There’s a lot going on in the stock market right now. And I think there are opportunities, but investors should still be careful.

Stock market volatility

There are two major threats facing the stock market right now. One is the conflict in Iran and the other is the rise of artificial intelligence (AI).

The issues are very different, but they have something very important in common. They both have uncertain outcomes.

The situation in the Middle East is much more high-octane. It’s often changing multiple times a day and that makes it hard to keep up. 

AI is much more slow-moving. But it’s also less familiar and that makes it harder for investors to find something to compare it to.

All of this means share prices are much more volatile than usual. And that can indeed create opportunities for investors. 

Buy on the sound of cannons

There’s a popular saying about investing during war. It tells investors to “buy on the sound of cannons, sell on the sound of trumpets”. It’s attributed to Nathan Mayer Rothschild, during the Napoleonic Wars. And it’s still relevant in an age where drones have replaced cannons.

It’s a bit like being greedy when others are fearful, but better. People are sometimes right to be fearful – because things are changing.

That might be the case with AI. It doesn’t look like a passing fad – the technology is real and it seems to be here to stay. 

Wars, however, generally don’t last forever. And while share prices are never the most important thing in conflicts, they do move a lot.

Where to look

One stock that’s been under pressure recently is JD Wetherspoon (LSE:JDW). The conflict in Iran is a dual threat for the FTSE 250 company. 

Higher oil prices threaten to both push up its own energy costs and weigh on consumer spending. And the share price is down 15% in a month. 

Betting on a quick resolution to the conflict is obviously risky. But my thesis for JD Wetherspoon shares isn’t based on this. 

It’s based on the fact that the firm has lower costs than its competitors. And this puts it in a better position to withstand short-term shocks.

That kind of advantage is exactly what I look for in an investment. So I think it could be in a very strong position when trumpets sound.

The best time in a long time?

When Bill Ackman says the best companies in the world are on sale, he’s not thinking of JD Wetherspoon. But the principle is the same.

Uncertain situations can create buying opportunities. And the stock market is facing a unique combination of issues.  That means it might well be the best time in a long time to buy shares. But that doesn’t mean things can’t get even better. 

The most important thing is to be ready at all times. Buying opportunities can present themselves when investors least expect them.

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Things can already seem confusing enough, even before adding in potentially baffling acronyms like ISA, SIPP, ETF, or more (here’s a useful glossary of investment terms).

Actually, though, an ISA can be a useful way to start investing.

Making the most of your money

The reason for that is not about the investing itself. You could do that in a normal share-dealing account, after all.

Instead, the potential advantage of an ISA is about tax. If the shares held in it go up in value – even by a lot – they will not attract capital gains tax. If they pay dividends, those also will go untaxed.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Now is the perfect time to think about this, as every year the end of the tax year marks the closure of that tax year’s allowance.

That deadline is only for putting money into the ISA, though. It can inside it for a while (years, even) before being invested.

So, for someone who has an inkling to start investing, now could be a good time to think about whether a Stocks and Shares ISA might match their needs.

Start as you mean to go on

Investing can seem complicated and, indeed, many people make it complicated.

But look at some of the most successful investors from history as well as today and what becomes clear is that their success is often built on simplicity not complexity.

I think that can be a sensible way to start investing – and keep going.

Doing so involves sticking to businesses you can understand, taking time to understand a company’s financial health, paying close attention to valuation, and thinking of investment as a marathon, not a sprint.

Getting going can be quick

It may take a bit of time to get to grips with the basics of how the stock market works. But the mechanics of actually investing are not complicated.

Comparing options for an ISA, choosing one, and setting it up could probably be done in a matter of days — or perhaps within a day.

So, someone who wants to start investing and does that this weekend should still be in good time to put money into their new ISA before the 5 April deadline a fortnight from now.

Finding the right shares

Once inside the ISA, as I mentioned, the money can sit without being invested.

Right now, though, I think there are some shares worth considering for their long-term potential.

J D Wetherspoon (LSE: JDW), for example, tumbled at the end of last week as the market digested its interim results. Pre-tax profits tumbled by almost a third year on year.

The company warned that rising energy costs are a risk to profits.

