Ocado (LSE: OCDO) shares have been one of the worst performers in 2022. The stock has slumped nearly 50%, compared to just a 5% fall seen by the FTSE 100.

The shares have come under pressure in recent times. However, does this fall open an opportunity for me to add a bargain to my portfolio?

A rocky road for Ocado

The stock’s price has been on some journey over the past few years. With the Covid-19 pandemic taking full grip of our lives, the online grocer saw a boom in business as consumers were forced to take their shopping habits online. Its retail business saw a 35% jump in revenue for 2021. And during this booming period, its share price hit an all-time high of nearly 3,000p.

However, 2022 has told a different tale. Inflationary pressures have seen consumers batten down the hatches as rising rates have eaten away at incomes. And with grocery prices consequently rising, it’s clear to see Ocado has taken a hit. The firm has placed itself among the upper echelons of grocery retailers, having recently partnered with Marks & Spencer (and previously Waitrose). So as the popularity of budget retailers like Aldi and Lidl continues on an upward trend, the outlook for Ocado has turned sour.

Where next?

So, where does the business go from here?

Well, it recently raised £578m from investors as it looks to continue the rollout of its e-commerce technology. The group has taken large strides to expand its capabilities, including the creation of over 50 customer fulfilment centres across the world.

The firm charges third-party retailers to use its technology, so an increase in centres should come with a boost in Ocado’s revenues.

However, investors don’t seem to be convinced. The stock dropped 5% as the company issued new shares at a 9% discount. Ocado has failed to turn a profit despite heavy investments. And with this latest round of cash raising, it looks like market spectators fail to see a way out for the firm.

It has also expanded the territories it operates in recently, notably in France and Poland. This expansion opens new markets, which of course, could be a benefit for Ocado. However, with a lack of agreements in these regions, the outlook remains dire.

Ocado released a trading update back in May where it downgraded its full-year outlook. The business stated that the average basket value had fallen 9% year on year. And that sales had dropped 8% so far for the quarter. As such, the firm lowered its expected sales growth from the previous 10% to low single digits. Its half-year results are due this month, so it will be interesting to see how it has fared.

Why I’m not buying

The pandemic was key in highlighting that Ocado can succeed. And with the amount it’s pumped into its expansion, it could see this pay off over the long term. However, I’m not convinced. I struggle to see a way back for Ocado. And with a gruelling period ahead of them as costs continue to rise, I think the stock will lag. I won’t be buying Ocado shares any time soon.

The post Is now the time to buy cheap Ocado shares? appeared first on The Motley Fool UK.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado 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.

Marks and Spencer

Marks and Spencer (LSE: MKS) is a major British multinational retailer that sells clothing and beauty, home, and food products. This week, three director dealings were carried out. A large number of shares were received in lieu of a cash dividend, but a portion was sold to cover tax and national insurance obligations.

• Name: Stuart Machin
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 203,120 @ nil
• Total value: N/A

• Name: Stuart Machin
• Position of director: Chief Executive Officer
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 99,121 @ £1.37
• Total value: £135,805.68

• Name: Sacha Berendji
• Position of director: Property, Store Development, and IT Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 138,115 @ nil
• Total value: N/A

• Name: Sacha Berendji
• Position of director: Property, Store Development, and IT Director
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 67,399 @ £1.37
• Total value: £92,343.37

• Name: Paul Friston
• Position of director: International Director
• Nature of transaction: Free shares
• Date of transaction: 22 June 2022
• Amount received: 131,691 @ nil
• Total value: N/A

• Name: Paul Friston
• Position of director: International Director
• Nature of transaction: Sales of shares to cover tax and national insurance liabilities
• Date of transaction: 22 June 2022
• Amount sold: 62,264 @ £1.37
• Total value: £88,048.11

Cranswick

Cranswick (LSE: CWK) is a leading UK food producer and supplier of fresh and premium food products. It’s most famous for its meat products. Four directors opted to exercise their share options this week. However, they then proceeded to sell portions.

