boohoo (LSE: BOO) shares have turned from everybody’s favourite growth stock into a huge disappointment. So, let’s take a closer look at the company’s past performance and see how much I’d have if I’d invested £1,000 in the stock at the start of 2022. 

The numbers 

The FTSE AIM stock has been rather volatile since the onset of the pandemic. In March 2020, it crashed to 180p. But it quickly rose to an all-time high of over 400p that summer, partly driven by increased demand for online shopping. 

Since then, the shares have performed badly and are down 70% year-to-date and 81% in the past year. The stock now trades at just 37p. 

That means if I’d invested my £1,000 in boohoo inthe New Year, I’d be left with a worrying £300 now. 

How has this happened?

Since allegations of bad working conditions in its supply chain in summer 2020, boohoo has had a run of negative press. 

The company, alongside its fast-fashion peer ASOS, is still being investigated by the Competition and Markets Authority (CMA) for misleading sustainability claims on its website. 

boohoo’s inability to shake off the bad news has spooked investors and led to a massive sell-off in the stock. 

The company’s financials are also worrying. In 2021, it announced a pre-tax profit of £125m and net cash holdings of £276m. The FY22 results showed that pre-tax profit sank to a mere £8m, while net cash holdings plummeted to £1.3m. 

There are also concerns that Chinese rival Shein will grab more of boohoo’s market share, as well as worries for the whole fast-fashion sector as consumers (and government regulations) become more eco-focused.

Future Plans

Yet I don’t think boohoo’s future demise is a foregone conclusion. There are some positive figures and news that give me hope. 

First, recent results show some improvement on past performance. Revenue is now almost £2bn, a 14% increase year on year. The business has also seen a 43% increase in active customers since 2020 — this list now sits at 20m people. 

Despite boohoo’s poor sustainability credentials, its drive to improve its record (overseen by Sir Brian Leveson) has meant big supply chain changes. And the recent partnership with Kourtney Kardashian Barker could help change this image. Her role as a sustainability ambassador could resonate with the shoppers it wants to reach. 

Also important to remember is that boohoo owns brands such as Debenhams, NastyGal, PrettyLittleThing and Karen Millen. The wide-ranging portfolio means it reaches a wide variety of consumers. Further acquisitions of higher-end high-street brands could result in even further diversification of customers. 

Should I buy boohoo shares now? 

The road ahead for the fast fashion industry and boohoo looks shaky. 

There were some glimmers of hope in its recent earnings, and new brand partnerships could lead to the online retailer gaining even more consumers. 

However, with the company is still under investigation by the CMA and with it being the most shorted UK stock right now, I think there are better companies to for me invest in.

Right now, I won’t be adding boohoo to my portfolio. 

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The Motley Fool UK has recommended 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.

A potential stock market crash is looming. Inflation continues to rise, a recession is imminent, and the pound has hit record lows against the dollar. 

These conditions can cause markets to be more volatile than usual. It can even result in a crash, which occurs when a major exchange falls at least 10% in a single trading day.

On the surface, a stock market crash might seem bad news, but it’s important to remember markets are cyclical and will always move up and down. That’s why I’m viewing this as an opportunity for me to add stocks to my portfolio at a lower price. 

I’m interested in adding defensive stocks to my portfolio and shares in companies that can capitalise on high energy prices. 

Let’s take a look at two of these stocks. 

On the defensive 

Defensive stocks are well-established companies in industries such as consumer staples that provide consistent earnings and stable returns, regardless of economic conditions. 

One company I think fits this description is Unilever (LSE:ULVR). Its extensive portfolio of brands and global business means that it has a regular customer base of millions of people. Regardless of economic conditions, demand for the likes of household cleaning products and personal hygiene items will continue to be consistent.

The stock has performed well recently and is up 16% in the last six months. 

It is logical to assume that some consumers may swap branded goods for cheaper alternatives as the cost-of-living rises. This switch may impact Unilever’s growth in the short term. 

Nonetheless, brand loyalty for Unilever’s products such as Marmite, Persil and Dove is strong. I believe that consumers will stick with these much-loved brands or, even if they make the switch briefly, will return to purchasing these items in the long run. 