National Insurance and labour rate increases have hammered Spoons, adding around £60m in annual costs. That equates to almost 90% of last year’s net profit of £68m.

So, why do I remain upbeat from a long-term perspective?

The pub industry faces ongoing challenges as demand falls and taxes increase, but Spoons is a best-in-class operator. It has a compelling value proposition for customers. It has sizeable economies of scale.

At under 10 times earnings, I reckon its share price now looks like a possible bargain.

The post Could an ISA be a good way to start investing? appeared first on The Motley Fool UK.

At 550p per share, the Wetherspoons share price is now languishing at one-year lows. This means its forward price-to-earnings (P/E) ratio sits at 12.9 times, well below the 10-year average of 19-20.

Does this represent a top dip buying opportunity? Or should investors avoid the FTSE 250 company like a watered-down pint of Stella?

What’s happened?

Like the broader leisure industry, JD Wetherspoon is suffering from ballooning labour and energy costs. It spooked the market in January when it said “higher than anticipated” costs meant first-half profits would fall year on year, sending its share price lower. Investors have been even less than forgiving following its latest warning today.

Sales have continued ticking nicely higher, up 5.7% in the six months to February, to £1.1bn. On a like-for-like basis revenues were up 4.8%. However, the good work in attracting punters through the door continues to be undone by a range of increasing expenses.

Operating costs rose £28m year on year in the first half, while repairs rose by £10m and business rates by £9m. As a consequence, operating profit tumbled to £52.9m, an 18.4% decline from a year earlier.

For the full year, Wetherspoons Chair Tim Martin said rising pressure on consumer wallets, combined with higher energy, labour and tax-related expenses, could “result in profits that are slightly below current market expectations“.

Pressure rising

The worry for investors isn’t just that costs are rising, either. Wetherspoons is nursing enormous amounts of debt, which rose to £772.9m in February from £724.3m last July.

This is especially concerning given recent developments in the Middle East. As analyst Dan Lane of Robinhood notes, these debts “will bite more now that interest rates have jumped since pre-pandemic levels and a potentially higher inflation environment points to a prolonged pause in interest rate cuts“.

There’s also questions to be asked as to whether Wetherspoons takings will continue rising despite the pub’s famously low prices. With inflationary pressures crimping consumer spending, and the UK economy stuck in low-growth mode, will people drink and eat less when they’re at the pub or take fewer trips out?

Are Wetherspoons shares a buy?

The good news is that Wetherspoons could well benefit from drinkers switching down from more expensive pubs. It’s still outperforming the broader market, and may continue it cash-strapped Brits change their habits.

But that isn’t enough to encourage me to invest. eToro analyst Mark Crouch comments that “wage increases, higher business rates and energy expenses are clearly eroding margins, and these pressures are unlikely to ease in the near term“. Unfortunately,

Wetherspoons shares might be cheap. But I think I’ve found far better value stocks to buy in the current climate.

The post After toppling 11%, are Wetherspoons shares too cheap to miss? appeared first on The Motley Fool UK.

The reason? Well, this part of the press release didn’t help:

“There is clearly considerable pressure on consumer finances, combined with higher taxes, wages and energy costs for the hospitality industry. This may result in profits that are slightly below current market expectations.”

But I think the City may have over-reacted. Let me explain.

Easier ways to make money

You don’t have to watch EastEnders to know that running a pub is difficult. However, just imagine the problems that Wetherspoons’ boss, Tim Martin, has to contend with. After all, he has 747 boozers to worry about.

But I love the fact that he’s never shy in explaining the issues that the industry, and his chain in particular, are facing. This morning’s announcement is no different.

With careful reasoning – supported by some insightful numbers — he explained how business rates for Scottish pubs have become a “de facto sales tax”, highlighted the “plethora of stealth taxes (non-domestic electricity charges, climate change levies, packaging charges, etc)” placed on his business, and argued for “VAT equality” with supermarkets.

And this is before we know how the conflict in the Gulf is going to affect disposable incomes and whether the pub chain’s margin might come under pressure from rising costs.

Overall, earnings per share (EPS) for the period fell 32.7% to 18.7p.

