The UK government’s stimulus measures did their job keeping the economy relatively buoyant during the pandemic. And this is evident from the real estate market. The housing market saw a massive boom as people rushed in to make the most of the stamp duty holiday. House builders, as a result, continued to see strong order books.  

Bricakability’s stock is on the rise

Because of this, property and related stocks did well, like Brickability (LSE: BRCK), the concrete blocks and bricks manufacturer. Its share price is 104p as I write, close to its highest ever levels. The stock, which was publicly listed on AIM in 2019, has been a penny stock all along, and it is only in August this year that it rose above that level. It has stayed above 100p ever since. Let me put it another way. The stock has moved way past its pre-pandemic levels, which I often use as a guiding point to understand a stock’s progress since the pandemic. 

Solid results

And I reckon that there could be more growth in store for Brickability. Consider its latest results. The company reported a huge 197% increase in revenue for the six months ended 30 September 2021 compared to the same six months in 2020. Its pre-tax profits have also seen an impressive rise of 120%. 

These results have received a huge bump-up from its acquisition of Taylor Maxwell earlier this year, which adds to its portfolio of services that now include timber cladding. However, the company’s like-for-like revenue growth, which is adjusted for the impact of acquisitions, has also been robust at around 54% as well. I also like that it has made the acquisition without taking on a whole lot of debt. Its debt levels have barely budged from last year, because it was funded through an equity raise.

Positive outlook for the near-penny stock 

Brickability’s outlook is positive too. It expects that its full-year performance will be “at least” in line with what the market expects. I read that to mean that there is a good chance that it could actually be higher. It is also on an acquisition drive, which could see it expanding fast in the coming years. 

What I’d do now

With this strong showing, the stock does look somewhat pricey right now. Its price-to-earnings (P/E) ratio is 25 times, but it could well be the premium that investors are willing to pay for a high growth stock. I reckon that if the economy goes into a tailspin because of coronavirus or inflation or any other threat we can think of, a stock like Brickability could be impacted. And then buying at the present price might not seem like such a good idea. 

But going by both its profit-making capacity in the past and with a view to its future, I think it does look like a good stock for me to buy. Penny stock or not, this is one I like.  

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.

Babcock International (BAB) has had its problems in recent times. Today’s half-year results announcement could show if recent major changes at the company have benefitted it and if the shares could be a good investment for my portfolio.

As I write, shares are trading for 309p. A year ago shares were trading 1% higher at 314p. The shares did rally earlier this morning to 321p after its report was released.

Aerospace, defence, and security

Babcock is an UK-based international aerospace, defence, and security business and operates marine, naval, land, and aviation divisions. It has a footprint in Canada, Australasia, and South Africa, as well as other key markets.

Aviation and defence spending is a lucrative market. Many governments can often continue spending on such things even in times of austerity. Babcock shares have unfortunately fallen out of favour with investors recently. Accounting problems and leadership issues have led to a loss of investor confidence. Since these challenges arose, a change in leadership and a thorough accounting review could mean a recovery is underway. 

Recent performance and outlook ahead

Babcock’s strategy has refocused the business under new leadership. This has resulted in the sale of some of its business to streamline operations as well as the accounting review mentioned, which saw some past results restated. 

So has this change in tack benefitted Babcock? Based on HY results announced today, it seems to be the case so far. It reported revenue had increased from £2054m in the same period last year (although these figures were restated after the accounting review) to £2,223m. Losses reported last year turned into an underlying profit of £115.3m this year. Net debt had also decreased, which is always positive.

Babcock pointed to a strong contract backlog worth over £10bn, especially linked to its maritime division. It recently signed an agreement with the UK’s Ministry of Defence worth £3.5bn. In addition, the ongoing sale of smaller businesses will continue to help it save money and streamline operations. Additional positives from the report were further contract wins worth over £700m in the half-year period.

Babcock shares have risks

Babcock’s results are positive but there are still credible risks worth noting before I invest. Firstly, it notes supply chain issues and rising inflation as potential threats to achieving forecasted full-year results. These are common macroeconomic pressures a lot of firms are experiencing issues with right now. Furthermore, Babcock seems to be on the right track once more but there is still lots of work to do to streamline operations and continue growth and winning new business. History teaches me this can be a long and tedious task, which could affect performance as well as investor sentiment and returns.

