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Shares of Liontrust Asset Management (LSE: LIO) are up almost 10% this week. This is an impressive little run no doubt. But for investors in the stock, it’s just another week in what has been a very lucrative half-decade. The stock is up 65% in the past year and an incredible 567% over the past five years. Assuming dividends had been reinvested, the total shareholder return would have been closer to 787% for the five-year period. So how has this little known dividend stock achieved this on a stock exchange that has consistently underperformed and should I be buying it?

Beating its peers

As Liontrust is an asset management firm, I can compare it to other brokerage service companies. Intermediate Capital Group and 3i Group returned 218% and 105%, respectively, over the same five-year period. Liontrust has far outstripped its peers in this regard. But for the sake of certainty, say I wanted exposure to the financial services sector generally back in 2017 and chose banking stocks. Lloyds, Barclays and HSBC would have lost me 18%, 14% and 31% of my investment, respectively. I think there’s simply no comparison in the sector to what Liontrust has achieved and it seems like the market is starting to realise the underlying value of this stock.

The business

Liontrust is structured very similarly to a hedge fund. It employs several different strategies to make a profit for its investors. In 2021 it almost doubled its assets under management (AUM) from £16bn to £30.9bn. This huge influx of extra cash meant that net income also doubled. Free cash flows, which represent the actual cash flowing through the business after deducting operational costs, have almost tripled in the past two years. They went from £15.6m in 2019 to £43.4m in 2021. Positive trending free cash flows are always a plus, as they indicate a growing ability for the company to generate money that can then be returned to me as an investor.

Among the positives is the lack of long-term debt on the balance sheet. Interest payments on long-term debt cripple the ability of a business to reinvest revenues and grow the business. Therefore, Liontrust carrying almost none is very encouraging to see. Also worth noting is the recent move into the ESG area with its Sustainable Future fund managing £13.2bn in assets, making it by far the largest in the UK.

So back to the question of whether I’d buy. From a growth perspective, I think there’s still a lot of upside to this stock, but from a value perspective, it’s not something I’d look to hold for life based on what I’m currently seeing. Liontrust doesn’t sell a unique product or unique service and with a market cap of just £1.46bn, it doesn’t benefit from from competitors facing a high cost of entry. Warren Buffett might say it has no durable competitive advantage or moat.

That being said, even though I’m a value investor at heart, I would buy this stock today as part of the smaller growth part of my portfolio. The potential upside in the short term is simply too tempting to pass up, I feel.

Stephen Bhasera has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Lloyds Banking Group. 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.

Making money from falling share prices is common investing strategy that involves taking a chance on companies whose share price has fallen in recent times, hoping they can find a return to former glories.

There are some good recent examples of this strategy working for active investors. Take Marks and Spencer for example, whose current share price of 240p is up by around 70% in the past 12 months. That said, even this is some way below the company’s five-year peak of 369p back in May 2017.

Plenty of investments to choose from

There are plenty of potential investments to make if I want to follow this approach. As of November 23^rd, there are 117 companies in the FTSE 350 Index who are trading at a lower share price than they were three years previously.

That gives me plenty of options to find a business that might be capable of turning the tide. If I run through these companies by sector, I find recurring patterns.

Sectors in the doldrums

It will come as no surprise to know that businesses associated with entertainment, leisure and travel have not fared so well recently. A broad sweeping generalisation would be that Covid-19 is to blame for this, and there is of course some truth to this.

It is not the whole truth in every case, though. Take a look at travel operator TUI for example. It is currently trading at an 80% lower price than three years ago, and Covid-19 is not the only reason why.

Package holiday operators were already having a tough time before Covid, with the venerable Thomas Cook for example biting the bullet in late 2019. Consumer habits were already changing before Covid, so even if the world returns to ‘normal’ in the next year or so, there is little reason to think TUI will all of a sudden have people rushing to book holidays with it again.

Energy might be the way to go

A good number of the poor recent FTSE performers have belonged in the energy sector. Even the giants such as BP (LSE: BP) have been lagging behind their historical performance, but I think there are reasons to be more optimistic about the sector and certainly BP in particular.

BP remains a financial powerhouse and is using its muscle to transition away from oil. In the current climate – no pun intended – this represents a bold but welcome move. BP intends to divest $25bn in fossil fuel assets by 2025, and is also committed to reducing oil production by 40%.

