London may be getting its most exciting new listing in a long time. After facing regulatory hurdles in its attempt to list its initial public offering (IPO) in New York, Shein is stepping up its preparations for a London listing. The China-based fast-fashion company was valued at $66bn (£52bn) in a fundraising last year.

Is this one for investors to pay attention to?

A change for London

In September last year, the LSE lost out on the IPO for Cambridge-based Arm Holdings, which sought a higher valuation on the Nasdaq. More recently, betting firm Flutter ditched its primary London listing in favour of the NYSE.

The track record for big names has been poor in London. Maybe Shein might be the trend-changer going forward.

At the most recent valuation, Shein would place itself as the 12th largest company in the FTSE 100. This would be a major win for the LSE, finally attracting one of the big names over its counterparts across the pond.

Regulations

Regulations were the main hurdle in Shein’s attempt to list in New York. Geopolitical tensions between China and the US proved too hard to overcome.

Now in London, the company faces more issues. Three parliamentary committee chairs have pressed for more scrutiny of the company, and also insisted that the listing should not go ahead while parliament is dissolved for the general election.

Why the scrutiny?

Well, there are ESG concerns about Shein’s labour policies in China, the poor working standards, as well as intellectual property theft accusations.

Although the listing would be good for London’s image, this may be a listing that comes with as many problems as it does solutions for the IPO market.

The company itself

Shein will want to establish itself as a global player rather than just a Chinese company selling inexpensive clothing internationally. Also note that there are not many apparel companies with a valuation near $66bn. Shein has a big valuation with a lot of problems.

In 2023, the company made $32.5bn in revenue and $2bn in net income. So, with roughly a price to sales ratio of 2, Shein is in line with peers such as Next and TJX Companies.

My view

Will I be buying shares if the IPO goes through in London? No. This is a name that I will let pass me by.

A good move for the LSE, perhaps, but not for my portfolio.

There is something that doesn’t sit right with me knowing that a company faces large ESG issues and is present in my portfolio. The financial industry is putting more and more pressure on this metric. I can only see this risk decreasing the valuation of shares as time goes on.

In a crowded apparel market, there is a risk that Shein may lack a sustainable competitive advantage over its rivals. It is a brand built from offering very low prices. However, the fast-fashion industry typically has low profit margins. Competing primarily on price could further reduce those margins.

The post Should I buy Shein shares after the IPO? appeared first on The Motley Fool UK.

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Jesse Williamson does not own shares in any company 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 price of copper is on the rise. This is starting to look like a theme that could hold up for longer and not just be a quick theme that we look back to in a 2024 recap. With copper on the move, it’s time for me to look for some cheap shares that have exposure to the commodity.

Copper

Copper futures are trading above $11,000/tonne after starting this year below $8,700/tonne. Prices have increased just shy of 30%. That puts copper as one of the best-performing assets in 2024, ahead of other metal peers (gold and silver) and major indices such as the Nasdaq 100, S&P 500, and FTSE 100.

There are several tailwinds helping copper higher. Increasing expectations of Federal Reserve monetary easing are seeing the dollar fall, which helps the price of commodities rise and also increases investors’ appetite for riskier assets.

However, there are some deeper fundamental tailwinds that are supporting a further move: China.

Last Friday, the Chinese government announced important measures to address the housing market issues, including providing additional funding and making it easier to get mortgages.

On the same day, it was reported that China’s industrial output grew by 6.7% in April, which was better than expected. These announcements had a positive impact on industrial metals.

In 2008, at the peak of the China-led commodity boom, the metal briefly reached a price of over $8,000/t. When adjusted for inflation, the same real value for copper would need to be $14,000/t.

Central Asia Metals

Central Asia Metals (LSE: CAML) produces copper from its Kounrad mine in Kazakhstan and produces lead and zinc in North Macedonia. 

2023 was a year of investment for the company. Nigel Robinson, the miner’s chief executive, said it was a “year of development and investment” in both its lead and zinc operations in North Macedonia and in the copper operations in Kazakhstan.

Currently, the company’s stock is considered undervalued, with a price-to-earnings-growth ratio of 0.4. Anything below 1 would suggest an undervaluation by the markets. Analysts predict a 26% increase in annual earnings in 2024, followed by a 15% increase in 2025.

Central Asia Metals ticks two boxes for me. The first box is that it has copper exposure. The second is that, by valuation metrics, I can call these shares ‘cheap’. Who doesn’t like a bargain? I don’t think I could name anyone who would turn one away.

