A stable utility

First we have BT Group (LSE:BT.A). The stock is up 17% in the past three months, and 30% over a broader one-year time horizon. The Q3 update from February suggested broadband competition is easing, with customer losses coming in lower than feared. At the same time, its full-fibre rollout continued at pace, now passing over 21m premises. Investors were impressed by the strong take-up growth, and this could keep helping the stock outperform later this year.

BT’s cash flow has also been improving. In volatile markets (especially amid geopolitical tensions), that kind of predictable, infrastructure-backed cash generation becomes very attractive. Telecoms aren’t flashy, but they’re essential. After all, people don’t cancel broadband in a crisis!

The stock is holding up very well, and I believe it could continue to do so as people will see it as a defensive play. In uncertain conditions, investors tend to allocate funds to these companies with stable demand and dividend potential. Its yield of 3.79% isn’t the highest in the index, but is above the FTSE 100 average.

One risk is regulatory scrutiny. This is always something investors are concerned about as they have the power to materially impact any growth plans by putting roadblocks in the way.

Engineering profits

The second company doing well is Weir Group (LSE:WEIR). It’s up 47% in the last year and has been rallying so far in 2026 as well.

Interestingly, the share price dropped in March following full-year results. This came due to a guidance tweak lower for this year and higher spending on a new company-wide IT system. Even though these could be seen as risks going forward, there were plenty of positives to take away from them. For example, revenue was up 2%, with adjusted profit before tax up 4%.

We also need to factor in the indirect benefits from the ongoing commodity boom. Remember, Weir is a global engineering company focused on providing high-performance technology and services to the mining industry. I believe key themes such as the electrification push and AI build-out will continue to keep commodity prices high. This should help smooth out any market volatility in the share price as people are aware of the long-term demand trend.

Even though some were disappointed by the recent guidance, the company is still expecting further growth and margin expansion in 2026. This is supported by various factors, including operational improvements and its push into higher-margin software offerings. This increasingly diversified set of revenue streams should further make it a reliable company that people would do well to investigate further.

Overall, I think both stocks could be considered for portfolios aiming to manage volatility as we face uncertain times ahead.

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However, working backwards means that it begins with building a solid FTSE 100 portfolio to generate the necessary funds. Here’s how someone might approach it.

Two main routes

Let’s start with analysing where the income could come from. The most straightforward is from dividends. If a company pays out these to shareholders, it acts as a regular cash payout. Based on the dividend yield, this can provide an investor with a yield anywhere from 0% to above 10% annually. However, people need to remember that dividends aren’t guaranteed.

Another source comes from capital gains. This occurs when someone buys a stock and its value appreciates. Let’s say an investor bought 100 shares in a company for a total of £1,000. If the stock rallied to a value of £2,000, the person could sell 50 shares, bank £1,000, and still be left with the original investment value of £1,000, retaining the remaining 50 shares. The main risk here is that there’s no certainty that a stock pick will gain in value. In fact, it could fall!

Looking at the numbers

An investor could consider allocating half of the monthly investment amount to growth stocks and the other half to dividend shares. Over the long term, I believe the average yield on income stocks could be around 6%. For growth stocks, the capital gains could work out to be 10% a year. Therefore, the portfolio is expected to yield an overall return of 8%.

If an investor adds £300 a month to each bucket, this £600 total could grow over time. After 12 years, the total pot would be large enough to stop needing fresh capital. Into the following year, it would generate an average of £1k a month.

Of course, the exact timing depends on several factors. However, it provides a rough estimate to give everyone an idea.

Finding good picks

One example for consideration would be Weir Group (LSE:WEIR). Founded in 1871, the Scottish-based engineering company supplies equipment, services and technology to the global mining and minerals sector.

Over the past year, the share price is up 31%. If we increase this period to five years, it’s up 91%, showing it would meet the criteria for the growth stock category. In terms of reasons for the gains this year, it has been partly due to mining customers increasing capex after a long period of underinvestment. In fact, this was noted during the half-year report.

Looking ahead, I believe mining investments can accelerate significantly from here. This would be driven in part by the demand for metals for electrification and battery production. I’m also positive on the stock being held for the long run as it’s a business that has survived the test of time.

