One of the hottest topics in the investing community in recent years has revolved around renewable (or ‘clean’) energy stocks vs their traditional counterparts.

So we asked two Fools to name their favourite shares in the energy sector right now, and why. As ever, note that returns are not guaranteed and past performance is not a reliable indicator of future results.

National Grid: the ‘picks and shovels’ choice

By Alan Oscroft. The UK energy market is in a state of flux, with wind power providing the biggest share for the first time ever in the first quarter.

Betting on any single energy source looks risky. That’s why I rate National Grid (LSE: NG) as my safest choice.

We’re leaving hydrocarbons behind, a lot faster than I’d expected. So why take the risk of being in the oil and gas business when it’s headed the way of the dinosaurs?

We could back renewable energy sources, but which ones? Whenever we see a technology shift, newcomers rise and fall. And it can be years before we can identify the winners. People often point out that it wasn’t the Wright brothers who made the money from aviation.

Wherever energy is sourced, it has to be transported to where it’s needed. And that’s where National Grid comes in. I don’t see networks of electricity pylons and cables becoming obsolete any time soon.

The company handles gas distribution too, and that’s where I think the risk comes in. However we generate our future energy, it seems unlikely that gas will play a big part. But National Grid already has its business focused around 70% on electricity distribution.

There’s hydrogen, batteries, and technology like that. But there are plenty of firms already working on even newer tech that could render today’s obsolete.

National Grid looks future-proof to me. It’s profitable, and it’s been paying dividends for decades.

Alan Oscroft has no positions in National Grid.

BP: oil remains black gold

By Andrew Mackie: The energy sector was the standout performer in 2022. Surging oil and gas prices turned BP (LSE:BP) into a cash-generating machine. Although last year might be viewed as something of an outlier, that doesn’t mean that oil and gas companies won’t continue to outperform — quite the contrary.

There are many reasons why BP is my favourite energy stock. A steadily rising dividend, significant share buybacks, falling net debt and a growing presence in the renewables sector, to name but a few. However, the fortunes of the company in the foreseeable future is inextricably tied to the price of black gold. Therefore, my continued investment in the company must be predicated on my conviction on this front.

When war broke out in Europe, oil was a crowded trade. Today less so. However, the fundamentals haven’t changed in the last year.

Surprisingly, one would expect — with a bull market in this space now entering its third year — that supply would be increasing materially. But we haven’t seen any of that yet. After all, that is precisely what happened during the last run-up in prices back in 2007 and 2014.

I believe there are two main reasons for this. Firstly, the tightening of monetary conditions have made access to capital challenging and led to excessive capital conservatism. Second is the continuing pressure from government and ESG mandates. This is having a direct knock-on effect on both oil production and exploration for future reserves.

The biggest near-term danger to the BP share price is that if a protracted global recession does play out, oil prices could fall significantly. However, given how constrained supply is, this is likely to lead to a floor for prices. BP itself has a break-even cost of $40 a barrel. Although nothing should be ruled out, given the present macro backdrop, I don’t believe we will see prices that low any time soon.

Andrew Mackie owns shares in BP.

The post Better energy stock buy: National Grid vs BP appeared first on The Motley Fool UK.

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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.

Today, the long-term investing case for BHP Group (LSE:BHP) shares is put under the microscope by two Fools with opposing stances…

Bullish

By Royston Wild. BHP Group’s share price has plummeted 20% year to date as I write. The Australian mega-miner has dropped as worries over global economic growth (and by extension commodities demand) have ramped up. 

I think this weakness represents an opportunity for long-term investors to grab a bargain. The former FTSE 100 stock trades on a forward price-to-earnings (P/E) ratio of 10.2 times. It also carries a bumper 6.9% prospective dividend yield. 

It’s my view that BHP shares could soar from today’s levels as demand for its raw materials ramps up. Rapid adoption of electric vehicles and renewable energy technology could supercharge sales at its copper and iron ore operations. Demand for its potash could surge as farmers seek to improve crop yields to feed the growing population. The list goes on. 