Mining stocks are operationally leveraged. They can benefit greatly when their underlying products perform well. However, price declines can also hurt revenue forecasts and projections, and commodities can be volatile. This is an inherent risk when allocating capital to commodity-exposed assets.

An investment case

What would I say for my own investment case? The CEO actually said it well in the 2023 annual report: “The metals we produce are essential for modern living and a technologically advancing future. They play a key role in transmitting power and transporting people to foster economic growth and development.”

I really like the outlook for copper and would like to increase my exposure to the commodity via a company that I find attractive at current prices.

The post One overlooked cheap share to tap into the year’s hottest theme? appeared first on The Motley Fool UK.

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Jesse Williamson does not currently own any shares of Central Asia Metals. 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 FTSE 100 has recently reached a record high. This might seem like good news all around, but it can actually make it harder for income investors to find high-yielding shares.

With inflation heading lower in the UK, dividend shares are becoming more attractive than alternative investments such as UK gilts, which have been returning mid-4% annually for different durations.

So, I thought I would examine two companies that I like for allocating capital to income shares.

British American Tobacco

British American Tobacco (LSE: BATS) operates in the… well, you guessed it, the tobacco industry. It sells products all around the world, managing a more diverse operation than that of its peers.

There are some macro headwinds for the company. It is working hard to keep selling a lot of traditional smoking products, like cigarettes and cigars, in its biggest market, the United States. In other countries, things are looking brighter. There’s also some hope that BAT’s efforts to do better in the US are working. For now, these traditional products are still the most important way the company makes money, so if sales keep going down, it could make investors feel even worse.

But BAT is making a strong transition to ‘Building a Smokeless World’. This vision aims to move 50% of revenue to non-combustible products by 2035. Although this is a large change for the company, it places it in a strong position to lead the way in a transitioning industry.

As far as income from investing in shares, British American Tobacco boasts a 9.37% dividend yield.

Legal & General

Legal & General (LSE: LGEN) is a major player in the insurance and investment industries, offering a wide range of services in both areas.

The increase in interest rates has been causing some problems for the investment management division’s assets, but the situation is getting better. On the bright side, the higher rates are actually helping the larger pension businesses.

The UK market is well established, but L&G is also expanding into other countries like the US, Canada, and the Netherlands. There are about $6trn in pensions in these markets, with only a small portion managed by insurers. This means L&G has a lot of room to grow.

It’s important to note that L&G has a strong solvency II ratio, which shows how well capitalised it is. Even though it dropped a bit last year, it’s still well above 200%, which is a good sign of financial strength. Also, L&G is making more money than it’s paying out in dividends, which supports a potential yield of 8.18%.

A good balance

If I were to allocate £5,000 to an account to generate some passive income, splitting a portfolio across British American Tobacco and Legal & General offers me a high passive return (at 8.77%, more than double the 3.5% of the FTSE 100 and higher than UK gilt investments) and allows me to invest in companies that I think can do well in the coming years.

The post £5,000 in savings? Here is how I would invest in income shares appeared first on The Motley Fool UK.

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Jesse Williamson does not currently own any shares in the companies mentioned. The Motley Fool UK has recommended British American Tobacco P.l.c. 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.

Nvidia has quickly become a household name. The AI craze has taken over, and the stock has benefitted, returning over 1,700% to shareholders since March 2020 lows.

Yes, you read that correctly. 1,786%, to be exact (at the time of writing). To add some perspective to the figures, you would have had to invest in the S&P 500 at the beginning of 1989 to have the same return on investment.

The majority of companies that produce semiconductors, which is a key component to power artificial intelligence technology, are listed in the US. But I thought I would take a look at some of the UK listed companies and see if there is a more local opportunity.

Alphawave Semi

Alphawave Semi (LSE: AWE) is a global leader in high-speed connectivity for the world’s technology infrastructure. The company serves the global market, with customers in North America, Asia Pacific, Europe, and the UK.

Although 2023 revenue came in below estimates, the company is forecasted to continue growing revenue in the coming years.

The EV to EBITDA is 53.4, which is much higher than the FTSE Russell’s relative sector average of 6.2. That means there is a much higher premium to be paid for this stock, but the figure is not far off the likes of Nvidia and Advanced Micro Devices.

The share price has held above £1 in the last year and currently sits just above that level at £1.16. The company hit a two-year high of £1.93 in March of this year.