Moving forward with renewables 

The second stock I think will perform well in the current economic climate is Greencoat UK Wind (LSE:UKW). Greencoat operates 45 wind farms across the country that generate clean electricity for UK households. 

In the past year, the stock is up over 12%. In the same time period, the FTSE 250 is down 26%.

The company announced in its half-year results that it generated net cash of £328m and is issuing a dividend of 3.86p a share. These strong results are likely a result of increasing demand for renewable energy sources given the sky-high gas prices. 

It’s important to note that maintaining wind turbines is not a cheap business. As we become more prone to extreme weather events, Greencoat could see costs increase as it tries to keep current turbines working. 

I still think Greencoat is in a strong position to capitalise on the shift from fossil fuels to renewables. The rising and sustainable dividend makes it a good income stock for my portfolio.

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Yasmin Rufo has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencoat UK Wind and 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.

Last week, easyJet (LSE:EJZ) shares tumbled to under 300p and reached a low of 280p on 28 September. Given the share price was over double that a year ago, is the stock below fair value and should I add it to my portfolio? 

The travel sector

The travel sector as a whole has improved remarkably since the start of the pandemic. Demand has increased as the ‘revenge travel’ trend means people are making up for lost trips.

Budget travel sector growth is also presenting companies with a wealth of opportunities. This is especially true for easyJet, as it is one of the industry’s leading players.

In a business update, easyJet reported that summer travel was “strong” and the company has sold 86% of tickets for Q3 2022. 

Despite these positive numbers, easyJet still made a pre-tax loss of £114m in Q3. The company also cancelled 10,000 flights across the summer months due to staff shortages, an ongoing problem.

A potential dividend stock

Another factor I’m considering is the company’s dividend. easyJet isn’t exactly known for its sustainable dividend – it cut payouts in 2019 due to higher fuel prices before axing them altogether during the pandemic – but this may change. The business expects to bring back a dividend for shareholders next autumn at 4.5p per share, representing a 1.5% dividend yield. 

Even if dividends grow in the future as the airline industry recovers, I think it would take several years for the yield to be higher than the FTSE 100 average of 4%. Therefore, I am unlikely to consider investing in the stock for passive income alone. 

easyJet’s future

I see two problems for easyjet right now. 

Firstly, inflation is pushing up costs for the airline and profit levels are impacted as a result. Costs are also increasing as fuel becomes more expensive due to the war in Ukraine. 

Secondly, the rising cost of living is likely to impact the travel industry. As people have less money to spend on non essential goods, easyJet ticket sales could slow down. 

The current share price does mean easyJet looks impressively cheap. It has a price-to-earnings (P/E) ratio of 12, far lower than competitors such as Wizz Air, which has a 74.46 P/E ratio.

Forecasts also show that easyJet will return to profit by next year. The company is expected to generate earnings per share of 38.5p and a net profit of £290m. 

Will I be investing? 

Whilst the current share price is tempting and growth opportunities seem plenty, I don’t think easyJet’s future is plain sailing. Rising costs for the company are impacting profit and, as the cost of living worsens, I’m not convinced travel demand will continue to grow at the same levels.

That’s why I won’t be adding easyJet shares to my portfolio right now. 

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Yasmin Rufo 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.

Of course, this list changes from time to time, but as Europe heads towards a recession, I’m avoiding investing in companies that are already battling declining trends. 

I’ve found three stocks that I will avoid buying at the moment. Let’s take a look at them. 

ESG nightmare

The first company I wouldn’t invest in is Imperial Brands (LSE:IMB). The British tobacco company has struggled in recent years due to increased global regulation and public health concerns on the impact of smoking. The stock is down almost 50% in the past five years. 

An increase in ESG-specific funds may also harm Imperial Brands. Investors could avoid buying shares in the company, instead opting for more sustainable corporations. 

It must be said, the company offers an enticing dividend. At 8.3%, it’s far higher than most FTSE 100 stocks, and if I was looking for passive income stocks then I may be tempted to invest. 