• Name: Mark Bottomley
• Position of director: Chief Financial Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 31,800 @ nil
• Total value: N/A

• Name: Mark Bottomley
• Position of director: Chief Financial Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 16,379 @ £30.82
• Total value: £504,768.02

• Name: Adam Couch
• Position of director: Chief Executive Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 48,100 @ nil
• Total value: N/A

• Name: Adam Couch
• Position of director: Chief Executive Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 24,775 @ £30.82
• Total value: £763,515.95

• Name: Jim Brisby
• Position of director: Chief Commercial Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 31,800 @ nil
• Total value: N/A

• Name: Jim Brisby
• Position of director: Chief Commercial Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 16,379 @ £30.82
• Total value: £504,768.02

• Name: Chris Aldersley
• Position of director: Chief Operating Officer
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 26,300 @ nil
• Total value: N/A

• Name: Chris Aldersley
• Position of director: Chief Operating Officer
• Nature of transaction: Sale of shares
• Date of transaction: 27 June 2022
• Amount sold: 13,546 @ £30.82
• Total value: £417,460.628

HomeServe

HomeServe (LSE: HSV) offers low-cost home warranty and home repair options. It markets itself as the solution to expensive and inconvenient emergency home repairs. Three massive director dealings happened earlier in the week, as shares were awarded to these directors based on performance conditions.

• Name: David Bower
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 21,119 @ nil
• Total value: N/A

• Name: David Bower
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 10,190 @ £11.69
• Total value: £119,121.10

• Name: Tom Rusin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 30,619 @ nil
• Total value: N/A

• Name: Tom Rusin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 11,815 @ £11.69
• Total value: £138,117.35

• Name: Richard Harpin
• Position of director: Director
• Nature of transaction: Free shares
• Date of transaction: 27 June 2022
• Amount received: 34,911 @ nil
• Total value: N/A

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this instance, all the director dealings above occurred with free shares. These shares were acquired by directors under their companies’ share plans. These were either a restricted share plan (Marks and Spencer), or incentive plans (Cranswick and HomeServe).

Share award schemes give employees actual shares rather than share options. The value of shares given to directors here is treated as employment income. This means that it may be subject to tax and national insurance contributions. That is unless the directors opt for an HMRC-approved share scheme, which has its own rules and requirements. Incentive plans give directors shares when they hit certain performance targets. For HomeServe directors, the awards were subject to the company’s earnings per share.

The post Director dealings: Marks and Spencer, Cranswick, HomeServe appeared first on The Motley Fool UK.

More reading

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• What are the best UK shares to buy now to try and make a million?
• Consider these 2 dirt-cheap stocks to buy if the Straits of Hormuz permanently reopen
• Marks and Spencer’s share price is down 16% to below £4! Is now the time for me to buy the dip with an eye to £8+?
• Why the Marks & Spencer share price fell 12% in March

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

Marks and Spencer (LSE: MKS) shares are down 40% this year. Despite that, the retailer reported excellent numbers in its most recent full-year results, with plenty of promise for the future. As such, I think a closer look at the company is warranted.

Hungry for more

After years of declining profit margins, Marks and Spencer launched its latest turnaround programme in 2020 under the Never the Same Again name. This bid to improve the brand’s image and business operations looks like it might be working. The FTSE 250 firm has posted an excellent recovery since, with improvements in customer perception of the M&S brand. As a result, M&S Food sales grew 10.8% year-on-year, while expanding its market share from 3.4% to 3.6% over a three-year period. This was also helped in part by its key partnerships with Coca-Cola‘s Costa Coffee and Ocado.

Additionally, the firm saw its operating margins improve in the second half of its financial year. Even so, I was impressed that the board is aiming to further improve its food supply chain through boosting efficiency and cutting costs. Thus, I expect its food prices to become more affordable, allowing it to expand its market share.

Getting the right fit

Marks and Spencer isn’t just its food business, however. One of the main reasons behind its poor past performance can be attributed to the company’s inability to keep up with the times, as far as its struggling clothing offer was concerned.

That being said, the Never the Same Again programme gave a breath of fresh air to the retailer’s clothing segment. Consequently, the division saw its sales figure jump 51.6% on the year and 3.8% against three years ago.