IQE

IQE (LSE: IQE) manufactures advanced epitaxial wafers — essentially semiconductor material — for a wide range of technology applications in wireless, optoelectronic, electronic, and solar devices.

The share price closed April up 37%, mainly due to its earnings announcement. Recent performance has not been strong with 2023 revenue falling, but a brighter outlook on future revenues helped investors to buy back into this name.

The EV to EBITDA is 11.4, which is more in line with its peers than Alphawave Semi.

A total of eight investors have a majority stake in the company with 51% ownership. Institutions’ substantial holdings in IQE imply that they have significant influence over the company’s share price.

Risks to both

Both companies are in the same sector, so they pose similar risks. Semiconductor valuations have been lofty. Any slowdown in this industry’s growth would cause investors to rethink their optimism.

A specific risk to Alphawave Semi is its transition away from Chinese customers. The firm is redirecting its focus towards other regions. This creates some risk towards revenue and the company successfully offsetting this loss elsewhere.

IQE has posted annual earnings per share (EPS) losses for the last five years. Although the sector is growing, investors will want to see bottom-line figures increase in the coming years. Any semi-annual earnings that set back these expectations will negatively impact what markets are pricing in.

Overall

I think there is some potential in these London-listed semiconductor names. With the rapid expansion and demand for chips, it is likely an area of the market that will outperform in the UK.

But I have to ask myself, “Are there better opportunities elsewhere?” Given the inherent volatility of investing in tech, I think I will keep my attention on the US frontrunners for now.

The post With Nvidia leading the way in the AI space, these UK stocks have my interest appeared first on The Motley Fool UK.

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Jesse Williamson does not own any shares of the companies mentioned. The Motley Fool UK has recommended Nvidia. 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 really looked like the Aviva (LSE: AV.) share price was going to break above £5 for the first time since the March 2020 global market crash. Technically, it did for all of one minute at the beginning of April. But I’m not counting that.

Will the stock be retesting that level again soon or will it move even higher?

The drop

Let’s first discuss the reason behind the recent pullback. The main drop in recent weeks was on April 11th, the day after the stock went ex-dividend.

If I buy a stock on its ex-dividend day, I am not entitled to the next cash dividend. Instead, this cash payout goes to the seller. So, the shares lose their appeal for passive income. April 11th saw several names go ex-dividend, and all fell as a result.

Since then, share prices have fluctuated but remain at a similar level to the closing price following the sell-off.

Although access to the next dividend is not available, Aviva boasts a strong yield of 6.9%, which is a big plus for an asset in my portfolio.

The trend is your friend

One positive that makes the recent pullback look like more of an opportunity rather than a problem is that the trend is still up. In fact, it has been trending higher for the past several years.

It’s up 80% from 2020 lows, 25% from 52-week lows and a comfy year-to-date gain of 5.5%.

I much prefer finding and investing in names that are already showing signs that buyers are in control rather than trying to find the bottom of a falling stock.

As well as the share price increasing over time, which external factors like an improving economy might have contributed to in part, fundamentals also support a continued move higher.

Strong forecast

Aviva reported better-than-expected operating profits last month, and its new guidance suggests an upgrade to the current consensus. The company has set a new goal to make a profit of £2bn a year by 2026. Additionally, it plans to increase the dividend to return more to shareholders.

The recent acquisition of Probitas gives Aviva access to the Lloyd’s of London insurance market. I think this is a unique deal that adds an asset with attractive margins and gives Aviva access to a new market.

Aviva’s bulk annuity business has grown rapidly, and the company is targeting £15-20bn of bulk annuity business over the next few years.

Risks

Rising rates and yields pose risks for insurers. However, if they manage these risks properly, they can capitalise on a great opportunity to increase their business’s profits.

Insurance companies can also be at risk of losing a lot of money due to natural disasters, big accidents, or widespread claims. These events can hurt their finances, especially when unexpected or rare events occur.

Overall

I think Aviva has the right fundamentals to continue advancing on its recent trend, not only to the recent £5 level (an 8.5% increase) but also towards pre-pandemic levels. Therefore, I am considering it as an investment for the long term at the current share price.

The post Down 8.5% this month, is the Aviva share price too attractive to ignore? appeared first on The Motley Fool UK.

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Jesse Williamson 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.

Barclays (LSE: BARC) has started 2024 with a boom. The share price is up 23% year to date, which makes a change from the dreary performance of the two years prior. I thought it was time to see if this giant is worth a place in my Stocks and Shares ISA.