There are of course some risks associated with BP. Whatever BP’s longer-term plans, it currently derives most of its revenue from oil. The price of Brent Crude has recovered since its 2020 crash, but a 10% drop in value in November 2021 demonstrates how volatile oil prices remain in these pandemic times.

That said, BP remains a business that continues to generate a healthy dividend, and with a share price that has shown signs of recovery of late, I am looking to get into BP for at least the medium term.

Garry McGibbon has no position in any of the stocks 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 people prefer to invest in dividend stocks and build passive income. But the problem with dividends is that that they cut into cash that could otherwise be used to grow the company. Instead, I prefer to take my money and invest it into great UK growth stocks. The Omicron variant has recently caused share prices to tumble, leaving lots of excellent companies cheaper to invest in than they otherwise would be.

Darktrace

After going public earlier this year and rocketing into the FTSE 100, the cybersecurity firm Darktrace (LSE: DARK) was the hot growth stock on everyone’s lips. But what goes up often comes down and sentiment seems to have soured with the share price correcting. I expected this to happen and it’s why I initially avoided Darktrace.

But looking at the company’s financial statements, sales and revenue have remained strong, and the business is projected to grow by a further 38% over the next year.

Darktrace operates on a subscription-based business model, which I believe will come to serve it well over the long term. The longer clients use it, the more vital it will become to their IT systems.

These are of course just projections and may not come to fruition. Tech is very speculative and the risks are higher for companies without a proven track record. Even so, the Omicron flash crash has pushed the share price to its lowest point since July (451p) so I will definitely be picking up some shares soon.

Wise

Wise (LSE: WISE) facilitates cheap and easy transfers between currencies and bank accounts. This UK tech company also went public early this year and its share price also climbed high before falling back. It reached 1,150p in September but is 752p as I write. This is fairly common after an IPO as it takes time for a market to determine the true value of a share.

Just like Darktrace, I don’t think this fall represents failings in the business. Wise customer numbers surged this year and earnings doubled from those of 2020. But profit margins have shrunk as management has chosen to invest in developing new products and entering new markets.

There’s a chance that the shares could fall further still as the market settles on a fair price. Reduced travel over the next few years could also cut into earnings as fewer people need to convert currencies, pushing the price lower. Despite these risks, I think Wise offers an affordable and high-quality service while operating with low overheads and I’m eager to add it to my portfolio.

JD Sports

JD Sports (LSE: JD) has done very well in 2021. The sports clothing retailer opened more than 600 new stores globally and increased revenue to a record £3.8bn. Pre-tax profits even tripled from 2019. Right now, the share price is trading for 216p, down 7.95% from November but up 32% from 2020.

I do have one concern though. Because of issues around competition, JD has been ordered to sell one of its subsidiaries, Footasylum. The shoe company brought in an additional £232m in revenue for JD in the 2021 financial year, a contribution that will be missed.

Regardless, given its long history in the UK market, I consider JD Sports to be a safer investment than Darktrace or Wise and will be adding it to my portfolio too.

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.

The past few weeks have been a bumpy ride for the FTSE 100. Recently the discovery of the Omicron Covid-19 variant has seen investors spooked. But before that, inflation was the primary cause for concern. And it remains a leading issue for investors today moving into 2022. As the cost of raw materials increase, the pricing power of businesses is being put to the test. And several firms are discovering their ability to pass on the additional expense to customers may not be as strong as initially anticipated.

In most cases, inflation is bad news, especially for consumers. However, a few sectors, like the housing market, can actually benefit from rising prices. With that in mind, I’m looking at shares of one FTSE 100 firm that might be the best buy to beat inflation.

Persimmon: my best buy today?

Historically during times of higher inflation, property values have increased. And that’s positive news for existing homeowners. After all, even if living expenses are on the rise, the boosted worth of their homes can help mitigate the damage to overall wealth. However, they’re not the only beneficiary of rising property values.

With the housing market being boosted, homebuilders can start reaping the rewards. But inflation also lifts the cost of construction materials like bricks and roof tiles, negating the rising price benefits. This is why Persimmon (LSE:PSN) has caught my eye because the firm is vertically integrated. That’s a fancy way of saying it has complete control over its own supply chain. And therefore, the rising cost of raw materials is far smaller than for other homebuilders. This is made perfectly clear in its latest half-year earnings report. Over the last six months, the group increased its bottom line by a staggering 64.8% compared to a year ago.

