ITM Power (LSE: ITM), the Sheffield-based hydrogen energy solution company, has had a wild stock market ride over the past year. The shares are currently changing hands at £5.00 but previously peaked in January 2021 at £7.24. Despite the decline in the company’s shares over a one-year period, investors would have seen an increase in value of their holdings of 66.15%. When looking at performance over multiple years, the share price performance has been truly eye-watering. 656% over two years, 1,539% over three years and a remarkable 2,003% if investors had held the shares over a five-year period.

ITM Power is globally recognised as an expert in hydrogen technologies. Its overarching principle is to take excess energy from the power grid and convert it into green hydrogen, utilising its own electrolysers, which are designed and built at its Sheffield base. The hydrogen is used in three main areas: mobility, chemicals, and industrial application. With governments around the world clamouring for clean energy solutions to help avert a climate catastrophe, interest in green hydrogen has really taken off.

ITM recently announced it was part of a consortium that had been awarded a grant from the European Climate, Infrastructure and Environment Executive Agency for the development of a 100MW electrolyser at Royal Dutch Shell’s energy and chemicals park in Germany. The grant totalled £27.5m. This is a world-leading project that demonstrates the increasing commitment by governments and industry to decarbonise at scale, using zero carbon footprint green technology.

In a show of confidence, the investment banking group Jefferies recently initiated coverage of ITM with a ‘buy’ rating and a target price of £8.00. Jefferies stated its preferred play on green hydrogen is the electrolyser companies and within that sub-sector ITM is its top pick. It sees a potential 60% share price upside from current levels.

ITM continues to expand rapidly. It recently agreed terms to acquire a site for its second UK factory in Sheffield. The £13.4m, fully automated factory of around 260,000 square feet is expected to have a capacity of 1.5GW per annum. This will complement its existing 1GW site. 

Despite all the positives, ITM Power isn’t without its issues. Hydrogen technology is still very much in its infancy and huge amounts of money are required to drive the research and development. Despite governmental interest in green hydrogen, there is no guarantee of commercial success. In the firm’s latest results, ITM reported that losses for the full year had widened to £21.4m. The loss-making company has a market capitalisation of £2.73bn due to the surging share price. The surge, in this investor’s opinion, is based on optimism and not financial results.

In the case of ITM Power, I believe that if I continue to hold my shares I will be rewarded over the longer term. It is important to note, however, that when investing for the long term I am always wary of putting all my eggs into one basket. I therefore spread my funds and invest in different sectors and geographies. I remain resolute in my belief that diversification is key to building a successful portfolio over the longer term.

More reading

Isaac Stell owns shares in ITM Power. 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.

What’s all the fuss about?

Tesla is by far and away the market leader in electric vehicles. This is true in both the design of its cars and their battery technology. The company is led by the eccentric and sometimes erratic visionary Elon Musk, who has championed the electric car revolution and driven the company forward despite the critics.

The drive to reach net zero by 2050 is a challenge that most governments in the developed world have signed up to achieve. The switch from gas-guzzling combustion engines to more environmentally friendly electric vehicles is top of the agenda.

In September, European EV car sales increased by 42% year on year. The two most popular models were the Tesla Model 3 and the Tesla Model Y. It is clear to see that Tesla commands a market-leading position in the EV market but the likes of General Motors, Ford and Volkswagen  are biting at its heels.

To buy or not to buy

Shareholders in Tesla have reaped the rewards of their continued faith despite setbacks along the road to success. Tesla now has a market capitalisation larger than the next 10 biggest automakers. This is remarkable given that it only delivers a fraction of their combined sales.

When we take account of the current share price compared to the underlying earnings, we see that Tesla is trading at 290 times its 2021 earnings. By contrast Volkswagen, a competitor with its own EV range, is trading at 5.5 times its 2021 earnings. Despite the remarkable differential in financial figures, investors it seems are still positive on the shares.

Tesla has performed well during the semiconductor shortage and managed to keep production at record levels. In its Q2 earnings call Tesla announced a 98% jump in sales to $12bn. Its gross profit margins also came in at 25.8%, way ahead of analysts’ expectations. Sales were also projected to grow by around 50% per annum for several more years. A remarkable number for any company, even more so for an automaker.

Despite the fanfare, with Tesla’s staggering share appreciation over the past year and its current price to earnings ratio, this investor will be leaving the shares on his watch list for the time being. There is no doubt in my mind, however, that the EV revolution is underway so I will be maintaining a very active interest the shares.

More reading

Isaac Stell 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.

JD Sports is a British success story and having recently cracked the US markets, long-term earnings look set to continue their upward trend. Profits for 2021 are expected to top £550m, a record for the company. At the centre of JD’s strategy are strong partnerships with internationally recognised brands such as Nike, adidas, Puma and The North Face. Sales are not only delivered through their physical stores but through a market-leading ecommerce platform, which coincidentally helped sales boom through the Covid-19 induced lockdowns. The bumper sales sent JD’s share price to £12.26, up 49% over one year, the FTSE 100 index by contrast has risen by 18% (dividends not included). However, if you had held the shares over the last five years, you would have seen a 255% rise in your holding as opposed to a meagre 8.5% from the FTSE 100 (again, dividends not included).