However, other than the dividend, I don’t think Imperial Brands offers much else. I wouldn’t be surprised if the dividend is cut in the near future as the company struggles to remain profitable. 

Increasing competition 

2022 has not been a good year for Royal Mail (LSE:RMG). The stock has experienced a large sell-off this year – it was trading close to 500p in January and is now only worth 200p. 

The company announced that, in Q1, the Royal Mail division revenue fell by 11.5%. Given declining trends in posting mail, I think the company will continue to suffer. 

On valuation terms, Royal Mail does look cheap. It has a price-to-earning (P/E) ratio of around 3.33, which is far lower than competitors such as FedEx, which has a P/E ratio of 11. 

Even though it appears cheap, I’d avoid the stock given the increasing competition from the likes of Evri and Inpost that offer similar services at competitive prices. 

Out of fashion 

The final stock I will never invest in is Boohoo (LSE:BOO). The AIM-listed fast fashion company’s stock has plummeted in the past year and is down almost 85%. 

Despite strong performance during the pandemic, growth has significantly slowed since. In the last trading quarter the company announced a 1% fall in UK sales. 

Boohoo’s diversified business model does mean that it might not be all bad news. The company already owns the likes of Karen Millen, Coast and Nasty Gal. A further string of profitable acquisitions in the near future could help the company regain some market share as it expands its target market.

The problem for me is that it’s not just declining sales affecting Boohoo shares. The constant stream of scandals and sustainability concerns continue to plague the company and drive investors away.

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Yasmin Rufo has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands 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.

My investment portfolio comprises a mix of high-growth companies and dividend stocks. The latter are those that regularly make cash payments to shareholders.

The money earned from dividends can be reinvested or used to generate a passive income. I also find them a great way to build up my long-term wealth. 

Currently, investing in an index such as the FTSE 100 or S&P 500 offers a dividend yield of just under 4% and 1.6% respectively. 

In contrast, there are a number of stocks offering impressively high dividends that I’d consider investing in to generate regular passive income. 

Let’s take a look at two stocks that have a yield of over 10%. 

Norsk Hydro 

Norsk Hydro (FRA:NOH1) is a Norwegian aluminium and renewable energy company. It currently offers a dividend of 11%. 

Despite historically having a lower yield of around 4%, Norsk Hydro recently announced an extra dividend and share buybacks, which is good news for investors.

The company operates a number of hydro electric power plants in Norway, and has a strong competitive advantage at the moment, as it can produce its own cheap source of energy whilst Europe faces sky high gas prices.

However, the company is not untouched by rising energy prices, and it has already warned of production cutbacks given how energy-intensive it is to make aluminium. Demand for aluminium may also decrease in the short term if Europe enters a recession, as industries such as construction will experience a slowdown.

As Europe continues on its decarbonisation pathway, I think the company has a good long-term advantage over competitors thanks to its continued investment in renewable energy.

Fortum 

Fortum (FRA:FOT) is a state-owned energy company and the third largest producer of carbon-free electricity in Europe. In 2020, Fortum was Finland’s largest company by revenue.  

Shareholders are currently offered a 10.3% dividend yield, one of the highest in its industry. 

The stock is down almost 60% year to date and across the last 12 months alike, and I think the current share price of €11 is a good entry point for me into such a promising company. 

One of the most immediate problems Fortum is facing is the potential nationalisation of Uniper, a German energy subsidiary that has been unprofitable for a number of years. If the German government dilutes Fortum’s share of Uniper, there may be a sharp decrease in the share price.

Nonetheless, I believe that many of Fortum’s problems are only short term. A recent €2.4bn loan from the Finnish government, as well as news that the company is exiting Russia and looking for a new buyer, makes me confident that the company will weather the current storm and come out stronger in the long run.

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Yasmin Rufo 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.

Low-level investor sentiment and current market correction makes for a great opportunity to find undervalued companies to invest in. When I’m building my portfolio, I’m looking for companies that are able to weather short-term problems such as rising inflation and ultimately produce long-term gains.

If I had £1,000 spare this September, I would invest £500 across two cheap UK shares – one in the retail industry and the other in defence. Let’s take a look at them.