There’s also the positive effect of M&S’s investments in digital. With heavy competition from e-commerce giants and more nimble omnichannel retailers, Marks and Spencer was always going to struggle. However, enhanced investment has made its e-sales more market competitive. In fact, market penetration has almost doubled to 34%. This has been helped by around its 40 clothing brand partnerships. Moreover, the acquisition of Jaeger and The Sports Edit have added even more depth and variety to its offer.

A summer with Marks and Spencer

Since 2018, Marks and Spencer has reduced its debt levels by 12%. What impressed me most though, is its cash position, which has grown by a whopping 455%! Furthermore, profit margins are back to a healthier level of 2.8%, with free cash flow at £1.1bn.

Nevertheless, my concerns of a potential recession impacting sales are shared by the board. Having said that, CEO Stuart Machin stated that its market positioning and business strategy will help mitigate any slowdown. He believes that the company has a strong brand image to help it maintain its market share. He also expects strong tailwinds from travel, leisure, and weddings to keep its sales numbers strong.

Marks and Spencer shares have a price-to-earnings (P/E) ratio of 9. While it’s not seen as a traditional growth stock, it does have an average price target of £1.93. This gives it the potential to rebound by 43% over a one-year period. Therefore, I’ll be capitalising on its low share price and will buy some stock for my portfolio in July.

The post Should I buy Marks and Spencer shares for its growth in July? appeared first on The Motley Fool UK.

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• What are the best UK shares to buy now to try and make a million?
• Consider these 2 dirt-cheap stocks to buy if the Straits of Hormuz permanently reopen
• Marks and Spencer’s share price is down 16% to below £4! Is now the time for me to buy the dip with an eye to £8+?
• Why the Marks & Spencer share price fell 12% in March

John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS, Ocado Group, and boohoo 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.

2021 has been another year characterised by the pandemic. Some sectors have soared, while others have lagged behind. Overall, the FTSE 100 has climbed 9%, sitting at 7,170 at the time of writing. With 2022 on the horizon, I have picked out three stocks in different industries that I think could offer great growth throughout the year.

M&S (LSE: MKS)

The first stock I have chosen is UK retail and grocery firm M&S. Delivering a whopping 69% year-to-date return, the retail chain has proved a top FTSE 100 performer. There are a number of reasons I think the firm will continue to offer strong growth throughout 2022. Firstly, M&S has announced a series of great results throughout 2021, delivering £296m free cash flow for the year. Secondly, the firm has an improving online presence through its 50% stake in Ocado‘s retail operation. The pandemic has accelerated the shift to online spending, and M&S is well poised to capitalise on this throughout 2022. Finally, as I covered in another article the firm has many of the qualities of a great private equity (PE) investment. If a PE firm took over M&S, I think we could see some big share price growth, although I’m more interested in it for long-term returns as an independent business. It does still come with risks as its recovery isn’t guaranteed to last and retail is a tough market to operate in, but I’d consider buying it today.

NIO (LSE: NIO)

My second stock is electric car manufacturer NIO. Unlike M&S, the NIO share price has had a rough ride throughout 2021, falling 44% year-to-date. However, currently sitting at $29, I think this stock has the capacity to climb throughout 2022. Its growth has been very encouraging over the past year. Results published in November highlighted a 120% increase in deliveries year-on-year. Also, the firm is expected to release two new models at its ‘NIO Day’ event on 18 December. This could help push up the share price going into 2022. However, the business has been battling with the supply shortages caused by the pandemic. For example, in October the firm had to halt production, leading to a 65% decline in month-on-month vehicle production. This is a risk that could hold back the NIO share price throughout 2022. That being said, I think at current cheap prices, NIO could offer healthy growth in 2022. I own some shares already but may buy more.

Lloyds (LSE: LLOY)

The third stock I like the look and might buy for 2022 is Lloyds. Having delivered 27% year-to-date returns, the firm is in a good place moving into the New Year. I like the look of Lloyds partly because of its exciting growth plans announced by new chief Charlie Nunn. The refreshed strategy could enhance the firm’s position in some of the markets where it’s not strong, such as wealth management and investment banking. In addition to this, Lloyds is planning to become the UK’s largest private landlord through its newest venture, Citra Living. If these plans come to fruition during 2022 then I think we could see some healthy growth in the Lloyds share price. One risk however is the threat the Omicron variant may pose to the UK economy. If more lockdowns occur, it could dampen the growth of Lloyds’ business ventures.