One risk is that as a global company, Weir’s exposed to “macro-economic and geopolitical uncertainty” it spoke of in the recent results. This can make it tricky to operate in and can cause unexpected supply chain issues.

Overall, I think it’s a good stock for investors to consider if they’re looking at this income strategy.

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Others can often quietly go under the radar but also represent great investment opportunities, if you ask me.

Two picks I reckon investors should be taking a closer look at are Unite Group (LSE: UTG) and The Weir Group (LSE: WEIR).

Unite Group

Unite is set up as a real estate investment trust (REIT). It develops and operates student housing across the UK.

REITs are a great way to boost passive income, as these types of investment trusts must return 90% of profits to shareholders.

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.

Unite shares are up 1.5% over a 12-month period as they were trading for 979p at this time last year, to current levels of 994p. I reckon market volatility including rising interest rates and soaring inflation has hampered the shares from climbing further. This has also been the case for many FTSE 100 shares.

The positive for Unite is that demand for student beds is outweighing supply levels. If it can plug this gap, I can see performance and payouts growing in the future. Speaking of payouts, a dividend yield of 3.4% is attractive. However, it’s worth remembering dividends are never guaranteed.

From a bearish perspective, a recent government review into foreign student visas may curb new international student numbers. This could hurt Unite’s uptake, as well as performance and return levels. I plan to keep an eye on any developments on this front.

For me, demand outstripping supply, a great investor return policy and level of return, as well as extremely strong brand power, make a compelling investment case.

Weir Group

Scottish-based aero engineering firm may not be a well-known name among those who don’t know the industry well. However, I view it as another potentially great way to gain exposure to the sector. This is away from other larger names such as Rolls-Royce or BAE Systems.

Weir shares haven’t moved much over this past year. In fact, they’re down by 1.5% from 1,841p at this time last year, to current levels of 1,813p.

When the pandemic struck, the aerospace industry ground to a halt. However, since we seem to be over that, burgeoning demand could boost Weir shares in the long term. Plus, the business recently announced plans to strategically boost operating margins. It could also continue its acquisition strategy to stimulate further growth and boost market presence.

At present, a dividend yield of 2% helps the investment case. Plus, if the business can boost margins as it is trying to do, and grow, payouts could also be boosted.

A current valuation on a price-to-earnings ratio of 23 may seem expensive. However, if the firm achieves forecast targets for 2024, this could drop to 14, making the shares more attractive, in my eyes.

A risk I’ll keep an eye on is what looks to be rising debt levels on its balance sheet. This is especially as it can be costlier to pay down during times of high interest, like now. Higher debt levels could impact growth aspirations as well as investor returns.

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It’s true that all are well known, but retail investors often focus on companies they have affinity with. Therefore, there are some firms that don’t crop up in conversation as much.

Here are two I like that I don’t feel get the attention they deserve.

Not the British bank we’re thinking of

First up we have Standard Chartered (LSE:STAN). The British bank often gets overlooked by investors for the likes of Lloyds or Barclays. I think this is because Standard Chartered doesn’t have retail banking operations in the UK and therefore gets less exposure than some other British high street-based peers.

That said, there’s plenty of reasons to like the bank. Over the past year the share price has jumped 22% and recent half-year results also showed a 27% leap in profit before tax versus H1 2022.

Strong net interest income (driven by higher interest rates) is helping to boost revenue. It also recorded high growth rates in its Financial Markets and Wealth Management divisions.

An added benefit is that it isn’t exposed to the UK retail market. With concerns over the cost-of-living crisis, not being involved in this space is actually a bonus.

One risk is the pressure to keep a lid on expenses. These rose by 11% year-on-year, which is suprisingly high.

With a price-to-earnings ratio of just 9 and the stock down almost 50% over the past decade, I feel there’s strong long-term potential here.

Watch out for Weir

Weir Group (LSE:WEIR), the Scottish multinational engineering firm, is one of the smaller companies in the FTSE 100 with a market-cap of £4.6bn. To put this into context, fellow constituent Shell has a market-cap of £157bn.

I feel the size of the company and the less prominent nature of industrial engineering means Weir Group doesn’t get a lot of time in the spotlight. Yet with the share price up 10% over the past year, it’s beating the FTSE 100 average.