Needless to say, that’s impressive. And with inflation expected to continue rising throughout 2022, I think the strong profit performance can continue. This is why I believe Persimmon could be one of the best FTSE 100 shares to buy to beat inflation.

However, these tailwinds won’t last forever. The Help-To-Buy government support scheme is coming to an end in March 2023. And combining this with rising house prices may result in homes becoming unaffordable, pushing property values back down over the long term. That would obviously be bad news for Persimmon and its share price, making it a factor I’ll be watching closely.

Final thoughts on the FTSE 100 stock

There’s an ongoing debate about whether today’s inflation is permanent or temporary. Assuming it’s the latter, it could be a couple of years before it returns to pre-pandemic levels. That creates a solid period in which Persimmon could maximise profits.

I do think an eventual slowdown in the property market is inevitable. However, the need for housing in the UK isn’t likely to disappear any time soon, considering the expanding population. That’s why, despite the risks, I think Persimmon could be one of the best long-term shares to buy for my portfolio.

Zaven Boyrazian 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.

There was big news out yesterday for Nvidia (NASDAQ: NVDA). The US Federal Trade Commission (FTC) announced it’s suing to block Nvidia’s $40bn acquisition of UK chip designer Arm. The potential takeover has been rumbling on for over a year now as numerous investigations from global regulators scrutinise the deal. As a current holder of Nvidia stock, I need to understand the risks here.

Let’s take a closer look to see if the shares are a still a buy for my portfolio.

Nvidia’s current business

Nvidia stock has been on an absolute tear this year. Its share price is up a huge 146% as I write. It makes the company the seventh biggest by market value in the US today, at $803bn. For some additional context, Meta’s (previously Facebook) current market value is $863bn, so not too much bigger than Nvidia nowadays.

Nvidia specialises in graphics processing units (GPUs) that are used in a range of applications, such as video gaming and data centres. Artificial intelligence is another exciting opportunity, with this sector alone expected to grow significantly through this decade. The company is also creating its own omniverse.

Nvidia’s growth forecasts for the fiscal year 2022 are spectacular in my view. Revenue is set to expand 60%, with earnings estimated to grow over 150%. I think this reflects the opportunities open to the business already, even before the potential acquisition of Arm.

Is Nvidia stock a buy?

I previously wrote about the firm’s results back in November, noting the potential risk around the Arm acquisition. It must be taking considerable work time within the company to address concerns from global regulators. This is a distraction for management and takes attention away from running the core business.

The news today from the FTC only heightens this risk. What’s more, the FTC has set a date for the administrative trial of 9 August 2022. Nvidia initially expected the acquisition to complete in 2022. This is clearly going to drag on for a while longer.

But when the news broke yesterday of the FTC’s challenge, Nvidia’s share price didn’t budge. There are two ways to view this. First is that it was expected due to the global scrutiny the deal is already under. And second, Nvidia’s core business already has a number of growth avenues. Therefore the stock is priced to reflect this rather than the additional potential of the Arm acquisition.

Were I to buy more shares in Nvidia, I’d have to separate out the current business, and the potential of the combined company. I view its growth potential as highly attractive without the Arm acquisition, so I’ll carry on holding the shares.

Nevertheless, I think the combined company of Nvidia and Arm would strengthen the business. There’s clearly a long way to go before the acquisition goes through, if it ever does. So for now, I’m going to see how the situation develops before adding to my position.

Dan Appleby owns shares of Meta and Nvidia. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. 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’m searching for the best UK shares to buy for my Stocks and Shares ISA. Here are three top-quality penny stocks on my radar right now.

A rock-solid penny stock

Sometimes boring can be mega attractive. This is why I’m a big fan of Assura (LSE: AGR). As owner and operator of primary healthcare properties in the UK, its day-to-day business isn’t exactly gripping.

But from an investment perspective this makes it a terrific stress-free stock to buy, at least in my opinion. Even as the Covid-19 crisis worsens again, this penny stock doesn’t have to worry about earnings taking a battering. This remains the case, whatever social, economic or crisis comes along.