I also like BHP because of the low production costs enjoyed across its asset portfolio. Its Chile copper mines and iron ore projects in Australia are amongst the most cost effective in the business. This provides profit margins with a beefy boost. 

Royston Wild does not have positions in BHP Group.

Bearish

By Roland Head. BHP’s annual profits have risen from $6bn to $28bn since 2017. Shareholders have received about £9 per share of dividends in that time. That’s equivalent to 90% of the £10 share price in 2017.

Why aren’t I buying? Simply put, I think this is as good as it gets for now.

Mining is a cyclical business. BHP and other iron ore producers have enjoyed a spectacular boom over the last couple of years. All the signs suggest that things are now calming down.

After spiking to record highs in 2021, the price of iron ore is back down to more normal levels.

There are also worries about the state of the global economy — especially in China, which is BHP’s biggest single customer.

Broker forecasts point to a steep fall in earnings (and dividends) over the next couple of years.

I’m steering clear of BHP until the market provides a cheaper entry point.

Roland Head does not own shares in BHP Group.

The post Bull vs Bear: BHP Group shares appeared first on The Motley Fool UK.

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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.

Many investors overlook Real Estate Investment Trusts (REITs). Those who don’t, however, tend to view them as a tax-efficient source of stable and resilient income.

So we asked two Fools to name their favourite REITs in the sector right now, and why. As ever, note that returns are not guaranteed and past performance is not a reliable indicator of future results.

Primary Health Properties: a cure for what ails you

By Mark Tovey. With UK inflation in double digits, the consumer is being crushed. I am hunting for companies with real pricing power and indispensable products.

Primary Health Properties (LSE:PHP) fits the bill. The REIT serves six million patients (around 9% of the UK population) through its portfolio of 513 healthcare facilities.

On 19 April, Primary Health Properties said it had generated £1.3m extra rental income on a like-for-like basis in the first quarter of 2023.

That largely came from rent reviews, with 90% of its facilities leased on inflation-indexed contracts to the UK and Irish governments.

The ‘NHS Long Term Plan’, published in 2019, promised to hire “more GPs, nurses and 20,000 additional pharmacists, physiotherapists, paramedics, physician associates and social prescribing link workers…”

To state the obvious, all those extra staff will need space in which to see patients and do paperwork. That spells a massive growth opportunity for Primary Health Properties, given its existing buildings are already full to the rafters with an occupancy rate of 99.7%.

On the other hand, a political lurch to the left could put the REIT and its peer group in the firing line. For many radicals in the Labour Party, the NHS paying out billions of pounds a year to private landlords is rage inducing.

Still, I bought PHP shares in April this year. For me, its 26 consecutive years of dividend growth clinched the deal.

Importantly, I don’t lose any sleep at night holding a rock-solid stock like PHP. And with a hefty dividend yield of 6%, I’m dreaming sweet dreams. 

Mark Tovey owns shares in Primary Health Properties.

Tritax Big Box: robust demand

By Paul Summers: Right now, my favourite REIT is without doubt Tritax Big Box (LSE: BBOX). 

As the name implies, the £2.8bn cap owns and operates huge warehouses and distribution hubs. Clients include Amazon, Tesco and Next – essentially the who’s who of retail. 

Unfortunately, the cost-of-living crisis seems to have hit sentiment around this investment trust. Realistically, it’s possible things could get worse before they get better if inflation doesn’t drop as quickly later this year as analysts expect and people continue to feel the pinch.

To me, however, a 40% reduction in the share price over the last year already feels excessive given that online shopping has become the norm for many of us. Surely demand for the sort of assets Tritax specialises in will only grow in the years ahead?

Contrast this defensiveness with other REITs. Offices, for example, are arguably no longer so essential thanks to the rise of home-working. Even doctor surgeries aren’t immune to a drop in demand as more consultations move online. But there will always be a need for the aforementioned companies to store their products and send them to customers as quickly as possible.