Momentum is really with the business, and I believe this can continue. Half-year results just out showed revenue up 16% versus the same time last year. It now has a record opening order book, something that should help revenue to continue to grow.

The company also has very good operating cash flow conversion (51%). This means it’s able to prevent bottlenecks in finances and means the business can function seamlessly on a day-to-day basis. The importance of this can’t be overstated.

One slight concern is rising net debt, from £792m to £842m. However, the net debt to EBIDTA ratio is only 1.5x, which is a very manageable figure. Yet the business does need to ensure it keeps an eye on this to prevent problems further down the line.

I feel both stocks are valuable additions to an investor’s portfolio, despite not having the prominence of some other FTSE 100 names.

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TV

My first pick is broadcaster and TV content maker ITV (LSE: ITV). The ITV share price had been falling back in 2022. But it jumped 6.7% on Thursday morning on the back of the company’s half-year report.

ITV recorded an 8% rise in total revenue, to £1,679m, with a 16% increase in revenue from ITV Studios. I don’t see much to distinguish delivery platforms, and I reckon success is increasingly down to content production.

Statutory pre-tax profit rose by 65%. Adjusted EBITA did drop 3%, but the company put that down to additional reinvestment ahead of the launch of ITVX.

The committed full-year dividend of at least 5p would yield 6.8% on today’s price. And the shares are on a forecast price-to-earnings (P/E) ratio of under seven.

Drugs

Next up is Indivior (LSE: INDV), whose share price dropped 3% on first-half results. It has still doubled over the past 12 months, mind.

The generic drug manufacturer reported a 10% increase in net revenue. But operating profit dipped 14% with earnings per share (EPS) down 13%. That was pretty much in line with expectations. But analysts are forecasting earnings growth in the next few years which would drop the forward P/E to only around 11 by 2024.

It all stems from the company’s specialisation in opioid addiction treatments, with demand expected to climb in the US in the coming years. Revenue from Sublocade, specifically, grew 61% in Q2. And the board expects $390m-$420m from it for the full year.

Is the stock cheap now? Indivior is engaged in a share buyback programme, so it seems to think so.

Pumps

Weir Group (LSE: WEIR) is the third of the potentially cheap stocks I’m picking, after H1 results sent its shares up 6%. It does come after a slide since late 2021, so we might just be seeing a new buying opportunity.

The engineering firm makes pumps, turbines, valves, and things like that. And demand looks strong now. The company reported “record aftermarket orders” in the half, up 23%.

Revenue grew by 18%, with second quarter growth reaching 20%. The company does carry net debt, at a two times multiple of EBITDA, and that concerns me a little. But it expects free cash flow to increase through the second half, with 80%-90% free operating cash conversion.

And though Weir experienced input cost inflation, the firm says it managed to maintain its gross margins.

We’re looking at a P/E of close to 20. But growth forecasts would drop that to 14.5 by 2024.

Buy?

All three of these face individual risks, for sure. And I would not buy any of them based on just one set of results. No, I’d need to do some deeper research. But right now, they all look like cheap stocks to me.

The post Are these 3 cheap stocks to buy after the latest results? appeared first on The Motley Fool UK.

I am not interested in buying a firm just for a couple of months. I want to buy businesses with robust competitive advantages and an international footprint, qualities that should help them expand and grow over the next decade.

With that in mind, here are two FTSE 250 shares that I would buy for my portfolio today with a view to holding them for the next decade or so.

FTSE 250 global leader

Part of the global economy that is currently experiencing substantial growth is the resources sector.  Demand here has exploded over the past couple of years, and companies are struggling to keep up.

The result has been a substantial increase in commodity prices, and corporations in the sector are now throwing off cash.

With profits surging, businesses are looking to invest in increasing their capacity, and that bodes well for equipment manufacturers such as Weir (LSE: WEIR).

This corporation develops innovative engineering solutions for the minerals and mining markets. That includes equipment such as pipes and valves mission-critical infrastructure, which helps enterprises improve efficiency and increase output.

With a significant global footprint and 15,000 employees around the world, the company is one of the most trusted and experienced operators in the space. This in itself is a competitive advantage.

Mining businesses do not want to install equipment that breaks a couple of months after it has been delivered. They want to buy equipment from someone they can trust. The FTSE 250 company offers just that.