Not all bad

But the results did contain some good news.

During the period, like-for-like (LFL) sales increased 4.8% compared to a year earlier. Revenue was also up 5.7%.

In February, industry LFL sales were down 0.2%. For the 42nd consecutive month, Wetherspoons outperformed the wider market with a rise of 3.2%. Sales per pub increased 35.4%.

And the drop in the group’s share price means its stock is, on paper at least, attractively priced.

EPS for the year to 25 January was 50.9p, giving a current price-to-earnings ratio of just 10.8. Before today, the five-year average (median) was 15.3.

It’s a similar story when it comes to the group’s balance sheet. Since March 2021, its price-to-book ratio has averaged 2.3. It’s now 1.86.

To be honest, I think today’s 10% drop in the group’s market cap is a little unfair. After all, the group hasn’t said that its full-year profit will be below expectations. It said it “may” be.

So does this mean it’s time to bag a bargain?

Well, it depends. If I knew with a reasonable degree of certainty that the fall in the group’s earnings is a temporary phenomenon then I would say ‘yes’. But given all the problems that Tim Martin lists in his chair’s statement, I can’t be sure.

Based on its revenue, JD Wetherspoon is clearly doing better than the industry as a whole. Pubs are closing all over the place and yet ‘Spoons continues to grow. With its cheap food and drink, prominent high street locations, and strong brand it has lots going for it.

But taking a stake now would be too risky for me. I would like to see an improving bottom line before parting with my money. When I see evidence of this, I shall revisit the investment case.

The post JD Wetherspoon’s share price takes a sobering 10% dip! appeared first on The Motley Fool UK.

The firm’s half-year results revealed a 30% fall in earnings per share. That’s not a good thing, so should I cut my losses and sell?

Results

If the firm’s news had been a revenue update, things might have looked pretty good. Like-for-like sales increased 4.8%, which is pretty good. 

In fact, it’s better than good. Despite growth slowing in the last few weeks, the business is well ahead of the wider industry.

The trouble is, it isn’t a sales report and margins have been under pressure. The firm also stated that full-year profits might be below expectations.

This is the risk that the market has been worried about for some time with JD Wetherspoon. And it’s pretty clearly manifesting itself.

A total of £71m in extra costs this year looks like a huge problem. Especially for a business that reported £67m in net income last year.

My view, though, has been that JD Wetherspoon is a better business than its numbers show. And I still think that after these results.

Competitive strength

Higher costs across the pub industry are an issue. But I think they’re less of a problem for JD Wethrspoon than its competitors.

The reason for this is that the company’s scale gives it a purchasing advantage. And this is still the case even as other costs go up.

The counter to this is that JD Wetherspoon can’t increase its prices in the way competitors can. A focus on customer value restricts this ability.

Yet I think that seeing this as negative is a mistake. One reason is that it’s not clear other pubs can increase prices – their sales are going backwards.

Another is that the gap between the firm’s prices and its rivals is huge and widening. So it has scope to raise prices while still offering the best value.

I think that means the company is still in a terrific competitive position. But it’s impossible to ignore the fact that profits are getting hit.

Long-term investing

At the end of the day, profits are what matter for investors. But I think that day is a long one and I’m prepared to wait for them.

The firm’s issues are clearly industry-wide, rather than company-specific. And I think that makes all the difference for this business.

The hospitality industry has seen big challenges before. The most recent was the Covid-19 pandemic, which was a disaster. 

JD Wetherspoon took advantage of the crisis in a spectacular way. As a result, average weekly sales per pub are 31% higher than they were before the pandemic.

The firm has also widened the gap with its competitors. And I expect it to do so again in another challenging environment.

I’m not thrilled about the fact that costs are going up. But I think it could be that short-term difficulties create long-term opportunities.

What I’m doing

A 12% decline seems like a fair reaction to the latest results from a short-term perspective. But that’s not what I’m looking at. 

I think the company’s long-term prospects are still very strong. So I see the falling share price as an opportunity. 

There’s a lot that I want to buy in today’s stock market. But JD Wetherspoon is definitely on the list.

The post My JD Wetherspoon shares just fell 12% in a day! Here’s what I’m doing appeared first on The Motley Fool UK.