The dividend stream should be considered too. Based on analyst projections, Tritax yields 4.8%. That’s significantly higher than the 3.2% offered by the FTSE 250, of which it is a member.

If I had the spare cash, I wouldn’t hesitate to begin building a stake here. 

Paul Summers has no position in Tritax Big Box, Amazon, Tesco or Next. 

The post Better REIT buy: Primary Health Properties vs Tritax Big Box appeared first on The Motley Fool UK.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon.com, Primary Health Properties Plc, Tesco Plc, and Tritax Big Box REIT 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.

Today, the long-term investing case for Admiral Group (LSE:ADM) shares is put under the microscope by two Fools with opposing stances…

Bullish

By Stephen Wright. I’m bullish on Admiral stock for a simple reason – the company has a durable competitive advantage in a service that people need. For me, that’s a winning combination for the long term.

Drivers have to buy car insurance, whether they want to or not (I suspect most don’t). This is a good thing, but the competitive nature of the industry means a lot of insurance companies struggle to maintain consistent profitability.

Admiral, though, has outperformed the average of its peers with its underwriting for each of the last 10 years. And that’s not an accident – it comes from the company’s use of technology, data, and analytics.

If that doesn’t indicate a durable competitive advantage, then I don’t know what does. There are some short-term headwinds, like inflation driving up the price of cars and repairs, but I like the look of this stock for the long term.

Stephen Wright does not own shares in Admiral.

Bearish

By Royston Wild. In bygone days, motor insurance premiums that are rising by high single digits would be celebrated by the industry. But these aren’t normal times, and profitability at businesses like Admiral continues to be crushed by elevated levels of claims inflation. 

Latest figures from the Association of British Insurers (ABI) illustrates the scale of the problem. The average motor premium rose 8% quarter on quarter between October and December of last year. Yet this was still offset by soaring claims costs. 

The price of paint repairs, for example, leapt 20% over the period. And courtesy car costs rose 30%, according to the ABI. 

There’s only so far Admiral can pass these higher costs onto customers before they become unaffordable to drivers. This is why Admiral was forced to eat a 39% decline in pre-tax profits last year, and to slice the full-year dividend down by a similar percentage.

I think conditions could remain tough for some time to come, too. So I’m looking past this former dividend hero and seeking other stocks for passive income.

Royston Wild does not have a position in any of the shares mentioned.

The post Bull vs Bear: Admiral shares appeared first on The Motley Fool UK.

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The Motley Fool UK has recommended Admiral 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.

Today, the long-term investing case for International Consolidated Airlines Group (LSE:IAG) shares is put under the microscope by two Fools with opposing stances…

Bullish: James Beard

After coming close to being wiped out by the pandemic, International Consolidated Airlines Group returned to profitability in 2022.

This year, the airline will have a seat capacity equivalent to 98% of its 2019 availability. Revenue per kilometre from both passengers and cargo is now higher than ever before. And it reported a load factor of 83.2% for the last quarter of 2022 (Q4 2019: 84.3%).

Last month, Heathrow passenger numbers were 48% higher than a year ago. For flights outside Europe, the increase was 59%. This points to a recovery in demand, particularly for long-haul travel, which is IAG’s most lucrative market.

The easing of jet fuel prices should also help improve profitability. But with 60% of fuel costs hedged for the next 12 months, the full benefit will not be immediately apparent.

With capacity and load factors close to pre-Covid levels, and higher ticket prices here to stay, I’m bullish that IAG’s stock will soon take off.

James Beard has no position in IAG.

Bearish: John Choong

By John Choong: International Consolidated Airlines Group shares have started the year well — up 18% and outperforming the FTSE 100. Nonetheless, it should go without saying that its performance has lagged many of its UK peers, such as easyJet and Wizz — and with reason, too.

Surging international travel demand, especially in Asia, and business travel are great for margins. However, the airline’s poor fundamentals could discount all its upwards momentum, with elevated oil prices in the near term more likely than not to hurt IAG’s bottom line.