Sales growth

According to its latest results release, the business is already benefiting from the increase in capital spending. During 2021, orders increased 22% to £2.2bn. Growth accelerated towards the end of the year. In the fourth quarter, the value of orders placed with the group increased 26% year-on-year.

With profits growing, the company’s redeploying cash flow back into its business. It acquired Motion Metrics in 2021, increasing its exposure to technological solutions.

Management has also hiked spending on research and development to find new products. Outlay here increased to 6% of revenue during 2021, up around 0.4% on the previous year. Management believes that the corporation can achieve a similar rate of growth in 2022, based on current trends.

And it looks as if city analysts agree. Analysts have pencilled in earnings growth of nearly 40% in the current year. They have also projected growth of around 12% for 2023.

FTSE 250 projections

However, I should caution that these are just projections at this stage. There is no guarantee the corporation will hit these targets. Indeed, pressures are building across the engineering industry, which could hit the company’s growth in the years ahead.

Costs are rising significantly across the sector, with energy and materials costs putting tremendous pressure on manufacturing firms like the FTSE 250 business. Economic uncertainty resulting from the situation in Eastern Europe could also cause corporations to delay capital spending plans.

This would have a significant impact on the company’s order book and growth potential over the next few years.

Still, even after considering these charming challenges, I would acquire the FTSE 250 stock for my portfolio today, considering its competitive advantages and growth potential over the next couple of years.

Growth services market

The housing and home services market is one of the largest markets in the UK and indeed the world. And one of the best ways to invest in this market is with Homeserve (LSE: HSV).

This corporation is an international home repairs and improvements enterprise. It claims to make home repairs and improvements easier by matching customers to trades to generate repeat and recurring income.

Over the past couple of years, growth across the group has been nothing short of outstanding. Revenues have increased at a compound annual rate of 16% since 2016. Unfortunately, the company did suffer a setback during the pandemic, and profit growth hit a wall.

However, analysts expect the group to return to growth this year with a net profit of £161m pencilled in, up from £109m reported for 2019.

Bolt-on growth

Over the past couple of years, the company has developed and refined a unique growth strategy. As well as capitalising on the organic demand for its services in the UK and USA, it has been acquiring other home services businesses to complement growth.

The property services markets in the UK and US are highly fragmented. They are made up of a network of smaller traders. This presents a tremendous opportunity for the company to consolidate the market and use its economies of scale to push down costs and increase profitability.

That is precisely what the corporation has been able to do over the past six years.

FTSE 250 income stock

And as profits have grown, the company has been able to reinvest more back into the business and return cash to investors. The dividend per share has more than doubled since 2016 and, at the time of writing, the stock supports a dividend yield of 4.1%.

That said, I cannot take the company’s growth for granted. The cost of living crisis could force consumers to delay repairs to their properties, which would have an impact on growth.

Rising interest rates could also increase the cost of the corporation’s borrowing. It has relied heavily on borrowing in the past to fund its acquisition programme.

Higher interest rates could hit profitability and profit margins and lead to slower growth if the group is forced to delay further deals.

Despite these risks, I would be happy to add the firm to my portfolio of FTSE 250 shares, considering its growth potential over the rest of 2022 and beyond.

The post 2 FTSE 250 shares I’d buy for April and beyond appeared first on The Motley Fool UK.

I think these sectors are set to benefit most from the global economic recovery over the next few years. While geopolitical tensions may lead to some uncertainty over the next couple of months, I think the long-term outlook for these industries is exciting. 

Indeed, some companies like Rio Tinto (LSE: RIO) are currently benefiting from what I can only call a Goldilocks environment.

Best shares to buy now for growth and income 

The price of the company’s main product, iron ore, is trading at a multi-year high. This is only part of the equation. For the past decade, the organisation has been trying to reduce its operating costs and pay down debt. The combination of these initiatives as well as the higher iron ore price, has helped the firm generate record profits. 

I believe these trends will persist for some time. By investing in automation and other efficiency initiatives, the company can keep costs down. The iron ore price is unlikely to remain high forever, but I think the cost of this crucial commodity will remain elevated as the world tries to rebuild from the pandemic. 

Rio is one company I would buy for my £5,000 portfolio. I think the engineering group Weir (LSE: WEIR) also deserves a place on my list of the best shares to buy now. 