In both cases, the situation is more complex than it seems. But I think anyone looking for buying opportunities should give both of these stocks a closer look.

Valuations

One of the key pillars of value investing is to look for a margin of safety in case things go wrong. And at today’s prices, that looks very easy to find with both Jet2 and JD Wetherspoon.

Jet2 has a market value of £2.28bn. But its latest update reported £2bn in net cash on its balance sheet, which covers virtually all of this straight away. 

With JD Wetherspoon, the company has a market value of £750m and another £725m in net debt. This, however, is almost entirely offset by £1.4bn in property, plant, and equipment.

That means the stock market isn’t giving these businesses much credit for any future cash they generate. So, are these huge opportunities or too good to be true?

Jet2: cash is king?

The catch with Jet2 is that a lot of the cash on its balance sheet is already accounted for. Around £1.3bn is offset by what’s known as deferred revenues. 

This represents cash the firm has received up front but hasn’t yet provided the service for. In other words, holidays that people have booked but haven’t yet gone on. 

Deferred revenues don’t show up as debt, so they don’t affect the firm’s net cash position. But they do change the value equation for investors and means it’s not the bargain it first seems. 

Oil prices surging higher represent an ongoing and obvious risk. But I think Jet2’s impressive growth and new Gatwick operations, though, mean the stock is worth considering at today’s prices.

JD Wetherspoon: unlocking value?

With JD Wetherspoon, the reverse might actually be true. The value of the firm’s properties on its balance sheet could actually be understated based on how often it updates them. 

Investors, though, need to consider how realistic it is that the company is going to sell its properties to unlock their value. While I think it’s more likely than most, I don’t give it a high probability. 

That means it’s down to the firm’s cash flows. And I’m much more optimistic here with that big property portfolio keeping leases down to contribute to the lowest costs in the industry.

Hospitality has been under pressure from rising costs and this remains a risk. But pubs have been doing surprisingly well – and I think JD Wetherspoon is the best in the business.

Opportunities?

An initial look at Jet2 and JD Wetherspoon makes them look like investments with huge margins of safety. Alas, investing isn’t quite so straightforward.

My own view is that both companies have something in common. They’re some of the best operators in industries that have been historically difficult to do well in.

Cost pressures in both airlines and hospitality have been and remain challenges. But at times like this, I think investors could do well by taking a look at some of the top names.

The post 2 quality UK stocks trading below intrinsic value? appeared first on The Motley Fool UK.

But I think there is still lots to be learned by a small private investor from the billionaire Sage of Omaha’s wisdom when hunting for shares to buy.

Here is a trio of UK shares I think demonstrate the sorts of characteristics Warren Buffett has often mentioned looking for in shares to buy.

Diageo

To start with, a share that Warren Buffett did actually buy (and later sold) in the distant past, when it traded under the name Guinness.

Today the black stuff remains an important brand in the portfolio of premium drinks owned by Diageo (LSE: DGE). It also owns a host of premium spirits brands.

Warren Buffett likes well-established brands that can command a price premium (he is a long-term shareholder in Coca-Cola).

He also likes the fact that consumer goods brands can build customer loyalty, keeping people coming back for more year after year.

But while Diageo is highly profitable, there is a risk that shifting drinking habits could hurt sales revenues.

That was one reason Warren Buffett’s investment in Kraft Heinz underperformed many other deals he made: consumers increasingly lost their taste for processed food. There is a risk that a similar trend could hurt alcohol sales.

Still, I own Diageo shares with no plans to sell. Like Warren Buffett, I aim to be a long-term investor.

J D Wetherspoon

Sticking with the booze – though food and accommodation are also part of its business – I reckon J D Wetherspoon (LSE: JDW) is a share investors should consider.

Warren Buffett likes a business to have what he calls a “moat”: a competitive advantage that sets them apart from rivals. Spoons has one in my view: a national chain of individually named pubs, that benefits from economies of scale. Its value proposition for drinkers is unrivalled on a national scale.

While falling alcohol sales are hurting Diageo, Spoons’ wider offering means it remains in growth mode.