The share price fell over 15% in 2022 and 3% in 2023. As it tends to go in the investing world, just when things start to look bleak, the company catches markets off-guard.

Headline earnings

Barclays surprised markets in February when it announced a plan to return £10bn to shareholders over the next three years.

The pledge from the Barclays CEO included reorganising the bank into five divisions, with mostly new management in charge. The bank is doing this to improve its performance, as it has faced criticism in recent years for relying too much on investment banking.

The bank plans to return a total of £10bn to its shareholders through share buybacks and dividends, well above the £6.1bn given to shareholders between 2019 and 2022.

The ambitious forecast from Barclays was a nice surprise, but markets also perceived it as attainable. They bought into the plans, causing the shares to rise 20% in the following three weeks.

Key stats

There are some key fundamental stats that highlight Barclay’s good value. The company has a forward price-to-earnings (P/E) ratio of just 6.1x and a fair book value of 0.4x (vs a theoretical target of 1). The P/E isn’t extensively cheaper than peers such as Lloyds Banking Group (7.8x) or NatWest Group (6.9x), but it is much lower than US banking giants JPMorgan Chase (11.8x) and Bank of America (11.3x).

The company also provides a stronger dividend yield at 4.3% than the FTSE 100 average yield.

When I combine the planned fundamental business changes with an attractive current valuation, Barclays starts to really appeal to me.

Upcoming earnings

The next Barclays earnings report is very timely for this article, as it is due imminently. Revenue estimates have been trimmed in the run-up to the release, and earnings are likely to be lower than the bumper 2023 numbers. Barclays is expected to report a pre-tax profit of £2.2bn, down from £2.6bn reported in Q1 2023.

But last week, Barclays maintained a broadly optimistic view on the earnings outlook for UK banks in the coming quarters, mentioning a recovery in net interest margins (NIM).

Risks

One risk that I can highlight about Barclays — and this applies to any company that announces a restructuring — is that I am at the company’s will to deliver on its promise.

A successful execution can definitely be the catalyst to turn Barclays around, and I’d be patting myself on the back for buying into it. But if bumps and hurdles start to present themselves in the coming months, investors will start to price the positives of a restructuring out of the shares.

Overall

I like the industry, the valuations, and the pledge to return value to shareholders enough to take on the risk of buying Barclays. And there’s no better time than a fresh new tax year to start finding these new additions.

The post Why this FTSE 100 company is the first I’m buying for my 24/25 Stocks and Shares ISA appeared first on The Motley Fool UK.

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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Jesse Williamson does not currently own shares in any of the companies mentioned. The Motley Fool UK has recommended Barclays Plc and Lloyds Banking Group 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.

When I scout for new additions to my UK shares portfolio, I gravitate towards market trends. Currently, commodities are in the spotlight. While some, like gold and silver, have already surged, there’s still significant potential in other base metals such as iron ore and copper.

One way to tap into a move in a commodity is by searching for mining companies. Rio Tinto (LSE: RIO) operates in 35 countries and has a portfolio consisting of iron ore, copper and aluminium.

It trades at 4.5 times forward EBITDA, compared with a sector average of 5.5 times.

Expansion into copper

There has been a lot of change happening at Rio Tinto. Rio Tinto’s copper assets, which are worth $21bn, are now bigger than its iron ore business. This reflects the company’s investment in a massive copper mine in Mongolia, which is just starting production.

Copper is more exciting than iron ore because it is crucial to the energy transition, and its demand is expected to double by 2040. However, there might be some supply shocks along the way, which could push up its price. Rio Tinto’s increasing exposure to copper might make its equity story more attractive to investors.

Discount to Australian shares

A slight arbitrage benefit for investing in Rio Tinto right now is the discount it has on its Australian listing. The company is public on three exchanges: UK, US and Australian markets.

When converting both the UK and ASX shares into USD, the UK shares are discounted by around $18. It has been a profitable strategy for firms in the past to exploit this difference by purchasing UK shares and shorting ASX shares. However, as a retail investor, I can at least benefit from a smaller premium price right now on the London Stock Exchange for a company I am interested in.

ESG

In a world where emphasis on ESG is growing, Rio Tinto ticks the right boxes. The CEO said, “Decarbonising our assets de-risks our business. It also opens up commercial opportunities as we expand our role in providing low-carbon materials.”

Not only is Rio Tinto compliant with net-zero transitions, but it is also a company that will aid change around the world through its growing operations in copper mining.