This engineering enterprise supplies critical components to the mining, oil, and gas sectors. Due to the essential nature of these products, it is unlikely customers will try to shop elsewhere to reduce costs. This gives the corporation a competitive advantage, in my opinion. 

As mining outfits like Rio ramp up production to meet rising demand, they will need to invest in their production facilities. They will need to maintain and enhance facilities’ capabilities. This suggests Weir’s growth potential over the next couple of years is pretty strong. 

Challenges and opportunities 

Despite their attractive qualities, these companies will both face some challenges as we advance. Economic disruption and supply chain issues could push up prices. They may not be able to pass all of these price hikes on to consumers. Further, commodity prices can be incredibly volatile. If they suddenly fall off a cliff, these firms may suffer a decline in profitability. 

Even after taking these headwinds into account, I believe these are some of the best shares for me to buy now in the mining and engineering sectors. There are other opportunities, of course. Rio’s peer, Anglo American, exhibits similar qualities to the iron ore giant.

Nevertheless, I believe these two businesses are some of the best corporations in the most exciting sectors I could own right now. As the world rebuilds over the next five to 10 years, I think these two companies should be able to capitalise on the rebound.

The post Best shares to buy now: how I’d invest £5k appeared first on The Motley Fool UK.

I think all of the three companies outlined below have significant growth potential, which is why I would buy them for my portfolio today. 

Growth potential

The first company on my list is the engineering business Weir (LSE: WEIR). The group produces engineering equipment for the mining and oil and gas sectors, and it is currently benefiting from an increase in commodity prices. As prices rise, miners have more cash to spend on new and existing projects. This means more orders for Weir. 

According to its interim results for the six months to the end of June, orders during the period increased 17% and adjusted operating profit jumped 12%. 

I think commodity prices will continue to boom as demand for critical resources expands. Governments are spending significant sums on infrastructure projects worldwide, and the resources for these projects will need to come from somewhere. Weir may continue to benefit as miners grow to meet this demand. 

That is the main reason why I would buy this stock for my portfolio of UK shares. However, I should note that the commodities industry is incredibly volatile. If prices slump, producers could slash orders. That would be terrible news for Weir. 

Recovery play 

In my opinion, casino operator Rank Group (LSE: RNK) is an attractive pandemic recovery play. During the pandemic, the firm’s casinos were forced to close. The company survived by boosting the size of its online business, which provided much-needed cash flow for the organisation. 

Thanks to its online business, the group was in a solid position to stage a recovery as the economy reopened. And since that reopening, in the 13 weeks to 15 August, sales have rebounded. During the period, they were just 19% below the same period in 2019. With average weekly revenues of £5.7m, the firm is comfortably above its cash break-even level of £4.4m. 

I think these figures imply the company is set for a strong recovery in the weeks and months ahead. That is why I would buy the stock for my portfolio of UK growth shares. 

Issues that may destabilise the group’s growth include the risk of another lockdown, and additional regulations, which may increase costs and reduce customer spending. 

Basket of UK shares 

The final company I would buy as a growth investment is Virgin Money UK (LSE: VMUK). 

I think this challenger bank has tremendous potential. Its growth slowed last year, mainly due to the pandemic, but management is targeting expansion this year. The company is trying to grow in personal lending and mortgages, and it is targeting higher interest loans to improve profit margins. 

It is also investing heavily in its digital capability, and this is already yielding results. Over 100k customers have signed up for online products, and it is working with other fintech companies to improve the offering for consumers. 

As the bank pushes ahead with its growth plans, I would buy the stock for my portfolio of UK shares. 

However, this equity might not be suitable for all investors. Banks can be challenging to understand, and if there is a sudden economic downturn, this sector is usually the first to feel the pain. 

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FTSE 100 shares

The first company on my watch list is Barclays (LSE: BARC). There are a couple of reasons why I’d buy this FTSE 100 stock. 

Not only is it one of the largest retail banks in the UK, but it also has a large international investment bank. This suggests to me the business will be able to ride the UK economic recovery. But, at the same time, its global investment arm should benefit from increasing market activity as the economy recovers.

Indeed, the FTSE 100 group’s investment bank was invaluable last year. Fees generated from investment banking deals more than offset losses in other sections of the enterprise at the height of the pandemic.