What’s more, the acquisition of Air Europa may present further deterioration of its already delicate balance sheet. A veto from competition authorities could see IAG pay impairments on a failed deal. All of these aren’t ideal when its debt levels are already above its own market cap and liquidity.

And although its multiples may indicate decent value at these prices, I think further growth in IAG shares to higher levels may present more risks than reward.

John Choong has positions in easyJet.

The post Bull vs Bear: IAG shares appeared first on The Motley Fool UK.

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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.

According to many brokers, older landlords are selling their buy-to-let investments at a clip. And, as Foolish (capital F!) investors will know, one alternative to having exposure to this market is through owning property stocks.

So we asked two Fools to name their favourite shares in the sector right now, and why. As ever, note that returns are not guaranteed and past performance is not a reliable indicator of future results.

Persimmon poised for future growth

By Alan Oscroft. Right now, I think it’s hard to choose between any of the UK’s top housebuilders, including those in the FTSE 100 and the FTSE 250.

But if I have to choose one, it’s Persimmon (LSE:PSN), the one I bought myself.

It’s been slower to respond to the latest uptick in sector share prices. While others — like Taylor Wimpey (LSE:TW) — have been gaining since late 2022, Persimmon remains stubbornly down.

Persimmon shares, in fact, have lost more than 50% in the past five years.

I suspect some of that is due to expectations of a dividend cut. Some sources still show forecasts of 12-13%, but we know that’s not going to be repeated this year.

And that really just echoes the firm’s past returns of surplus cash through special dividends. Based on ordinary dividends, forecasts suggest a yield of around 5.5% this year. And that’s fine.

Investors might also be put off by Persimmon’s £350m provision for claims relating to building safety remediation. That’s mainly about the crisis over sub-standard cladding.

The sector clearly faces risk when property prices are falling on slowing demand. And there are still big uncertainties over how Persimmon’s 2023 cash flow situation will look.

But earnings growth predicted for the next few years makes me think Persimmon might be the best of the bunch.

With a bit of luck, inflation should start to drop in the next few months. And when interest rates start to fall, I could see the whole sector getting an uprating.

Alan Oscroft has positions in Persimmon

Taylor Wimpey: tough as bricks

By John Choong. Investors have been ditching housebuilder stocks due to their expected decline in profits and dividend yield over the next couple of quarters. This is because lower profits are being projected due to cost-of-living crisis affecting mortgage affordability, thus affecting dividend payouts. Nonetheless, I believe Taylor Wimpey shares are the best of the bunch for a couple of reasons.

The first would be the fact that, unlike its peers, Taylor Wimpey’s dividends are asset-based and not earnings-based. This means that any short-term downturn in profits isn’t going to affect payouts tremendously (like Persimmon, for example). The High Wycombe-developer has assured shareholders that it always aims to return 7.5% of net assets annually, which equates to at least £250m per year.

And while it’s more likely than not that house prices will face some further weakness in the months to come, it’s worth noting that the company is also much more resilient than many of its other peers. That’s due to the fact the builder’s customers’ average LTV ratio sits at approximately 75%, showing the strong affordability by its more affluent customer base. As such, this should better shield it from the headwinds of the housing market.

Pair these factors with its strong balance sheet boasting a debt-to-equity ratio of merely 2%, and decently valued multiples, and it’s easy to see why Taylor Wimpey shares are my preferred investment in the sector.

John Choong has positions in Taylor Wimpey.

The post Better property stock buy: Persimmon vs Taylor Wimpey appeared first on The Motley Fool UK.

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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.

Today, the long-term investing case for Britvic (LSE:BVIC) shares is put under the microscope by two Fools with opposing stances…

Bullish: Christopher Ruane

Warren Buffett has owned shares in Coca-Cola for decades. The business has the hallmarks of a Buffett investment. Demand is robust, unique brands give the company pricing power, and the business does not tie up huge amounts of capital.