The post Three stocks I would invest in today for growth in 2022 appeared first on The Motley Fool UK.

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Dylan Hood owns shares of NIO. The Motley Fool UK has recommended 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.

Key info

Marks & Spencer is a well-known brand within the UK. Considered to be one of the country’s high-end retailers, it boasts some of the best brand recognition within the British Isles. ‘Marks & Sparks’ is home to sweets like Percy Pigs and is considered by many as the supermarket for those who’ve ‘made it’.

Its share price currently trades at 235p, up from 131p this time last year. Most of these gains were made in August and November of this year. 

Marks & Spencer vs Tesco

But M&S doesn’t come close to Tesco (LSE: TSCO) in terms of market cap or revenue. Tesco pulled in over £64bn in revenue in 2020 whereas M&S was only able to make £10bn. Tesco’s market cap is £21bn, while M&S’ is £4bn.

However, M&S is a much more diversified business than Tesco. Tesco makes the vast majority of its revenue through grocery sales, leaving other products and markets as an afterthought. M&S, by comparison, offers over 100 different brands of clothing, home appliances, and even banking services to its customers. This diversification gives the company lots of different revenue streams to pull from in the face of changing market tastes.

Online restructuring

Marks & Spencer has made a concerted effort over the past few years to restructure its business around it’s “46 flagship websites”.  This does seem to have paid off as M&S’ international e-commerce sales were up 75% across 100 different countries and are, in large part, responsible for its sudden uptick in profit projections. However, the company continues to struggle with the effects of the pandemic and Brexit.

Challenges

The Marks & Spencer share price may have jumped on Wednesday, but unfortunately the price-to-earnings ratio (P/E ratio) gives something away about the health of the company. Yes, profits and revenues are up but the P/E ratio is, at time of writing, 187.26, meaning people are paying nearly 200 times what the company is actually earning per share. I blame this on projected profits exciting investors who are jumped in early on the hopes that the share price will continue to rise.

On top of that, M&S has been in the process of closing 11 of its stores in France, citing new costs incurred from doing business across the European Economic Community (EEC) border.

Marks & Spencer is not the only company struggling with the new status quo. Tesco has closed all of its stores in Finland. I can see this playing out two different ways though. Reduced international revenue will hurt, but cutting running costs is always good.

Conclusion

So, will I add Marks & Spencer to my portfolio? Probably not.

While I am pleased to see that it is increasing its revenue and cutting costs, Brexit presents an ongoing challenge to its international operations that will continue to hurt for years to come. If it continues to successfully pivot to online sales and maintains profitability I may re-consider. But for now it’s a no.

The post The Marks & Spencer share price is on the rise. Is now the time to buy? appeared first on The Motley Fool UK.

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

Why the MKS share price is jumping

Despite the “highly uncertain” trading outlook at the beginning of the year due to Covid-19 constraints, the company said it had seen an “encouraging performance” over the 19 weeks to 14 August. This, it believes, is evidence that the strategy to transform the business is working. 

Revenue from the company’s Food arm “outperformed” over the period. Thanks to strong trading at its larger stores, sales were up 10.8% on last year. They’re also up 9.6% from two years ago. Even hospitality and franchise are “progressively improving” as restrictions have eased. 

Of course, the food offering at Marks has never really been the issue. It’s the company’s clothing range that’s continually struggled. However, revenue at this division almost doubled (+92.2%) on last year with smaller sales and promotions helping full-price sales rise approximately 9% on pre-pandemic numbers. 

There’s also been a good recovery in sales away from Marks’ home market. International revenue rose a little under 40% over the period, despite sporadic lockdowns and Brexit-related delays. 

All told, group revenue was 4.4% higher than in 2019/20. 

But can this be sustained?

The company is inclined to think momentum can be maintained, even if “pent up consumer demand” may be partly responsible for this return to form. 

