But there’s one UK-based company, not listed in the FTSE 100, that has a marginally higher valuation of £159.6bn. It’s the world’s largest industrial gas supplier, Linde (NASDAQ:LIN). Although legally domiciled in Ireland, the group’s principal executive office is in Woking, just a stone’s throw from London.

So, what’s this multinational’s business model? And should investors consider buying its shares today?

Gas giant

Linde produces and distributes an extensive range of industrial gases, including oxygen, nitrogen, argon, hydrogen, carbon dioxide, and helium. It also supplies ancillary products, such as mobile gas cylinders, safety equipment, and freezers.

The company’s customers are diversified across multiple sectors. From engineering to healthcare to electronics, the firm’s gases have countless applications. What’s more, its operations span over 100 countries worldwide.

It’s fair to say these attributes make Linde a high-quality defensive stock, resistant to fluctuations in market cycles. That said, it’s not completely immune to global economic downturns since falling demand from the manufacturing industry can still hurt the bottom line.

Soaring share price

In the past five years, the FTSE 100 has advanced 43%, but the Linde share price has delivered a much stronger return of 138%. Adding to its investment appeal, the company has a 28-year history of consistent dividend growth. The stock currently yields 1.34%.

One thing I really like about Linde shares is the group’s competitive advantage. Its leading position in the market, immense distribution infrastructure, and heavy investment in R&D mean the group benefits from economies of scale that smaller rivals can’t match. A 2018 merger with Praxair helped to widen the company’s already substantial moat.

There are also attractive growth opportunities for the 145-year-old firm. Hydrogen‘s a good example. Due to its low-carbon qualities, it’s a key element in the global effort to achieve net-zero emissions. With over 200 hydrogen refuelling stations to its name, Linde has the biggest installed base in the world.

A sticking point is the valuation. Trading at a price-to-earnings (P/E) ratio of 33.1 and a forward P/E of 27.3, it’s not a cheap stock. By contrast, the average multiple for FTSE 100 shares is 16.3. Consequently, there’s pressure on Linde to perform and little room for error. Any disappointing results could deal a nasty blow to the share price.

Fortunately, earnings for FY24 gave shareholders some reasons to be cheerful. A 7% uptick in adjusted operating profit to $9.7bn and a 9% increase in earnings-per-share (EPS) to $15.51 were notable successes. However, sales were flat compared to the prior year at $33bn. It’s worth monitoring the next results closely. I wouldn’t want to see that figure go into reverse gear.

A stock to consider?

Overall, I think Linde shares are well worth considering as a portfolio addition. The company is often overlooked by UK investors who focus on the FTSE 100 without realising there’s a British titan beyond the ranks of the index.

The high valuation is an unfortunate drawback, but sometimes it’s worth thinking about paying a premium for quality.

The post This industrial giant is the UK’s largest business, but it’s not a FTSE 100 stock! appeared first on The Motley Fool UK.

One data point I find useful is whether hedge fund managers are bullish or bearish on stocks I’m researching. After all, professional money managers have a wealth of experience, knowledge and resources that I could only dream of wielding.

Beleaguered businesses

Short-selling is a way for investors to profit from stock prices falling. To short sell, a trader borrows shares and sells them on the market, with the aim of buying them back later for less.

The Financial Conduct Authority (FCA) mandates that funds disclose their short positions if they reach a certain threshold. To be specific, if an investor’s net short position is equal to or greater than 0.5% of the issued share capital of the company concerned, they must report it.

The table below adds all of those individual reports together to give a list of the 20 most shorted companies on the LSE this month.   

Short and sour

Should I steer clear of these stocks?

Not necessarily. While a company might be going through a bumpy patch right now, that doesn’t mean it won’t see better times in the long term.  

Focusing on just the most-shorted company on the LSE, ITM Power (LSE:ITM), I see some reasons for positivity.

Hydrogen hype goes Hindenburg?

ITM Power designs and manufactures hydrogen energy solutions for a variety of industries.

The start-up’s valuation has dropped from £3.5bn in 2021 to £600m due to delivery delays for its flagship product, a 24-megawatt electrolyser.

Electrolysers are devices that use electricity to break down water molecules into hydrogen and oxygen through a process called electrolysis. The hydrogen produced can be used as a clean fuel source.

The company’s technology doesn’t seem to be in doubt. It has already successfully developed products and secured orders from customers including industrial gas giant Linde, as well as Shell and RWE.

Its new boss, Dennis Schulz, seems determined to turn the ship around. Schulz said he would get the company to profitability within five years. His 12-month recovery plan involves cutting a quarter of the company’s headcount, trimming its product range, and improving its engineering processes.

Still, ITM Power’s financial woes can’t be swept under the rug. It has already burnt through around half of the £500m it raised during peak optimism around hydrogen-related stocks in 2021. To make matters worse, its annual revenue is a fairly puny £2m, meaning further equity financing and dilution of shareholders could be around the corner.

To buy or not to buy?

I currently have a position in Linde, ITM Power’s biggest investor. This provides me with some exposure to the firm’s technologies, while having the safety offered by Linde’s strong balance sheet.

As for the remaining 19 highly shorted companies, Primary Health Properties is on my watchlist, and I’ll re-visit the company when I next have spare cash to invest. I’m avoiding the rest!

The post 20 UK shares that fund managers think will go down in flames! appeared first on The Motley Fool UK.