Much of the same rationale can be applied to Britvic. Last year, for example, volumes in its UK business grew 6% but revenue was up 15%, underlining Britvic’s pricing power. The company’s stable of brands gives it a point of difference in its market. Capital expenditure last year grew sharply, but was still only around 5% of revenues.

Britvic shares have risen by over a quarter in just over six months. Over five years, the share price has grown 27%. That puts the stock on a price-of-earnings ratio of 17. I do not see that as cheap, but I think it offers reasonable value for a company that has attractive long-term prospects.

Christopher Ruane does not have a position in either of the shares mentioned.

Bearish: Mark Tovey

“A brand is a wonderful thing to own during inflation,” according to Warren Buffett.

After all, it’s easier to hike prices on products that customers are attached to.

Buffett has 8.5% of Berkshire Hathaway’s holdings in Coca-Cola stock.

How much Britvic stock is he holding? Nada.

Admittedly, Britvic is cheap compared to its rivals Coca-Cola and Pepsi as measured by the price-to-earnings ratio.

But Coca-Cola and Pepsi’s brands are instantly recognisable to almost everyone on the planet.

By contrast, three-quarters of Britvic’s sales come from the UK, meaning it will follow its home nation’s ups and downs.

Now look at revenue growth. For global juggernauts Coca-Cola and Pepsi, that has been four times faster than for Britvic.

When it comes to a portfolio strategy during inflation, I’d sip on Coca-Cola and Pepsi stock, and leave Britvic to the bees.

Mark Tovey does not have a position in any of the shares mentioned.

The post Bull vs Bear: Britvic shares appeared first on The Motley Fool UK.

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The Motley Fool UK has recommended Britvic 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.

Thanks to both artificial intelligence (AI) and the ever-increasing shift away from shopping in ‘bricks and mortar’ to online shopping — among much, much more! — there’s no doubting that tech stocks remain at the forefront of many investors’ minds.

So we asked two Fools to name their favourite shares in the sector right now, and why. As ever, note that returns are not guaranteed and past performance is not a reliable indicator of future results.

Building a digital empire in Latin America

By Ben McPoland. MercadoLibre (NASDAQ:MELI) is often referred to as ‘the Amazon‘ or ‘the PayPal of Latin America’. Not only does that reveal its business model, it also hints at its huge scale.

Today, MercadoLibre operates its online marketplace across 18 countries and receives 668m visits per month. That’s four times the amount of traffic that Amazon gets in Latin America. And when PayPal was looking to expand in the region, it decided to partner with MercadoLibre rather than compete against it.

The company’s growth has been breathtaking, with sales rising from $1.2bn in 2017 to $10.5bn in 2022. Last year, its revenue was 49% higher than 2021. Given the global economic challenges, that performance seems remarkable to me. 

More importantly, the firm reported a full-year operating profit of $1bn, which translates into an operating margin of 9.8% (far higher than Amazon’s 2.4%). Its free cash flow generation also beats its competition.   

Mercado Pago, its payments platform, is the region’s third most popular digital wallet today.

Now, the company’s ambition to become the digital bank of Latin America pits it (once again) against some mighty competition. Banco Santander, for example, isn’t going to just roll over and let MercadoLibre dominate in areas such as loans, insurance and other financial services.

However, this is a region where approximately 450m people are still unbanked (no account) or underbanked (accounts lacking access to credit and loans). So the market is large enough to accommodate multiple winners.

The stock currently trades at 6 times sales, a significant discount to its five-year average of 12.5. I think that presents investors with a timely opportunity to buy a small piece of this exceptional enterprise.

Ben McPoland owns shares of MercadoLibre.

Up 45% in 2023, AMD is on the rise 

By Matt Cook: Advanced Micro Devices (NASDAQ:AMD) is one of the biggest stock winners of 2023. As ChatGPT and interest in AI have boomed, so have stocks related to the technologies.

Year to date, AMD is up 45%, Nvidia 85%, and Intel 22%. Currently, Nvidia has the lead in graphics cards that can power AI technology. ChatGPT was trained on Nvidia hardware, and other companies are rushing to buy up Nvidia’s enterprise A100 and H100 cards.

