a high degree of correlation risk. In other words, its holdings often move in sync. That helps to explain why the fund is down almost a fifth (-18.8%) this calendar year. Lastly, most of AARK’s holdings are unprofitable companies promising ‘jam tomorrow’. And with interest rates poised to rise next year, that model could be a problem for ARKK investors.

Then again, I could be wrong. With such an intensive portfolio, Cathie Wood and ARKK might conceivably bounce back. For example, if euphoria were to return to markets, driving tech stocks ‘to the moon’ (via higher valuations) again. Still, whatever happens, I expect ARKK to be similarly volatile in 2022!

Cliffdarcy 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.

Legendary investor Warren Buffett is still working hard in his 90s despite having ample means for a comfortable retirement. Many investors in his position would be happy to reap the rewards of their investments and settle down into comfortable retirement. I know I would. Fortunately, following Buffett’s advice, I think it can be easier for me to achieve that. Here are seven straightforward tips from Buffett that I reckon could help me retire earlier.

1. Staying inside one’s circle of competence

Buffett repeatedly emphasises the importance of staying inside one’s circle of competence. In other words, he thinks investors ought not to stray from fields they understand, no matter how attractive the potential returns may seem. Buffett also emphasises that this is true even if one’s circle of competence is small. He said, “Know your circle of competence, and stick within it. The size of that circle is not very important; knowing its boundaries, however, is vital”.

Why is this so important, in Buffett’s view? As the old proverb goes, “a fool and his money are soon parted”. That is true not just of (lowercase) fools, but also of smart people who do not know what they are doing. To make an investment, it is important to be able to weigh the risks and opportunities well. That relies on having the right knowledge and understanding to do so in the first place.

2. Keeping things simple

A common management mantra is “Keep things simple”. Buffett applies this to his investment decisions. From the types of companies in which he invests to the way he structures his investments, Buffett’s approach eschews complex high finance. Much of what he does is what an ordinary private investor might do, albeit on a larger scale. For example, Buffett decided he liked the business model and profit potential at Apple, so he bought shares in the company. Admittedly, Buffett’s stake of over $100bn is massive. But the process he went through, from decision making to buying ordinary shares on the stock market, is the same as millions of retail investors who own a bit of Apple.

Why is keeping things simple important in Buffett’s worldview? Basically, he emphasises that the work of an investor is to buy a share of a great company at a good price. To do so typically requires being able to form a clear view of the company and its industry. That’s harder to do when things aren’t simple, for example if the company uses esoteric accounting methods.

3. Honest self-assessment

A rising tide lifts all boats. That old saw applies to the stock market too. But, as Buffett says, when the tide goes out we gets to see who has been swimming naked.

For years there has been a bull market overall, albeit 2020 saw a reversal for a while. A common mistake investors make in bull markets is thinking they are better than they are. They attribute strong performance to their own share picking prowess, rather than recognising the benefit they have received from being in an overall bull market.

That can lead to a skewed assessment of our capabilities or risk tolerance as investors. Over the long term, that can hurt, not help, our retirement planning. The stock market is cyclical, so after a bull market there will usually be a bear market, which continues until at some stage in the future things get bullish again. The clearer we are about the real reasons for our investment performance, the easier it is to change that performance in future. It is no coincidence that Buffett is so open about his failures as well as his successes.

4. Playing the long game

The difference between a good investment and a great one is often simply time.

A share that goes up massively in short order after buying it is what many investors dream about. But in some cases, such dramatic price swings are closer to speculation than investment. Buffett tries to pick companies that he thinks have good long-term business prospects, then sits back and lets those prospects bear fruit over time.

As well as hopefully improving long-term investment returns, sticking with a few great performers can also reduce trading costs. It also cuts the amount of time spent following ups and downs in the market.

5. Warren Buffett has an investment theory

A lot of investors buy or sell shares based on the shares’ individual prospects. But they don’t develop an overall investment theory. By contrast, Warren Buffett has a clear conceptual model for how he approaches investment. From sticking to things he knows to looking at how wide a company’s competitive advantage or ‘moat‘ is likely to be in the future, Buffett relies on a certain approach to investing. That informs his asset allocation decisions.

We don’t need to have the same theory about investing as Buffett to do as well as he has. But I think it’s helpful at least to have a theory. Starting with even a simple one is helpful. Based on our experience, it can be refined over time. That can provide discipline and force us to analyse what has worked best about our approach so far and why. Over the long term, such self-reflection will hopefully improve our investment performance.

6. Diversification

As shown by his Apple stake, when Buffett likes a company he is willing to go in on a large scale. So, why did Buffett scale back his Apple holding last year while still keeping most of it? Surely if he had turned negative, he could have sold the whole stake?

I think the answer is that Buffett is too smart an investor to put all his eggs in one basket. He recognises that a simple but powerful form of risk management for an investor is to diversify across different companies and business sectors. No matter how great one company’s performance has been or promises to be in future, events can always get in the way unexpectedly. Like Buffett, I make sure to spread my investments across multiple shares and lines of business to help reduce my risk if any one company underperforms. In the short term, that can mean I miss out on benefitting more from some great opportunities. But building a richer retirement is a marathon, not a sprint.

Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple. 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.

Smurfit Kappa (LSE:SKG) is one FTSE 100 stock I would buy today and hold for a long time in my portfolio. Here’s why.

Market leader

Smurfit Kappa is Europe’s leading corrugated packaging company and one of the leading paper-based packaging firms on the planet. Packaging in all forms has been a staple for all industries for many years but in recent times there has been an e-commerce boom and the pandemic has exacerbated this too. Due to this, demand has increased. Firms like Smurfit are primed to benefit.

As I write, shares in Smurfit are trading for 4,025p whereas a year ago shares were trading for 3,374p. This represents a 19% return over a 12-month period. It is worth noting that shares have comfortably surpassed pre-pandemic levels too.

Why I like Smurfit Kappa

Smurfit’s profile, offering, and reach are excellent. It is a world leader in its market and has a vast reach. It has 36 factories producing its packaging materials in countries across the world. In fact, it recently announced a new plant in Mexico. The Latin market could be key for it to continue growing, which could lead to increased performance and better returns. At current levels it looks attractively priced too. It sports a price-to-earnings ratio of 19. The FTSE 100 average is 20.

Next, Smurfit has a good track record of performance too. I understand the past is not a guarantee of the future however I like to use it as a gauge nevertheless. I can see revenue and gross profit increased year on year for three years prior to 2020, when levels dropped slightly due to the pandemic. Coming up to date, a trading statement in November for the first nine months of the year made for good reading too. Revenue increased by 15% compared to the same period last year. Overall, forecast full-year results are on target to be met.

Finally, the rise in environmental, social, and corporate governance (ESG) investing has shone a light on firms like Smurfit. It looks to adopt ESG practices and keep its business socially and environmentally friendly. This is a bonus for me personally as ESG investing is not high on my list of priorities. However, it is good to see Smurfit adopting practices in its operations such as recycling old materials and being environmentally friendly.

FTSE 100 stocks have risks too

Smurfit could experience performance issues due to the current macroeconomic pressures. Rising inflation and costs could hurt performance and any investor returns too. Costs passed on to customers could lead towards its customer turning to competitors, although they face similar headwinds too. Furthermore, the packaging market is competitive. Other FTSE 100 players include DS Smith and Mondi.

Despite the risks noted, I like Smurfit Kappa and would add the shares to my holdings at current levels. I believe it is currently attractively priced and performance seems to be on the up. Furthermore, it pays a dividend, which would make me a passive income.

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.