While it isn’t possible to say if the same will happen over the next few months, I think it’s likely Barclays’ diversified business model will help the group outperform in the recovery.

In addition, the bank is currently trading at a high-single-digit price-to-earnings (P/E) multiple and a discount to book value of around 40%.

While I’m optimistic about the FTSE 100 company’s outlook, I’m also aware it could face some challenges. These include ultra-low interest rates, which could weigh on profit margins for years. Regulatory constraints may also hold back the group’s dividend and growth potential.

Despite these risks and challenges, I’d buy the FTSE 100 stock for my portfolio today.

Industrial giant

The other cheap FTSE 100 stock I’d buy for my portfolio today is Weir Group (LSE: WEIR). This company produces critical components for the mining, oil and gas and power sectors. Products include pipes, valves and ore processing machines.

Over the past 12 months, prices for essential commodities such as iron ore and copper have jumped as demand has increased. Governments around the world are spending trillions on infrastructure projects to jumpstart their economies after the pandemic.

To meet the increased demand, mining companies will have to invest in new equipment. That could translate into rapid earnings growth at equipment producers like Weir.

As such, while the FTSE 100 stock doesn’t look particularly cheap, at the time of writing (it’s trading at a P/E of 24), I think the stock’s future growth may compensate for this high valuation. What’s more, due to the unique nature of Weir’s products, I reckon the company deserves a higher-than-average multiple.

That said, there’s no guarantee booming commodity demand will translate into higher sales for Weir. The company could also suffer from additional lockdowns, which could inflict further pain on the economy.

The post 2 cheap FTSE 100 shares I’d buy in July appeared first on The Motley Fool UK.

Some of those smaller businesses score well against quality indicators and often look and feel more dynamic. As well as dividend income, I reckon many of them are capable of delivering capital growth via a rising share price. I’d aim to buy these stocks when their valuations make sense for a long-term investment and then hold them for at least 10 years.

Over a decade, the underlying businesses will have time to grow. And I could see a decent return. However, as with all shares, positive returns are not certain. And it’s possible for me to lose money even when investing over such a long period.

A FTSE 100 stock positioned for growth

Nevertheless, I like the look of Weir (LSE: WEIR), the engineering business serving mining, infrastructure and oil & gas customers in more than 50 countries. In early March, chief executive Jon Stanton said the business was “resilient” in 2020. And the company has transformed itself recently into a “premium” mining technology provider. He reckons Weir is positioned to benefit from powerful long-term structural growth themes in the industry “for many years to come”.  

Stanton says underlying trading conditions are favourable. And he’s “confident” the business will outperform its markets over the next three years and deliver sustainable long-term profitable growth. But such an outcome is not guaranteed, of course. And one potential negative is that the mining industry is notoriously cyclical. If a general downturn arrives, Weir’s business could suffer and investment returns could decline for the company’s shareholders.

Meanwhile, with the share price near 1,744p, the forward-looking earnings multiple is around 20 for 2022. And the anticipated dividend yield is close to 1.8%. That isn’t a cheap valuation. So, although I’m keen on the business, I’d put Weir on watch for the time being and aim to pick up a few shares at a better buying point.

Serving today’s digital world

I’m also keen on security software company Avast (LSE: AVST). At the beginning of March, the company reported “another strong year of top-line organic growth, high levels of profitability and cash flow generation”.

Cybersecurity products were in high demand during 2020. And chief executive Ondrej Vlcek explained that more people and businesses turned to technology “to keep their lives and their work enabled“.

Looking ahead, Vicek is “confident” Avast can “unlock” new opportunities for growth with its commitment to ongoing product and technological innovation. Meanwhile, City analysts expect earnings to grow by around 65% in 2021 and 7% in 2022.

With the share price near 479p, the forward-looking price-to-earnings rating is just below 17 for 2022. And the anticipated dividend yield is around 2.6%. I reckon that’s a full-looking valuation. And it could end up looking even higher if the company misses its earnings expectations. If that happens, we could see the share price fall. Meanwhile, the business has a record of volatile earnings and shareholder dividends have only been around since 2018.

Nevertheless, I’d aim to pick up the stock on dips, down-days and general stock market corrections with the aim of holding for the long term

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