Retail

British retail has had a tough time in recent years. Not only were plenty of businesses forced to shut during Covid-19, but since reopening many have struggled given the rising costs of running a business and consumers spending less due to a rise in the cost of living.

One company I think could bounce back is WH Smith (LSE: SMWH). Down just over 6% in the last year, I believe that the current price of 1,466p looks like an attractive entry point.

To see how the company might perform in the long term, I’m looking at data from the travel industry as a large part of WH Smith’s revenue comes from its airport outlets.

In June, WH Smith said the travel division was performing particularly well, so much so that full-year results are now set to be “at the higher end of analysts’ expectations”.

As international travel continues to recover, WH Smith’s airport footfall will increase and this could lead to potential expansion – something the company is already looking into after the success of its Chicago and Las Vegas airport stores.

Of course, WH Smith’s success relies on a strong global economy and is extremely dependent on the travel sector, an industry that has seen much uncertainty recently given problems such as staff shortages.

A potential decrease in winter holiday-goers could also prolong WH Smith’s recovery as its airport revenues are likely to be lower than anticipated, at least in the short term. 

Defence

The other stock I would invest £500 in is one of the UK’s largest defence contractors, QinetiQ (LSE:QQ).

The FTSE 250 stock is up 23.16% year to date, partly driven by the increase in military spending following Russia’s invasion of Ukraine.

I believe the stock could go up further in the coming years given the new Prime Minister’s pledge to increase defence spending to total 3% of GDP by 2030. Other countries such as those that are NATO members may increase spending in this area given growing geopolitical tensions and threats.

QinetiQ reported strong Q1 earnings recently. It has a cash position of £225m, and during its results the company said it predicts “mid-single digit organic revenue growth”, which is impressively high for a UK company in this sector.

73% of QinetiQ’s revenue comes from the UK government, meaning the company is over-reliant on the government’s funding and contracts. If defence spending is cut in coming years, which is a possibility given the current economic climate, then the stock may not see the current growth levels it predicts.

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Yasmin Rufo 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.

As well as holding stocks and shares that I actively trade in my portfolio, I also own a number of dividend shares that provide me with a passive income.

Given the market uncertainty at the moment, I think dividend stocks are a great way of diversifying my portfolio. I can use these dividend earnings as a supplementary income or as more money to reinvest in stocks.

Most FTSE 100 companies offer a dividend yield, an amount of money companies pays to shareholders for holding its shares. The average FTSE 100 dividend yield is around 4%, but there are companies in the composite that offer far higher amounts.

Here are the two stocks that I’d buy today if I wanted to increase my levels of passive income.

Persimmon

Persimmon (LSE:PSN) is one of the largest housebuilders in the UK and has a market value of £4.6bn. Currently, the company offers a very attractive dividend yield of 16%. With inflation forecast to reach 11% by October, this is one of the only FTSE 100 stocks that offers double-digit yields and beats consumer price inflation.

Persimmon has already had a hard year and, given the rising threat of a recession, it could struggle even further as the market for buying and selling houses dries up. The company is still dealing with supply chain problems and securing the necessary labour to work on building new developments.

Nonetheless, in the long run Persimmon could recover well, particularly if house prices in the UK continue to rise. The company is also 75% forward sold for this year. Given the drop in the price of shares recently, I think now is a good time to add the company to my portfolio.

Rio Tinto

Another FTSE 100 company that offers a high dividend yield is the world’s second largest mining and metals company, Rio Tinto (LSE:RIO). Its annual dividend yield for 2022 sits at 10.46%, slightly above current inflation levels.

It’s important to note that Rio Tinto’s earnings, and therefore dividend yield, are closely linked to the price of commodities it produces. With over 50% of Rio Tinto’s revenues in 2021 coming from iron ore, the company’s profits may suffer if the price of the commodity was to fall.

Even if the stock does struggle in the short term, the company still pays a dividend yield of over 2.5 times that of the FTSE 100.