Risks

There are risks when it comes to commodity companies. Iron ore has supply-side cautions to raise.

Rio Tinto partly owns the Simandou project, a mining operation based in the Simandou mountains in south-eastern Guinea. This project is expected to start operating this year and could increase the global iron ore market by up to 15%.

China is the main demand for iron ore through its property sector. The country reintroduced steel production controls to reduce supply so as not to outweigh weak steel demand. This has a knock-on effect for iron ore, a key steel-making ingredient.

Overall

As Rio Tinto approaches its first-quarter 2024 production report, I’ll be closely monitoring the company’s performance metrics.

The company is known for being a stable investment option due to its low price volatility and a significant dividend yield of 6.35%. Additionally, Rio Tinto has enough cash to cover interest payments, which provides me with an extra layer of confidence.

My overall thoughts on Rio Tinto are that its increasing expansion and investment in the copper industry will benefit the company in the long term and, with increasing commodity prices, the short term. I’m strongly considering buying the shares for my portfolio soon!

The post Should I buy these UK shares for my portfolio? appeared first on The Motley Fool UK.

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Jesse Williamson 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.

Dividend-paying stocks with strong fundamentals and a positive future outlook (as well as a good dividend track record) can help build a solid passive income stream. However, it is important to note that dividends are not guaranteed.

Three stocks that flagged up as potential additions to my portfolio are Paragon Banking Group (LSE: PAG), Smiths News (LSE: SNWS) and Alumasc Group (LSE: ALU).

These three options deserve a closer look, and here’s why!

Some background (and risks)

Paragon Banking Group is, unsurprisingly, a bank. In 2024, the economy might not grow very quickly, and interest rates could be high. This, combined with the ongoing high cost of living, will make things tough. It will be similar to 2023 in terms of uncertainty, but each year has its own difficulties. Financial companies will need to adjust to pressure from different factors.

Smiths News is a distributor of newspapers, magazines, books and consumables. Management has raised caution that revenues may fall 3-5% in the medium term. But the company’s large market share and history of cutting costs well make the revenue issue just a small one, in my opinion.

Alumasc Group is a UK-based supplier of building and engineering products. As well as grappling with ongoing inflation, the industry is facing increased volatility in material prices. I think this poses as the biggest threat to the industry in 2024.

The metrics

“The higher the dividend yield, the better.” Not so fast! Many beginner investors searching for passive income can fall into the trap of this thinking. A high dividend yield is nice, but there are other factors to consider.

Therefore, I use a few filters to find dividend shares that could be great contributors in the long term. The first of which is looking at the share-price increase over the last 12 months.

If a share price falls dramatically, the dividend yield will increase significantly. However, the increase is not due to strong underlying fundamentals. In fact, it’s likely the opposite: weak fundamentals. Therefore, I look to avoid artificially high yields.

From my three selected companies, the 12-month performance is:

Alumasc: +11.2%
Paragon Banking Group: +29.3%
Smiths News: +1.0%

The second filter is focused on the company’s three-year free cash flow. Free cash flow is a key metric that helps a business function day to day, and supports income payments to investors without hampering operations.

To meet my criteria, a company has to have this metric above 10%. The figures are as follows:

Alumasc: 13.4%
Paragon Banking Group: 32.0%
Smiths News: 32.7%

The final part of my criteria is the dividend history. I want to find companies that aren’t stalling in dividend payments, but rather are growing them over the past few years.

All three companies tick this box. Their dividends are in line with or higher than their five-year average.

I’ll also add a fourth metric to the mix, because you may be wondering about this one. I look for a trailing 12-month (TTM) dividend yield above 4.5%.

The TTM dividend for my basket of dividend stocks is 6.4%. Smiths News leads the way with 8.8%, Alumasc with 6.0% and Paragon with 4.5%.

The post £10,000 in savings? Here are 3 stocks I’d consider to earn passive income appeared first on The Motley Fool UK.

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• Want to aim for a £500 second income each month? Here’s how much it takes
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• How are Diageo shares looking in April 2026?
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Jesse Williamson 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.

Glencore (LSE: GLEN) shares have recovered February’s losses this month. Sometimes, trying to buy stocks while they are still falling can be detrimental. However, a recovery of recent losses might be a signal of strength or a possible market overreaction for this FTSE stock.

Over the past three years, the shares are up just under 50%. But prices are relatively the same as they were two years ago.

So, what am I to make of Glencore? Will the share price be shooting higher soon? Let’s take a look.