The risk I see, that it has mentioned often, is growing national insurance, alcohol duty, and wage costs eating into already slender profit margins.

Still, with its strong value reputation and large customer base giving it a moat, I see a lot to like about the business.

Bunzl

Over 20 years ago, Berkshire, under Warren Buffett, bought McLane from Walmart. Maclane is a grocery and foodservice distributor, still owned by Berkshire.

Like grocery retail, logistics for the industry tend to be high volume but at low profit margins. So operational efficiency and economies of scale matter.

That is also true for UK-based international logistics company Bunzl (LSE: BNZL).

Bunzl sells plastic spoons, cups, takeaway boxes, paper towels, liquid soap, and the thousands of other small but essential products foodservice operators need to keep running.

Such a business benefits from ongoing demand across the economic cycle. People still need to eat and cleaning goes on.

Another thing I like is Bunzl’s decades-long run of annual dividend increases. Warren Buffett’s stake in Coca-Cola has shown how annual dividend growth over decades can add up.

Bunzl’s share price has crashed 37% in a year. Uneven performance in north America remains a risk.

But the company has been addressing it and I have recently bought more Bunzl shares.

The post 3 UK shares I think offer today what Warren Buffett looks for! appeared first on The Motley Fool UK.

As I write this, however, each one is down (at least) 10% since the start of the week. So is this a chance for me to add to my investments, or has something gone badly wrong?

JD Wetherspoon

JD Wetherspoon issued its trading update for the 25 weeks up to 18 January and despite the fact the share price has been falling in response, I think the business is actually doing well.

The firm opened six new pubs and eight franchised ones. But even aside from this, sales were up 4.7% overall with stronger growth in the second half of the period.

During the Christmas period, JD Wetherspoon achieved like-for-like sales growth of 8.8%. That’s impressive in comparison to the 5.1% (which still isn’t terrible) achieved by the wider pub industry.

The stock fell though, because the risk that investors have been mindful of over the last year or so is starting to materialise. Higher costs for staff and utilities are cutting into profit margins. 

That’s not good and it’s something investors need to keep an eye on. But I think the company has an extremely strong competitive position and it’s in a better position to deal with these than its rivals. 

The reason is that it has a lower cost base that comes from operating at scale and avoiding lease liabilities by owning its pubs outright. That hasn’t changed and I think it’s a key long-term strength. 

Judges Scientific

By contrast, there wasn’t much that was positive about Judges Scientific’s full-year update. Revenues were up, but earnings per share were down and the firm’s outlook for 2026 is very weak. 

The numbers for 2025 don’t look great and even they were boosted by a contract that won’t be repeated in the year ahead. But the company’s big problem has been research funding in the US. 

This highlights the risk of a heavy concentration in an industry that depends on government policy. The latest news on this front, however, has been extremely positive for Judges Scientific.

Congressional appropriators have categorically rejected the administration’s requests for cuts to major research funders. And in some cases, they’ve gone the other way. 

Instead of a 40% cut, the National Institutes of Health is set for an increase. The National Science Foundation is set for a drop, but this is focused on the budget for education, rather than equipment.

Judges Scientific isn’t seeing the positive effects of this yet and that’s why its profit forecast is around 50% below expectations. I think, though, that this is a big sign the firm might be through the worst.

What should I do?

So which stock am I looking to buy? Without wanting to be boring, the answer is a simple one – both. 

The reason I own shares in JD Wetherspoon and Judges Scientific is because I think both have strong competitive positions. And nothing much has changed on this front.

This is what I think matters most with a long-term investment. So I’m seeing both stocks as buying opportunities for my portfolio.

The post 2 of my favourite UK stocks are down 10% in a week! Should I buy more? appeared first on The Motley Fool UK.

The stock however, didn’t exactly surge as a result. And I’m not sure the announcement is as much of a benefit as it seems at first sight. 

Relief

Since the Covid-19 pandemic, the UK government has been helping the hospitality sector with business rates relief. This had been coming down each year, before ending in 2026.

The plan had been to replace this with a new – permanent – lower tax rate. But higher rateable values meant that several businesses would have had to pay a lot more as a result.