Accordingly, the FTSE 250 stock now expects adjusted pre-tax profit to be “above the upper end of previous guidance of £300m-£350m“. I can’t remember the last time when those words were uttered in a statement from the company. No wonder the MKS share price is up 11%, as I type.

That said, I do think it’s important to consider the reasons for me to continue avoiding the stock. 

Inflation concerns

For one, the encouraging outlook is dependent on Covid-19 being effectively beaten. As things stand, I don’t believe we can be completely confident of this. Regardless, the slow recovery in footfall and normal working patterns mentioned today could persist. 

Like many listed companies, M&S could also be impacted by inflation and supply chain issues going forward. To date, it’s managed to mitigate this by reducing costs. However, there’s clearly a limit as to how far this can go. Should prices continue rising, margins could get squeezed even tighter.  

Third, I need to put today’s numbers in perspective. Clothing sales might be back to 2019/20 levels, but I wouldn’t take this as evidence the company has shaken off its ‘frumpy’ image just yet. A rebound isn’t the same as shooting the lights out. Moreover, its physical stores continue to struggle with sales down by almost 20% compared to 2019/20. 

A long way back

As encouraging as today’s update is, I think the MKS share price has a long way to go before we can really be sure the company is back on form. Despite rising 45% over the last year (including today’s gain), the stock has still roughly halved in value since 2016. Oh, and there’s no dividend stream either.

In conclusion, I’ll be keeping an eye on Marks for now. For the reasons mentioned above, I won’t be adding the shares to my own portfolio just yet. 

The post Here’s why the Marks & Spencer (MKS) share price is flying today appeared first on The Motley Fool UK.

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• 5 years ago, £5,000 bought 3,185 Marks & Spencer shares. But how many would it buy now?
• What are the best UK shares to buy now to try and make a million?
• Consider these 2 dirt-cheap stocks to buy if the Straits of Hormuz permanently reopen
• Marks and Spencer’s share price is down 16% to below £4! Is now the time for me to buy the dip with an eye to £8+?
• Why the Marks & Spencer share price fell 12% in March

Paul Summers 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.

Joint venture with Ocado

In February 2019, M&S and Ocado entered a joint venture agreement whereby M&S bought a 50% share of Ocado’s UK retail business for up to £750m. This gave the retailer a full online food delivery service to help modernise the company. Even so, last year, the news was met with a largely negative response. This was due to the dividend being cut by 40% in order to help fund the deal and the fact that the company had to issue more shares.

Nonetheless, M&S products have been available on Ocado since the start of this month and there have been signs of promise. In fact, an Ocado spokesperson stated that “the M&S launch has been incredibly popular”. It’s also been noted that shoppers have been buying more M&S products than they did Waitrose products. As such, although many observers do still remain sceptical, this could bode very well for M&S shares.

Problems that remain

Despite this promise in the food sector, there are plenty of other problems in the rest of the business. For example, the Clothing & Home unit has struggled for many years, and has further declined this year. In fact, so far this year, overall sales in this department have fallen nearly 50%. 

There are a number of reasons for this disappointment. Firstly, its lacklustre online presence has allowed other fashion retailers to increase their market shares at the expense of M&S. This has included online retailers Boohoo and Asos. By buying stock very far in advance of a season, M&S has also struggled to react to trends, and this has meant that excess stock has to be heavily marked down. It has also led to significantly reduced profits. This faltering side of the business has therefore placed a major strain on M&S shares over the past few years, and evidently, there are a number of issues that need to be addressed.

Would I buy M&S shares?

In terms of addressing these issues, the retailer has made small steps. For example, it has made the necessary step of cutting 7,000 jobs. Although this is not good news for the workers involved, these streamlining efforts should allow the business to increase its longevity. The joint venture with Ocado is also a sign that the company is attempting to modernise.

Despite this, I’m still not buying. Although M&S shares are certainly cheap in the short-to-medium-term, I’m sceptical regarding the long-term future of the company. The current difficult economic climate should make the task of restoring the retailer to its former glory especially hard, and this means that the upside does seem limited. Instead, I’d prefer to buy a stock with better growth prospects.