I think Babcock shares remain a risky prospect, so I would not buy shares for my portfolio at the moment. It seems the new leadership team has got its house in order but there is a long way to go and macroeconomic issues to contend with too. Right now, I will sit on the sidelines and keep an eye on developments.

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.

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Over the past year, many stocks have rallied. However, stock market buoyancy has taken a hit in the past few months. While many stocks have still maintained some gains, only a few have managed to almost double their share price from last year. This FTSE 250 stock is one of them.

Media company Future (LSE: FUTR) has seen a 97% increase in its share price over the past year. And if that’s not impressive enough, over the last three years, it has seen a huge 540% increase in its share price. This is an extremely promising place for me to start figuring out whether it would make a good buy for me even now. 

Strong results for Future

Its latest financial results would certainly suggest so. The publisher of brands like The Week and MoneyWeek reported a fine set of numbers last week for its financial year ended 30 September 2021. Its revenues grew by a significant 79% compared to the year before, its pre-tax profits were up 107% and cash generated from operations increased by 117%. 

These latest figures only add to its consistent growth over the years. It also expects this growth to continue in the next year. In its outlook, the Future Group says that growth could accelerate in the second half of financial year 2022. It has also upgraded its expectations and now believes its adjusted numbers for next year will be “materially above current expectations”. 

Analysts optimistic about the FTSE 250 stock

It is little wonder then,  that analysts’ estimates compiled by the Financial Times expect its share price to rise by around 33% in the next 12 months. The more optimistic ones expected that it could rise by another 56%. However, not everyone is equally bullish. There are some analysts who expect a price fall by 37% as well. 

What could go wrong

Immediately, I can see at least one reason why this is the case. In relative terms, the stock is super-expensive. At 56 times, its price-to-earnings (P/E) ratio is far higher than that for many other FTSE 250 stocks. Of course there is a reason for this: it has done quite well, even at a time when many other companies have languished. So clearly, investors are willing to pay a premium for it. Additionally, its outlook continues to make the stock look promising. 

However, I think that if we finally put the pandemic behind us in the near future, it might look less attractive as an investment candidate for my portfolio. Stocks that are still struggling today might be more attractive — and affordable — investment options at that point.

My takeaway

On the whole though, I like the stock for its long-term potential. If I am willing to hold it for the next five years, for instance, there is a good chance that it will be a rewarding one to buy. Keeping this in mind, it is on my list of stocks to buy in 2022. It might not double my money next year, but I am hopeful it will do so over time.

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.

Yesterday, the Aston Martin (LSE:AML) share price hit its lowest level since the year began. It traded at just above 1,300p, before rallying slightly. At the moment, the share price sits at 1,398p. Given that it has traded up to 2,290p this year, the extent of the fall over the past few months is clear. So is now the right time for me to buy the shares?

A falling knife over time

First, let’s consider the share price from a long-term perspective. Over a three-year period, the shares are down 94%. That’s quite a staggering figure. Over one year, it’s a more tame 14.6%. 

Fundamentally, I could argue that the IPO price back in 2018 of 19,000p overvalued the business, so it was always going to correct lower over time. Added to this was the hit from the pandemic. With the UK and other countries falling into a recession, demand for luxury sports cars fell considerably. The pandemic also created a spiral, with lower revenue forcing the business to restructure debt.

In the short term, the Aston Martin share price has fallen due to news that CFO Kenneth Gregor is stepping down. This news last week saw the shares move lower, as he’s a key cog in the board management machine at the company. The good news is that he’ll be staying on until next summer, so the transition with his successor should be a smooth one.

Considering both sides

When looking for reasons to justify a turnaround in the Aston Martin share price, I can point to the latest financial results up to and including Q3. For the first nine months of the year, revenue jumped 173% compared to 2020. This means that it’s on track to meet the full-year guidance set out earlier in the year. 

Guidance looking forward to 2022 is also positive. The transformation project taking place at the moment includes various exciting product launches. That means new editions of the popular SUV, as well as hybrid vehicles and other supercars. With this pipeline, I think that demand (and revenue) should continue to rebound next year. This should help to pull the Aston Martin share price higher if the financial outlook is also met.

On the other hand, there are still risks ahead. The luxury sector is one of the hardest hit during economic downturns. With uncertainty around Covid-19 still very much a factor, we could be in for a tough winter. If economic data starts to disappoint, I think the share price could struggle to move higher. Negative sentiment could be a real drag here.