It’s possible that changing healthcare policy in Britain might affect demand for Assura’s properties going forward. But as things stand, government need for primary healthcare facilities is rising, not receding. And I expect demand for healthcare properties to rise as the country’s population steadily ages.

Cooking up a storm

A few years back The Restaurant Group (LSE: RTN) was in a heck of a state. No-one was going into its unfashionable eateries like Frankie & Benny’s and Chiquito, in spite of the vast sums it was spending to refresh its menus and improve its brands.

However, it finally seems to be turning the corner,  thanks in large part to its acquisition of super-popular noodle chain Wagamama. And according to its November trading update, the business is outperforming the broader market.

With Britons spending more of their disposable incomes on leisure activities like eating out the future may finally be looking rosy for The Restaurant Group. This is why I’m considering buying this turnaround stock today.

But remember that the mid-table restaurant market has been littered with casualties like Gourmet Kitchen Burger and Jamie’s Italian in recent years. The Restaurant Group will have to keep pedaling wildly to keep the recovery going amid high levels of competition.

Another top buy for my ISA

I’m also thinking about adding City Pub Group (LSE: CPC) to my Stocks and Shares ISA. Like The Restaurant Group, this penny stock could be a great way to exploit rising expenditure on social activities. It operates around 45 pubs and bars in Southern England and Wales.

All of its premium sites offer a high-end experience to drinkers, allowing it to stand out against branded pubs and to capitalise on a fast-growing part of the market.

My main concern with buying City Pub shares is the spectre of ballooning Covid-19 cases in the UK. The emergence of the Omicron variant has pushed the number of people dining out in the UK to their lowest level since mid-May, a recently-released study shows.

I think City Pub has plenty of long-term potential, though I am aware that profits could take a whack in the near term.

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.

Lloyds Banking Group (LSE:LLOY) shares are probably the most popular stocks to own in the UK. At least that’s what it seems like when looking at trading volumes.

But despite this enormous popularity, are Lloyds shares a good investment? And if not, what would be a better option for my portfolio?

Inspecting performance of the most popular UK share

Despite what the immense popularity of this stock would suggest, Lloyds has been a pretty terrible investment over the past two decades. And in the last five years, the performance hasn’t exactly improved. In fact, a £1,000 investment in December 2017 would currently be worth around £675, excluding the effects of inflation.

To be fair, this timeframe does capture the market crash in early 2020, triggered by the pandemic. But even if I measure between December 2017 to December 2019, the return is still a disappointing -14%. By comparison, the FTSE 100 index only fell 3% over the same period.

OK, the banking sector hasn’t exactly enjoyed the most favourable operating environment in recent years. With interest rates being so low, the ability to profit from issuing loans to individuals and businesses has been quite limited. Fortunately, for Lloyds and its shares, that may soon change.

With inflation on the rise, interest rates are expected to follow suit, improving the company’s profitability in the process. But why would I invest in a complex banking giant when there are far simpler alternatives in the financial sector that could yield better returns?

A more attractive option than Lloyds shares  

Financial service businesses have been getting a lot of attention in recent years, especially those embracing technological innovation. One in particular that has caught my attention is Alpha FX (LSE:AFX). 

Like Lloyds, the firm offers currency risk management solutions to corporate clients. The realm of forex hedging is exceptionally complicated. Yet it remains necessary for international businesses to protect their bottom line from fluctuating exchange rates.

While Alpha FX is a young company, its unique pay-as-you-go-like billing structure has made it a far more affordable and cost-efficient method for businesses, especially those too small to qualify for the services provided by traditional banks like Lloyds.

But beyond this core service offer, Alpha FX recently unveiled a brand-new enterprise-facing payments network. Using this system, sending large quantities of capital abroad can be done exceptionally quickly compared to traditional wire transfers that are both expensive and time-consuming.

Being a young business, an investment in Alpha FX undoubtedly carries more risk than buying Lloyd shares. It’s certainly not the only financial services business out there offering these solutions. And the rising level of competition could make it difficult to continue expanding, or retaining market share.

Having said that, performance has been rather extraordinary, so far. Over the last five years, the stock has exploded by 280%! Compared to the -14% delivered by Lloyds shares, that’s quite a remarkable difference. And far more enticing for my portfolio.

Zaven Boyrazian owns shares of Alpha FX. The Motley Fool UK has recommended Alpha FX and Lloyds Banking Group. 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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