The post After its joint venture with Ocado, are M&S shares a buy? appeared first on The Motley Fool UK.

More reading

• 5 years ago, £5,000 bought 3,185 Marks & Spencer shares. But how many would it buy now?
• What are the best UK shares to buy now to try and make a million?
• Consider these 2 dirt-cheap stocks to buy if the Straits of Hormuz permanently reopen
• Marks and Spencer’s share price is down 16% to below £4! Is now the time for me to buy the dip with an eye to £8+?
• Why the Marks & Spencer share price fell 12% in March

Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS and boohoo 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.

Then again, there are some sectors that simply scream ‘avoid‘ to me right now. Here are three that are unlikely to make you rich any time soon. 

No sweat

One set of businesses that I think will struggle more than most to recover will be gyms and fitness studios.

If reports from the US are anything to go by, many people do not intend to renew their memberships post-lockdown. It would seem a lot have simply become accustomed to working out in the park or at home. Either that or they’ve recognised the futility of shelling out money on a regular basis for something they don’t use all that often. With job insecurity rising sharply as firms adapt to the ‘new normal’, gym memberships are also a luxury most of us would be willing to forgo.

Of course, there will still be people who head back to their local gym, particularly those who miss the social and motivational aspects of a visit. Others will likely want to return in the winter months when the cold weather sets in. Then again, the possibility of a second wave coinciding with seasonal flu will surely make even the most dedicated gym bunny think twice.

It may benefit from reduced competition if other operators go bust but I’d continue to give Gym Group — one option on the UK market — a wide berth for now.  

High street fallout

Many retailers were already finding things tough before the coronavirus arrived on these shores. The lockdown and stuttering recovery in sales seen since could prove the final nails in many coffins. 

Certain UK stocks should be absolutely fine, of course. Supermarket titans Tesco, Sainsbury’s and Morrisons for example. A business specialising in low-ticket staples, like B&M European Value, should also thrive in troubled times. 

If you’re going to buy a retailer that sells more discretionary goods, however, I’d avoid anything that doesn’t already have a strong online presence and bulletproof finances. And even if they do have these, it’s important to ask whether they can be more resilient than their peers given the hyper-competitive markets in which they operate.

As such, I’d avoid stocks like Dixons Carphone and yes, even stalwart Marks and Spencer.

Bumpy ride

I don’t doubt that some airlines will adapt and recover from the coronavirus. Picking a winner at this stage, however, feels like a gamble. After all, the coronavirus story changes every day. This leads to huge volatility in stocks such as easyJet, Ryanair and IAG as investors struggle to accurately value them. 

There’s also the opportunity cost to consider. Why put your money to work in an industry that might not recover for 2-3 years? And can you stand the bumpy ride in the meantime?

Investing is all about generating the best return from the amount of risk you’re prepared to take. The right airline stock could make you wealthy in time but I think this part of the market is only for the brave or recklessly bold right now. 

The post Looking for the best UK stocks to buy now? I’d avoid these like the plague appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value, Tesco, and The Gym 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.

Can the company continue this positive momentum and help new investors grow their wealth? Despite being proven wrong in the past, I’m still to be convinced.

“Unprecedented demand”

The grocery sector has, of course, been one of the few to thrive during this pandemic. It comes as no surprise then that Ocado announced today it had experienced “unprecedented demand” over recent weeks and that it was now delivering “significantly more groceries to households than ever before.” 

Without doubt, today’s numbers were excellent. Revenue growth in its retail arm in Q2-to-date was a little over 40% higher on the previous year. It was also almost 30% higher than in Q1.

Although sensing that normal shopping habits had returned, the growth stock said the number of items in customers’ baskets was still high. That said, it did caution investors that the near-term outlook remained cloudy. Since no one knows how long it will take for life to return to normal, management chose to suspend its guidance on retail revenue for the current financial year. 

Growth stock

Of course, Ocado is more than just an online supermarket. It’s Solutions arm is the reason many investors hold the growth stock. Through its Smart Platform, the company is able to offer infrastructure and software solutions to grocery firms around the world. Giants such as Kroger and Coles Supermarkets are already on board. So too is the UK’s fourth-biggest supermarket Morrisons. 