On top of this, net debt is still a concern. It stood at £808.6m in the Q3 results. When I consider that total revenue for the business in 2021 was £736.4m, it puts it in perspective!

Overall, I do think that the Aston Martin share price can do well in years to come. However, I’m going to hold off buying right now until I get more clarity on the impact of the new virus variant.

Jon Smith and The Motley Fool UK have 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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Antofagasta’s (LSE: ANTO) a FTSE 100 share I’m paying close attention to because of its exceptional all-round value. Firstly, the blue-chip copper miner changes hands on a forward price-to-earnings growth (PEG) ratio of just 0.1. And I know that any sub-1 reading suggests a stock could be undervalued. The company boasts a chunky 4.7% dividend yield too.

Concerns over future Chinese consumption have ratcheted up this week as property giant Evergrande edged closer to default. This threatens to smack the entire commodities-hungry Chinese economy and not just the retail sector. China sucks up more than 50% of all produced copper.

This is a danger I believe is more than reflected in Antofagasta’s cheap share price of £14, however. I’d actually buy the company’s shares because I expect copper demand to take off as electric vehicle build rates boom. Vast amounts of metal are needed to make the cars and the related infrastructure to help them run. Miners like Antofagasta are in the box seat to exploit this trend.

Another FTSE 100 bargain share?

I think Tesco’s (LSE: TSCO) share price also looks cheap on paper. At a price of 283p the FTSE 100 supermarket also trades on a forward PEG ratio of 0.1.

For a firm with its immense market clout, and more specifically its key position in the fast-growing online grocery segment, this might seem too good to be true. The boffins at Statista reckon sales here will rocket 43.8% during the five years to 2024. Projected growth for online grocery is higher than any other part of the retail industry.

I still fear for Tesco as competition grows, though, and particularly from discounters like Aldi and from Amazon. These companies are expanding their operations online and in the real world to try to grab Tesco’s crown. I’m also concerned by the threat of rising costs in response to soaring inflation and worker shortages. Indeed, strike action is looming at the retailer’s depots in a dispute over wages. It also faces spiralling product costs worsened by supply chain issues.

5.7% dividend yields

I’d be more content to park my cash with Barratt Developments (LSE: BDEV). I already own shares in this FTSE 100 housebuilder and I’m considering upping my stake given the strength of Britain’s housing market. According to Halifax , house prices in the UK rose 3.4% between September and November. This was the fastest rate of growth since 2006.

These figures illustrate how robust the underlying health of Britain’s housing market is. Full-fat Stamp Duty has returned in recent months. But a myriad of factors continue to push buyer demand through the roof, from ultra-low interest rates and generous mortgage products from lenders, to ongoing Help to Buy support for first-time purchasers.

I don’t think Barratt’s low share price reflects the strength of trading conditions today. It trades on a forward PEG ratio of just 0.5. On top of this, at a current price of 727p the builder sports a monster 5.7% dividend yield. I expect this cheap UK share to continue strongly, even though building materials shortages could send costs higher and dent its margins.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild owns shares of Barratt Developments. The Motley Fool UK has recommended Amazon and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The FTSE 100 has rallied well after the Omicron scare. The index showed an incredible 1.5% recovery yesterday, largely dispelling investor concerns. Businesses are now much better prepared to cope with Covid scares. And I think the UK market is a great place to invest my savings right now given the quality dividend stocks on offer. 

Today, I will be looking at two FTSE 100 shares that look like great long-term picks for my portfolio, one for steady passive income and one with growth potential.    

Market leader with 6%+ yield

The British insurance industry is a tough nut to crack. There are several established insurers and asset managers vying for a larger chunk of the market. But Legal & General (LSE:LGEN) has been a name synonymous with the industry for nearly two centuries now.

Recent share price returns have been underwhelming. One-year returns stand at 12.6% and LGEN ranks 50th out of the 100 stocks listed in the footsie for returns over the period. But I see an impressive recovery from pandemic lows when analysts expected inflation and interest hikes to have a more profound impact on the insurance sector this year. 

These returns coupled with the 6.2% dividend yield mean investors collected a tidy profit this year. And unlike previous market crashes, LGEN kept its yield steady across a turbulent 2021, upholding its investor-first strategy. The company is currently trading at a forward price-to-earnings (P/E) ratio of 7.5 times, driven by strong profits from its asset management and life insurance divisions. 