However, I’m not buying shares in Nvidia. Since last year, I have been buying shares in AMD whenever I can. That’s because, although Nvidia has a headstart, I believe AMD is the only company that can give Nvidia a run for its money. 

AMD was slow to add the hardware that is required to run AI to its graphics cards. In 2020, Nvidia and AMD released the RTX 3000 and RX 6000 series of graphics cards, respectively. 

Due to Nvidia’s early adoption of AI hardware, its high-end offering was up to 77% faster in AI tasks than the best from AMD. Fast forward two years, and both companies released their latest graphics cards at the end of 2022. 

In one generation, AMD has made massive gains, closing the gap considerably to Nvidia with its latest card matching Nvidia’s best offering from early 2022. 

Nvidia may still have the lead, but with how quickly AMD is catching up, I think it’s the best buy in AI right now.  

Matt Cook owns shares in AMD and Intel.

The post Better tech stock buy: MercadoLibre vs AMD appeared first on The Motley Fool UK.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon.com and 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.

With M&A activity emerging in recent days, there’s cause for investors to look afresh at the British-listed stocks operating in the mining sector.

So we asked two Fools to name their favourite shares in the sector right now, and why. As ever, note that returns are not guaranteed and past performance is not a reliable indicator of future results.

Endeavour Mining: focusing on what matters

By Stephen Wright: Mining is a commodity business. In other words, gold from one company is just the same as gold from another.

That means there’s pretty much no pricing power for mining companies. The price of gold is what it is (although it moves around) and businesses have to figure out how to operate at those prices.

So what makes one mining stock more desirable than another? The answer, in my view, comes down to the quality of their assets in terms of (i) how much they can extract and (ii) how much it costs.

Endeavour Mining (LSE:EDV) stands out to me as a really good mining stock. The company owns and operates gold mines located in Africa. 

It costs Endeavour between $880 and $930 to extract an ounce of gold from the ground. That’s much lower than Newmont ($1,215), Barrick ($1,269), and AngloGold Ashanti $1,300.

The price of gold at the moment is around $1,989 per ounce, which is quite high. That probably goes some way towards explaining why the stock is one of the best performers in the FTSE 100 lately.

Buying shares in a gold-mining business when gold is expensive is a risk. If the gold price falls, it could cut into the company’s profits. 

I’m not convinced there’s ever really a bad time to invest in a company with lower production costs than its competitors, though. That’s why Endeavour is my top mining stock to buy.

Stephen Wright does not own shares in AngloGold Ashanti, Barrick, Endeavour Mining, or Newmont.

Rio Tinto offers strength in depth

By Royston Wild. Investing in mining stocks could prove incredibly lucrative as the world embarks on the next commodities supercycle.

Themes like the widespread adoption of green technology, a consumer electronics boom, and rapid urbanisation in emerging markets means demand for a swathe of metals might well explode.

Yet investing in businesses that concentrate on a sole commodity can be risky. This is because profits depend on a favourable pricing environment for just one raw material. Copper producer Antofagasta and gold digger Endeavour Mining are examples of such companies.

Diversified miners allow investors to reduce risk by providing exposure to a variety of commodities markets. This is why I chose to add Rio Tinto (LSE:RIO) shares to my own portfolio last year.

This FTSE 100 operator is the third-largest mining company on the planet. It’s perhaps known as one of the biggest suppliers of iron ore. In fact, in 2022 it made almost 70% of underlying EBITDA from production of the steelmaking ingredient.

However, Rio Tinto also makes significant revenues from copper, aluminium, and a handful of other minerals like lithium and titanium dioxide. Its share price could still fall if demand for iron ore falls. But the firm’s broad operations leaves it less vulnerable to shocks in one or two of its markets.

Diversification is just one reason I bought Rio Tinto shares, though. I also opened a position because of its significant financial strength and its ability to invest for future growth.