This however, has been abandoned. Instead, the Chancellor’s reported to be working on a relief package to continue supporting the industry and prevent the sharp increases.

The move marks a U-turn from the government, but I don’t really care about that. I am however, interested in the implications for JD Wetherspoon – a company I own shares in.

Who really benefits?

Wetherspoons’ pubs often have much higher turnover than their independent counterparts. This means their rateable values are typically high and this leads to higher business rates.

Given this, the company would seem to be the obvious beneficiary of a potential reduction in business rates. And while there’s some truth to this, there’s also a catch. 

The firm does typically pay higher business rates than other operators. But it’s also in a better position to deal with this as a result of a cost advantage generated by its size and scale.

As a result, I’m not sure more support for the industry as a whole is a good thing for JD Wetherspoon. It arguably doesn’t need it and it might help the competition.

An analogy

There’s a big difference between running a marathon at sea level and running one at an altitude of 5,000m. The second’s much harder, since it’s more difficult to get oxygen on board.

In either situation, the best runners should win. But the conditions they’re running in can make a big difference to how much competition there is to deal with. 

Specifically, there will be runners at sea level that just can’t complete the race at altitude. And even if you don’t run your best, it’s a lot easier to win when there’s less competition around.

I think that’s how it is for Wetherspoons. It’s one of the few pub companies that can cope with higher taxes, so more support might just help keep the competition in business.

What I’m doing

Lower business rates should help JD Wetherspoon’s financial performance. But there’s a risk they also make the industry more competitive, which isn’t a good thing.

The stock didn’t react particularly strongly to the announcement, but it‘s up 27% in the last 12 months. And it’s reached a level in my portfolio where I’m not sure about adding to it further.

Equally though, I’m not selling a single share. The industry will go through ups and downs, but I think the firm has a big advantage over its competitors and I expect it to do well as a result.

The post Could lower business rates send this FTSE 250 stock soaring? appeared first on The Motley Fool UK.

As long as investors are properly prepared for the possibility of falling share prices, there’s no need to worry. So what should you do to make sure you give yourself the best chance?

Investment returns

Over the last 10 years, the FTSE 100 has returned an average of 8.5% a year. That’s far better than what cash savings have been offering and that makes a huge difference over time.

With the stock market, though, things don’t just go up every year. Share prices fell in 2018 and 2020, meaning an investment in January of those years was worth less in December. 

Importantly though, even investments made in bad years have done well over time. A good example is 2020, when the FTSE 100 fell 11.5% in a year.

A £10,000 investment in a FTSE 100 tracker fund at the start of 2020 was worth around £1,5780 early Friday (2 January), before the index hit 10,000 points. That’s an average annual return of 7.9% – well above what cash offers.

Coping with a crash

The point here is clear – even an investment in a bad year has potential to do well over time. There are no guarantees, but this is what investors need to remember.

Strictly, share prices falling 11.5% isn’t a crash. But the FTSE 100 actually fell 23% at the start of the pandemic (which is crash territory) before a bit of a recovery.

The key to dealing with crashes is being able to stay invested even when prices are falling. There’s a way to lose money in the stock market — by selling when prices are low.

Anyone who invested at the start of 2020 and sold at the end of it lost money. But those who didn’t managed that return of almost 8% a year. Those who bought when prices were at their lowest might have made even more!

How to stay invested

I think the easiest way to stay invested is to focus on buying shares in quality companies. One example from my portfolio is JD Wetherspoon (LSE:JDW) – a FTSE 250 pub chain. 

I’ve held the stock for a few years and it’s been a bumpy ride. Higher staffing costs have hit it hard, but I’ve never really thought about selling. 

The main reason is that the firm has consistently grown its sales in that time. And its focus on value for customers means I think there’s a good chance it can continue.

JD Wetherspoon has been an outstanding operator in a difficult industry. But when the stock has faltered, focusing on the business has helped me avoid selling at a loss.

Buying shares

The stock market might crash in 2026. But even investments made just before a big drop in share prices can work out very well, especially with high-quality companies.

JD Wetherspoon’s scale gives it a cost advantage that it uses it to offer lower prices than competitors. That’s why it’s a stock I think anyone starting out investing should take a look at.

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