But, the British stalwart has to fend off strong competition from the likes of Aviva and M&G. Also, if Omicron fears strengthen, we could face another large market crash. And insurance shares could suffer as a result. But I’m watching LGEN closely, and will consider a £1,000 investment if the FTSE 100 recovery continues.

Top FTSE 100 performer

Ashtead (LSE:AHT) shares have been on an incredible run lately. One-year returns stand at an impressive 92%, making it the best performing FTSE 100 stock in this period, as of today. But. with Omicron fears plaguing the construction industry, the shares are down nearly 3% in the last month which I see as a rare buying opportunity. 

The company has also been bolstered by its growing presence in the US and Canada. US President Biden’s $1.2trn infrastructure investment plan and is great news for a company that specialises in renting out pricey construction equipment. I think Ashtead has a great business model, allowing smaller projects to cut down on construction costs. Although it’s not a new idea, Ashtead has scaled up its venture well and has attracted investors with consistently strong results. Revenue doubled from £2,546m in 2016 to £5,031m in 2021. The company simply shrugged off the pandemic crash while many large construction businesses struggled.

But this also means that its shares are overvalued right now, trading at a P/E ratio of 32 times. And I expect operational costs to rise with its expanding presence in the US. The larger equipment cache means more repair and upkeep costs. And the company operates primarily in North America and the UK, overlooking developing regions in Asia and Africa that have mammoth expansion projects.

Yet I think its strong focus on stable, defensive growth makes it a good FTSE 100 option for my long-term portfolio today.

Suraj Radhakrishnan 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.

Some of my favourite FTSE 100 defensive shares have been looking lively. And I reckon the rise of general price inflation could have a lot to do with that.

Warren Buffett once told us an environment of high inflation favours businesses with pricing power and a low asset value on the balance sheet. To me, that sounds like good advice because such enterprises will likely be able to raise their selling prices to preserve profit margins. And they won’t need to spend too much on maintaining assets when costs are rising. So, with that theory in mind, I’m heading for some of the defensives.

Defensives versus cyclicals

To me, defensive stocks are those with steady underlying businesses that have resistance to general fluctuations in the economy. They tend to trade well, generate strong cash flow and keep up their shareholder dividends. And that’s whether the economy is booming, busting or moving sideways.

The other extreme is the cyclical stocks. They tend to suffer in economic slumps and downturns. And they often have a record of erratic revenue, earnings, cash flow and shareholder dividends. Meanwhile, their multi-year share price charts often look like a sketch of the mountains in the highlands of Scotland with many peaks and troughs.

My search for defensive businesses often takes me to sectors such as fast-moving branded consumer goods, information technology (IT), pharmaceuticals & healthcare, utilities, energy, technology and others. And when I’m looking for cyclical businesses it’s usually sectors such as banking & finance, mining, oil & gas companies, retailers, housebuilders & the wider construction industry, transportation, airlines, travel, and others.

6 portfolio candidates

The FTSE 100 has some prime candidates for this defensive, potentially-inflation-fighting, investment strategy. For example, I’m keen on Unilever and Diageo in the branded, fast-moving consumer goods sector. And in pharmaceuticals, GlaxoSmithKline. While in the wider IT, software and technology space, I’m focusing on Experian, Relx and Sage.

However, such beasts rarely have a bargain valuation. And that’s because of often robust quality indicators — the market is usually quick to recognise such attributes by marking up valuations. For example, GlaxoSmithKline’s operating margin is running around 19%. But several are higher, such as Relx near 26% and Diageo above 29%. And percentages like that can be a strong clue that the underlying businesses could have a competitive advantage over their competitors.

A favourable economic environment

But buying quality doesn’t ensure a positive investment outcome. And the possibility of cycling valuations could cause me to lose money on these shares. Defensive stocks can fall in and out of favour with investors from time to time, even though the underlying businesses tend to be less cyclical than many others. And that sometimes causes valuations and share prices to cycle up and down.

But I’m keen on these stocks now because the general economic environment may help them attract investors. So, my guess is valuations and stock prices could cycle higher from where they are now. However, my assessment of the situation could prove to be wrong. Indeed, all shares carry risks. Nevertheless, I’m watching and buying stocks like these now because I also see them as good candidates for a long-term investment portfolio.

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