Ongoing expansion of its iron ore operations in Western Australia is one example of how the business is splashing the cash to boost earnings. I plan to buy more shares in this mining industry giant if I have cash to spare.

Royston Wild owns shares in Rio Tinto.

The post Better mining stock buy: Endeavour vs Rio Tinto appeared first on The Motley Fool UK.

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

With increasing hours of daylight and — theoretically — better weather, Brits’ thoughts inevitably turn to holidays. And there are a host of travel stocks listed in the UK that could benefit from holidaymakers’ dreams and desires!

So we asked two Fools to name their favourite shares in the sector right now, and why. As ever, note that returns are not guaranteed and past performance is not a reliable indicator of future results.

easyJet has more room to climb

By John Choong: One of the FTSE’s biggest winners so far this year has been easyJet (LSE:EZJ). The shares have risen by an impressive 50% and are up 75% from their October lows. And while the consensus is to buy low and sell high, easyJet shares are still nowhere near their pre-pandemic highs. In fact, they’re still down by 60% — which is why I still see its current share price as a buying opportunity.

The hot momentum that fuelled the steep climb for travel stocks earlier this year may have dissipated. However, investors shouldn’t take this as a sign of waning demand. In easyJet’s latest trading update, CEO Johan Lundgren cited strong bookings momentum going into the summer, and expects the budget airline’s capacity to continue growing throughout 2023, with a return to pre-Covid levels by September.

More excitingly, the company’s up and coming Holidays segment (where customers can book packages), is proving to be a huge driver for revenue growth and should help expand the firm’s margins. And with fuel costs also expected to decline this year, this should help easyJet’s earnings, which are forecast to come in at 27.9p per share, an increase of almost 250%. That said, there’s always the risk that fuel prices climb back up or a deeper-than-anticipated recession hits, which could dampen forward bookings, and push the stock back down.

And despite its shares having risen drastically this year, the stock’s valuation multiples remain cheap and comfortably below the industry’s average.

What’s more, the group has robust financials, which is a tough find for travel stocks, especially after the pandemic. Its balance sheet boasts strong liquidity (£3.64bn) that sufficiently covers debt (£3.20bn) and has positive free cash flow (£246m). Thus, I see easyJet shares as the best FTSE travel stock out there.

John Choong owns shares in easyJet.

Cheap, stable and global: Marriott bounces back

By Mark Tovey. When it comes to travel stocks, I think buying Marriott International (NASDAQ: MAR) is like booking the presidential suite.

The hotel industry provides more consistent revenue streams than the airline industry. Fuel price spikes, cut-throat competition and even volcanic eruptions can leave airline operators’ profits up in the air. 

By contrast, Marriott’s globally diversified business has unflappable foundations. The hotelier operates nearly 8,300 properties under 30 brands spanning 138 countries and territories.

With a price-to-earnings (P/E) ratio of 20, I think Marriott looks cheap considering it is exposed to high-growth markets in the developing world. In 2022, the company added more than 65,000 rooms globally, and its worldwide development pipeline totalled over 3,000 properties and more than 496,000 rooms.

Moreover, Marriott has bounced back from pandemic-era shutdowns. Fourth quarter revenue per available room increased 4.6% worldwide in 2022 compared with the 2019 fourth quarter – and that’s after adjusting for inflation.

My main concern about investing in Marriott is that interest-rate rises around the world are weighing on real estate prices. That’s because, like any asset, hotels are valued in terms of the rents they generate over time. With higher interest rates, the opportunity cost of buying a hotel – and not for example a government bond – increases. Therefore, the hotel’s price must fall to restore equilibrium.

However, taking a longer-term view, higher interest rates also make obtaining loans for capital-intensive projects less possible. That would in turn suggest fewer hotels being built, and less competition for Marriott.

I plan to buy shares in Marriott when I next have some spare cash.

Mark Tovey does not have a position in Marriott International.

The post Better travel stock buy: easyJet vs Marriott International appeared first on The Motley Fool UK.

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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.