In the long run, I feel positive about the stock’s performance. Themes of green technology and increased urbanisation rates are likely to drive demand for commodities. There are also ongoing infrastructure projects in developing economies that require a high level of steel. As well as this, Rio Tinto has committed to producing 2.3m tonnes of lithium – a material found in electric vehicle battery production – which has a rising demand level.

I believe that all of these factors could have a positive effect on Rio Tinto’s share price. This may result in an even higher dividend yield being paid out in the coming years. I will look to buy shares in the company soon.

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Yasmin Rufo 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.

Travel

During the pandemic, all stocks related to travel took a massive hit as demand plummeted. Yet, most travel companies and airlines have recovered well, and that’s particularly the case for British Airways owner IAG (LSE:IAG).

The company’s recent H1 results were particularly positive. Notable successes included Q2 being the first profitable quarter since the beginning of the pandemic. IAG also reduced its debt and is expecting a 78% capacity compared to 2019 levels.

Of course, there are still challenging times ahead as the company must compete with low-cost airlines such as Ryanair and easyJet. The share price has somewhat recovered from its lows in October 2020, but it’s still lower than its pre-pandemic trading levels.

Nonetheless, as business and personal travel continues to rise, I think IAG has a lot of potential to provide long-term gains.

Banking

Inflation in the UK is currently over 10%, which is a 40-year high for the country. With rising inflation comes an increase in interest rates from banks, and the rate is set at 1.75% right now.

A rise in interest rates is particularly beneficial for banking sector stocks, as the likes of Barclays (LSE:BARC) can charge more for products such as mortgages and loans.

Certainly, there’s a level at which high rates deter people from borrowing as they don’t have the ability to pay it back. If interest rates reach considerably higher levels, banks may start to see a reduction in customers, but I believe we are still a way off from that.

Barclay’s share price is up over 11% in the past six months and is still the cheapest bank on the FTSE 100. The company has a P/E ratio of five, compared to competitors such as HSBC that has a 9.13 P/E ratio.

Telecommunications

A stock that offers both a decent chance of performing well and has an impressive dividend yield is Vodafone (LSE:VOD).

During recessions, telecom stocks tend to remain stable and can withstand external pressures. The company also has an impressive dividend yield of 5.9% for this year, which is far higher than the FTSE 100 average of 4%. Vodafone has also set its 2024 yield to 6%.

Although the share price has been pretty flat recently, only down 2.41% year to date, I think this could change soon thanks to increasing roll-out of 5G and broadband. However, it is important to note that telecom companies like Vodafone require extremely large amounts of capital to grow and invest in new technologies, so this may dampen the company’s performance in the short term.

On the whole, analysts seem positive about the stock — there’s a consensus Buy rating, and Morgan Stanley analysts believe the shares could reach 180p. That represents a 60% upside.

Overall, if I had a spare £500 I would split my money across IAG, Barclays and Vodafone, as I believe all will pay off in the long term.

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Yasmin Rufo has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, HSBC Holdings, and Vodafone. 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 metaverse appears to have taken investors by storm and is being called the next tech revolution by the likes of ARK Investment’s Cathie Woods, who sees it as a “multi trillion-dollar opportunity”. To profit from this tech revolution, here are the three metaverse stocks I’m buying now.

The metaverse

The metaverse is a virtual reality world in which interactions and experiences take place as they would in the real world. I believe the infiniteness of the metaverse, allowing companies from every sector to adapt and participate in this digital space, makes it a great investing opportunity. That’s why I am adding the following three hot stocks to my portfolio right now: Meta Platforms (NASDAQ:FB), Nvidia (NASDAQ:NVDA) and Autodesk (NASDAQ:ADSK).

Meta Platforms

In a signal to show its commitment to the development of the metaverse, Meta Platforms changed its name back in October from Facebook, and is now leading this trend in investing.

The appeal of this stock is the head start Meta Platforms has over its competitors and its ability to leverage its highly successful and all-encompassing social media platforms to engage users in these new virtual reality worlds.

Hopefully the company’s rebrand and shifted focus will help distance it from the flurry of recent negative press it received following damning testimonies from whistle-blower Francis Haugen. Further similar bad press could spook investors in the short term and result in sharp price drops, something that I will have to keep in mind.