On this front, there was more good news. Despite the pandemic, the company reported delivering its first international customer fulfillment centres (CFCs) to French firm Groupe Casino and Canadian retailer Sobeys on time. It added that it was not experiencing any material delays in terms of delivering further facilities to other customers.  

So, was I wrong about Ocado?

I have no hesitation in holding my hand up and declaring that — purely from a share price perspective — my call on Ocado was wrong. It’s done very well for investors and I’m not one of them.

So, has my opinion on the company changed? Not really. 

From a valuation perspective, Ocado still looks faintly ridiculous. Yes, it has market-leading technology (although it’s worth noting that its website couldn’t cope with demand in March). Yes, it has £1.2bn of cash on its balance sheet. And, yes, online grocery retailing is the future. But, with a market-cap approaching £12bn, how much of this is priced in? I’d say a lot (and then some).

Aside from the fact it’s still to make a profit, Ocado must also contend with the possibility that a free-falling global economy will have an impact on how much people are able/willing to spend on groceries going forward. In this scenario, it’s surely the German discounters Aldi and Lidl that will benefit, not new joint venture partner Marks & Spencer. 

As positive as today’s update was, I certainly wouldn’t want to be caught owning the shares if everything didn’t proceed perfectly. And, as we know, it pays to expect the unexpected when investing, particularly in 2020.

Good luck to all new holders. But I think there are less risky ways to make money in the FTSE 100 right now.

The post Can FTSE 100 growth stock Ocado still make you rich? appeared first on The Motley Fool UK.

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Paul Summers 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.

It’s no secret that the now-FTSE 250 business, like many high street retailers, has struggled in recent times. But just how bad has it been as an investment? 

Long term loser

If you’d put £1,000 in Marks on Monday, 22 December 2014, you’d have got 221 shares for your money. For simplicity’s sake, I’m using the price at the end of the day and ignoring the costs of trading here.

Over the last five years, Marks and Spencer’s share price has more than halved in value. So, if you’d done nothing, your stake would now be worth a measly £480.

Admittedly, this shabby state of affairs is improved once dividends are considered. Based on my research, those buying the stock five years ago would have received a total of 90.1p per share to date. A holding of 221 shares would, therefore, have generated a total payout of just over £199. Adding this to the value of the shares now gives a final total of £679, if we assume dividends weren’t re-invested.

A 32% loss over five years? What a shambles!

If only I’d bought…

Marks and Spencer’s woes are all the more ironic when it’s considered that the performance of online grocery specialist Ocado (LSE: OCDO) — a company that the battered retailer purchased a £750m stake in earlier this year — has been so good.

Had you put your £1,000 to work with Ocado rather than Marks five years ago, you’d have a little over £3,000 now. What makes this result even more remarkable is the fact that all this has come purely from share price growth. Ocado doesn’t pay out dividends to its owners. 

So, it’s safer to back Ocado?

Not necessarily. Given that it’s still to generate consistent profits, the £9bn cap is clearly one of the more speculative plays in the FTSE 100 right now. The longer this situation persists, the more likely investors are to bank their gains and move on. Such is the issue with momentum stocks: they’re a great source of profits right up until the point they’re not.

In sharp contrast, expectations around Marks and Spencer have rarely been this low, particularly when it comes to its clothing range. Accordingly, the shares change hands for ‘just’ 12 times earnings.

Whether this valuation turns out to be a bargain will depend greatly on what happens next September when the deal kicks in. Given what it’s paid to use Ocado’s software, it goes without saying that everything must work swimmingly from the outset.

I see no particular reason why this won’t happen. However, one persistent concern I do have is whether it will be able to attract a sufficient number of new customers. Getting those who buy products from Waitrose through Ocado to swap to M&S is one thing, but asking those not already on board to pay more for their food is another. 

Marks next updates the market on 9 January. For the sake of those holding since 2014, I hope it’s good news.  

The post Ouch! Here’s how much £1k invested in Marks and Spencer 5 years ago would be worth now appeared first on The Motley Fool UK.

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Paul Summers 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.