Some investors may believe that the growth story has now been priced into the shares and any further share price appreciation may be muted. I personally do not think this is the case. As an investor who seeks out companies to buy and hold for the long term, I am always looking for innovative companies, with experienced management teams and strong financials. In the case of JD Sports, I believe I have all three. Peter Cowgill, the executive chairman, has been leading the company since 2004. During his tenure he has delivered shareholder returns of 15,000%! An eyewatering return, but also a demonstration of how buying and holding the right shares really can create extraordinary wealth. In a show of confidence, Cowgill bought an additional 50,000 shares in July, in a transaction costing the chairman £430,000.

JD Sports is not without its issues. In a recent judgement by the competition and markets authority the company was ordered to sell Footasylum, which it acquired in 2019 for £90m, due to worries that consumers would have to pay more for less choice. Supply chain issues also remain a headwind, coupled with complications arising from the loss of tariff-free trade with the European Union.

In the case of JD Sports I believe that if I buy shares I will be rewarded over the longer term. It is important to note, however, that when investing for the long term I am always wary of putting all my eggs into one basket. I therefore spread my funds and invest in different sectors and geographies. I remain resolute in my belief that diversification is key to building wealth over the longer term.

More reading

Isaac Stell has no position in any of the shares mentioned. The Motley Fool UK has recommended Nike. 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.

The shares are currently swapping hands at £2.94, still a way off the pre-pandemic peak of £3.19 so there may also be some opportunity for share price appreciation.

The UK pensions and life assurance market is saturated with the like of Aviva, Prudential and M&G, so competition is intense, but for me, a company with a solid pedigree dating back to 1836 comforts me in my quest for a passive income.

Digging for dividends

Anglo American (LSE: AAL) looks well positioned to benefit from the huge increase in the demand for copper for use within electric vehicles as the switch to greener vehicles gathers momentum. The £37bn mining giant has interests in four copper operations in Chile and aims to develop and operate long-life, cost-efficient, socially and environmentally responsible copper mines. In the age of scrutiny, the latter is a major tick in the box.

In its half yearly results, Anglo American reaffirmed its commitment to paying out 40% of profits to shareholders. In addition to this, an extra $2bn was returned to shareholders through share buybacks and a special dividend. This all adds up to the bumper 6.54% dividend yield that investors are currently enjoying and one that is hard to ignore for passive income seekers like myself.

Although Anglo American delivers an enviable dividend, the mining sector can be fraught with its own challenges, ranging from environmental issues to volatile swings in commodity demand and pricing. It is important to remember that bumper dividend payments may not always last.

A green future

The green revolution is here to stay and the transition to net zero by 2050 will require huge investment both by private entities and governments alike. SSE looks well placed to make a significant contribution to the government’s ambitious target through its investment in electricity transmission, its onshore and offshore wind projects and hydro power.

SSE is currently trading near its 10-year all-time high, so from a capital growth perspective the shares may not offer much upside, but with a dividend of 4.88% and a policy linking dividend growth to inflation until at least 2023, this passive income seeker would be happy to let the green dividends roll in.

More reading

Isaac Stell has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential. 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.

Ben & Jerry’s, Dove Soap, Hellmann’s Mayonnaise, Marmite – love it or hate it, these are just a smattering of the brands that Unilever (LSE: ULVR), an Anglo Dutch consumer goods company, owns and produces. From everyday essentials to the occasional treat, Unilever is a company that has a presence in every home in the UK and in almost 190 other countries.

Over 2.9 billion people use at least one of Unilever’s products every single day – a staggering statistic in the ever-expanding consumer product space. Does any other company (FAANG stocks aside), command this level of repeat custom? Unilever has roots that date back to 1871. It is a company that has successfully navigated its way through two world wars, multiple market crashes and a pandemic. Its worldwide loyal customer base and credibility is testament to its longevity.

Why has the share price been falling?

Since hitting an all-time high back in September 2019, shares in Unilever have been trending downwards. During the Covid-19 pandemic, the share price was resurgent as demand for its cleaning products ranges and food brands rocketed. The euphoria did not last long and the price has been in retreat once again, with the shares currently swapping hands at £3.94, the same price as in March 2018. With sluggish sales growth prior to the pandemic and a turnaround plan taking longer to implement than previously envisaged, profits have been struggling to match shareholder expectations. Restructuring costs, expected to be around 2% of sales over the next two years, have also dismayed shareholders.

Why buy now?

In its latest quarterly results Unilever announced sales growth of 2.5% and year to date sales growth of 4.4%. Its sales from ecommerce grew by 38% and now accounts for almost 12% of overall sales. Raw material costs remain a headwind for Unilever, but the company announced it will be taking ‘appropriate pricing action’ (corporate speech for ‘our prices will be going up’). This is very important in an inflationary environment as a company like Unilever can command pricing power, as consumers see their products as essential. The impact that inflation will have on profit margins should be offset by these price rises.

Unilever also offers a compelling investment case from a valuation point of view. It currently trades at 17.6 times its earnings whereas the likes of its US peer Procter and Gamble trades at 23.7 times. Soaring valuations in the US are currently making investors uneasy, whereas UK valuations look increasingly attractive as demonstrated by the recent flurry of private equity bids.

Alongside the valuation case, Unilever delivers an inflation-busting 3.9% dividend, which has historically risen each year. This should provide me comfort in uncertain times. I believe it is therefore only a certain amount of time before the smart money begins flowing back to Unilever. If I buy the shares soon, I’m confident I’ll rewarded in the future.

More reading

Isaac Stell has no position in any of the shares mentioned.  The Motley Fool UK has recommended Unilever. 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.