Nvidia

The second stock I’m acquiring is Nvidia, the well-established manufacturer of graphic processing units (GPUs) used in the gaming industry. I think this stock will be vital to the growth of the metaverse as it provides the necessary processing power that the metaverse will need to run successfully.

However, Nvidia’s success hasn’t gone unnoticed and the stock has gained strong momentum over the past year, up 83% YTD. This is in addition to its extremely high P/E ratio of a whopping 84, far higher than its peers. Even though I think the company has room for further growth as the metaverse booms, this high valuation is something I will be watching closely.  

Autodesk

The final metaverse-orientated stock that I’ll be adding to my portfolio is cloud software company, Autodesk.

Unlike Meta Platforms and Nvidia, which have clearly positioned themselves in the metaverse, Autodesk is yet to be so vocal on its developments. Therefore, for some investors it could be worth waiting to hear about the company’s expansion plans before investing.

However, with expertise in 3D design and software — which will be instrumental to building a virtual reality world — I think it’s a no-brainer for me to buy the stock now. The company is also well backed by the analysts who have given the company an average price target of $340, representing a 32% increase from its latest share price of $257.

Takeaway

Although equity markets in 2022 have gotten off to a shaky start with tech stock suffering, I believe that the metaverse is a trend that’s here to stay for the long term and these stocks will form a key part of my portfolio going forward.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Yasmin Rufo has no position in any of the shares mentioned. The Motley Fool UK has recommended Autodesk. 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.

With just £500, here are the top three FTSE 100 stocks and shares I think offer great potential in 2022 and could help me generate a decent return despite ongoing uncertainty in equity markets.

As the impact of increasing global inflation continues to reduce the real value of savings, I believe there is no better time to invest my spare cash. These three stocks will help me create a diversified portfolio in which I can earn dividends and grow my capital at the same time.

Income stock

There are a number of FTSE 100 companies offering strong and steady dividends but my personal favourite is BP (LSE:BP). With a consistent dividend and a yield of 5% backed by strong cashflows, BP seems like a safe bet for me as an income investor. Recent comments from BP management also support this, as they have promised to offer share buybacks in 2022 if profits continue to rise.

Of course, there are risks attached to BP’s share price. The cyclical nature of the company, coupled with the uncertainty of BP’s position in the global energy transition, means investors have been wary of this stock. However, the company’s sustainability investment pledges and its diversification away from pure oil and gas is promising. Although the stock is still 20% down on pre-pandemic levels, I think 2022 could see the shares climb significantly.

Long-term stock

As a long-term investment, I am looking to acquire shares in insurance group, Prudential (LSE:PRU). With rising global inflation, I believe the current low interest rate environment is likely to change in coming years. Although there are lots of financial companies that will benefit from rising interest rates, I particularly like Prudential for two reasons.

Firstly, compared to typical bank stocks, Prudential is less impacted by the growth in FinTech, which is heavily disrupting the traditional banking sector. Secondly, Prudential’s demerger from its US business in September has helped streamline the business and focus its investments specifically in Africa and Asia — two continents that may provide strong growth in years to come. However, this growth may take time to be realised given the ongoing Covid-19 pandemic and low vaccination rates in these continents.  

Value stock

A value stock that has recently caught my eye is Rio Tinto (LSE:RIO), which I believe could do particularly well in 2022. The share price currently looks very cheap with a price-to-earnings ratio of 5.66. This is considerably lower than the average UK metals and mining industry P/E ratio of 7.9. Rio Tinto also has a current dividend yield for 2021 of 11.37%, far higher than the average FTSE 100 yield of just over 4%. I think this makes the company a great value and dividend stock. 

Rio Tinto’s recent diversification into lithium, following a purchase of a lithium mine in Argentina, should help push the share price up in the next few years as it accelerates its investment into this growing sector. Despite this diversification, Rio Tinto may struggle in coming months due to declining ore prices, from which 80% of its profits are generated.  

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Yasmin Rufo does not have a position in any of the companies 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.