The dividend

The company has reduced its dividend in order to repay debt incurred for the acquisition of new metallurgical coal mines from Canadian miner Teck Resources.

The 2024 dividend will be 10.3p, a 70% drop from last year.

The short-term impact on a dividend portfolio is not great, but this acquisition is appealing to me in the long term. Let me explain why.

Cash generator

The agreement will increase Glencore’s annual steelmaking coal capacity by 20 million tons, with a deal anticipated to be finalised by the third quarter of this year.

The business is expected to be highly cash-generative, and cash generation is key for stock investors. It’s how companies can keep compounding their returns to shareholders.

Even though the dividend has been impacted in the short term, this is one reason I think Glencore is one I will add for the long term. The company will be well positioned for large capital returns after that deal closes, and should return to its outperforming ways.

A boost to commodity prices

Falling commodity prices were one negative for Glencore in 2023. When a company’s core product and service is based around volatile assets, it becomes a constant risk factor to factor into an investment. Falling prices will drag profits down.

However, the outlook for commodity prices in 2024 looks positive because China’s demand for metals is stronger than what prices currently show. This is due to China’s increasing focus on clean energy and the limited availability of important resources.

Weighing up the investment

The reduced dividend payout isn’t great. Many people seek passive income, and investors don’t want to see this reduced. Nonetheless, I am willing to look past this short-term setback if I feel there is enough potential for the share price.

The outlook for commodities is good. The business’s restructuring plans could also be another great catalyst for rising share prices.

The volatility will always be higher in a commodity trading and mining company. But I think having some exposure to the industry is good for my diversification.

Despite the risks, I think Glencore has the potential to return a net positive outcome to my portfolio, and I plan to buy its shares soon!

The post This FTSE stock is one I’m buying for the long term appeared first on The Motley Fool UK.

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Jesse Williamson 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.

Burberry (LSE: BRBY) is one name that caught my eye recently. The share price is down 50% in the last 12 months, but when taking a look at the fundamentals of the FTSE 100 company, this seems like an overreaction.

Being one of the few UK deluxe fashion brands, Burberry is instantly identifiable due to its high-quality craftsmanship and heritage status.

With interest rates set to fall this year, consumer spending on luxury brands should increase.

Could this be one luxury name to add to my portfolio? Let’s take a look.

The economics of the company are intact

Although Burberry Group’s share price has decreased over the past year, its earnings per share (EPS) has actually gotten better. It’s surprising that the share price has gone down so much despite the increase in this metric. 2023 adjusted annual EPS was 122.5p, versus the 2022 result of 94p.

Revenue and operating profit are also up year over year. Revenue increased 9.5% to £3,094m, and operating profit rose to £657m, up 21%.

When searching for companies to add to my portfolio, I also look at the company’s dividend per share. After all, there’s nothing nicer than receiving some passive income. Burberry’s dividend increased to 61p in 2023, up nearly 30% from 2022’s payout of 47p.

One final positive aspect of the company’s recent financials is the share buyback. Burberry repurchased £400m worth of shares last October, which gives me confidence as an investor. Why?

Firstly, when a company buys back its own shares, the supply of shares decreases, but the company’s value stays the same. This usually leads to an increase in the share price.

Secondly, since there are fewer shares in circulation, the EPS should increase. This means that shareholders will have a greater stake in the company’s profits.

Turning my attention to the company’s forward outlook, Burberry highlighted that the “space is expected to be broadly stable in FY24.” Investors like stability, and more stability means less risk to factor into the share price.

One concern

Asia is the largest consumer of luxury goods, making it one of the biggest risk factors for lavish lifestyle companies.

Kering, the French luxury goods giant, announced that sales of its most popular brand, Gucci, have dropped by about 20% during the first quarter of this year. This raises some concerns for Burberry, whose Asian markets account for 43% of revenue.

Although all luxury names dropped slightly from this news, the market reaction suggests that this concern may be limited to Kering specifically rather than a primary concern for all in the sector.

Worthy of a place in the portfolio?

With more stability coming to the high-end market, Burberry is likely to find a place in my portfolio (and potentially in my wardrobe if things go well!)

The share price is at the low end of the last 10-year range, and offers plenty of growth to tap into, in my opinion. Combine that with a 5.3% dividend yield, and Burberry is a company I like over the next few years.

The post Down 50% in the last year, does this FTSE 100 stock have any luxury left? appeared first on The Motley Fool UK.

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Jesse Williamson has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry Group 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.