Taking a quick look at International Consolidated Airlines Group‘s (LSE: IAG) share price lately, I’m beginning to spot some turbulence. Despite these blips on the radar though, this Anglo-Spanish airline holding company is up this year. As of 26 May, it is trading at around 202p, up an impressive 27% from 159p a year ago.

As an investor looking for a less volatile travel play, IAG shares might be just the ticket. Having seen its stock price crash land in February 2020 from an all-time high of 457p, could it still have plenty of runway to go?

Looking at IAG’s financials

IAG shares were the worst-performing in the FTSE 100 in 2020, and they tend to perform badly when the Footsie does.

It’s also no secret that money is tight as air travel remains restricted. In Q1 this year, IAG reported a net loss of €1.7bn. However, these losses were down almost 37% from Q1 2020. IAG’s liquidity also remains at an impressive €10.5bn, a slight increase from the same time last year. This is due to bond issuances, revolving credit facilities, and reduced costs. 

But there’s no ignoring the elephant in the room. Passenger capacity is running at 20% of 2019 levels. IAG is also anticipating a figure of 25% for the second quarter of the year.

IAG’s share price potential

Although airlines remain crippled, IAG can take some solace from a number of positives. Its cargo operations improved by 35% quarter-on-quarter, taking in revenues of €350m. Though this is but a small dent in the grand scheme of things, it’s an improvement nonetheless. What’s more, IAG has been investing in making its fleet more efficient. By dumping older plane models such as 747s, it could make profitability easier in the future. 

Also, as things stand, we are in the end game of this pandemic — touch wood. Vaccinations are proceeding in the UK at a rapid rate, with Europe beginning to catch up. This has led to a rapid reopening of the economy, with air travel returning across the globe. As one of the largest airline groups in the world by passengers carried, the only way is up from here — barring any renewed lockdowns. 

Risks to IAG shares

There are, unfortunately, too many risks to choose from to put them all down here. Even at the best of times, the aviation industry is a challenging one for investors. Volatile fuel costs, industrial action, geopolitical tensions, terrorism and the usual economic cycle are all headwinds.

What’s more, IAG’s stock price may suffer in the future thanks to its ever-increasing debt. By the end of March, net debt stood at €11.5bn, up 18% from last year. With air travel not expected to return to pre-pandemic levels until at least 2024, it will be hard for IAG to generate enough profit to actually pay this back before too much interest accrues. 

So, is IAG a buy?

Is IAG a buy? This is a genuinely tough one for me. On the one hand, I am a big fan of IAG; I believe it has weathered the pandemic well and that it is still cheap compared to all-time highs. However, its rising debt levels and the uncertainty around air travel just make it too much of a risk for my portfolio right now.

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Jamie Adams has no position in IAG. 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 a long-term investor, the weekend is always a great chance for me to turn off and ignore market noise. It is much easier than on some volatile weekdays when I’m tempted to check up on the FTSE 100 and my portfolio for movement. 

Luckily, with the long weekend on its way, I get an extra day to reflect on my portfolio without market movement distracting me. And this weekend, I’ll be deep-diving into these two companies to see if I should buy shares. 

Diageo

Diageo (LSE: DGE) has long been one of my favourite holdings — and it’s not just because it owns Guinness. The FTSE 100 share is a strong business that owns some of the most well-known brands on the planet. In the past 12 months, Diageo’s share price has risen more than 18%, from 2,860p to 3,390p today. 

There are a number of reasons why I would consider increasing my position in Diageo. As summer rolls in, I’m getting more bullish on Diageo’s position among reopening stocks. Having taken a hit last year as Covid-19 shut restaurants and bars, it has since shown remarkable resilience. Home consumption saw first-half 2021 sales increase 0.9%, including a 10% rise in the UK. This allowed Diageo to maintain a strong £1.58bn profit year-on-year. Now, with vaccinations rolling out and the economy reopening, the company expects operating profit growth to increase by at least 14% this year. 

My biggest worry when it comes to Diageo is its rising net debt, which sits at almost £15bn as of December 2020. Should interest rates rise, it could cause the company a headache and reduce its ability to return shareholder value. 

Despite this, Diageo remains one of the strongest brands in the world. As life returns to normal and people look to have a good time, I’m thinking that there’s still a lot of potential for its share price. 

Vodafone 

I’m moving away from alcohol and over to telecommunications for my next stock pick. Vodafone Group (LSE: VOD) has been on my portfolio shortlist for years, but I’ve never taken the plunge. Despite being a top FTSE 100 income stock, I always felt it was too expensive for me. 

The leading British telecom giant has seen its share price remain flat in the past 12 months — albeit with some dips and surges in between. At 129p a year ago, now sitting at roughly 128p, there has been little to write home about. 

However, Vodafone’s share price fell 10% last week thanks to investor skittishness following its quarterly earnings report. I, for one, actually found the company’s plans quite exciting. CEO Nick Read outlined the company’s plan to invest heavily in its network amid the 5G boom. Despite this resulting in short-term cash burn, I am excited that the company is so open about self-investment. Covid-19 has accelerated global digitisation greatly, meaning demand for the pipes that run the broadband system will grow enormously. 

But that doesn’t eliminate the business’s already massive debt pile, which sat at nearly £40bn at the tail end of 2020. This will only be made more worrisome by the company’s 2.6% revenue deficit in 2020. 

However, its forward-thinking plans have got me excited, while Vodafone’s recent price drop makes it a more enticing investment opportunity for me.

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Jamie Adams owns shares in Diageo. The Motley Fool UK has recommended Diageo. 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.

However, in the past 12 months, the Cineworld stock price has risen 50% from 57p. I’m always looking for cheap shares that can diversify my portfolio. Is Cineworld actually on the rise as Britain reopens, or is it too risky for my portfolio?

A quick glance at Cineworld’s financial situation

Let’s be honest, the cinema industry did not need Covid-19 to put it in a bad position. The sector was already in decline, and the pandemic simply worsened a bad situation. This was reflected in Cineworld’s poor 2020 performance. 

Last year, revenue plunged 80.6% to £852m from £4.3bn in 2019, while losses mounted to a whopping £2.2bn. To keep itself from going completely under, some £810m of new debt was raised. More debt has since been raised, bringing its total to around £6bn.

Cineworld’s share price potential

It’s tough to talk about potential when I see a debt pile that big. The one saving grace that Cineworld has right now is that its UK branches reopened today, 19 May. Having already reopened many of its locations in the US last month, this ‘homecoming’ could go a long way towards recovery. 

Following the success of films such as Godzilla vs Kong in the US, similar expectations have been placed in the UK. Investors will be hoping that pent-up demand for moviegoing after more than a year in lockdown will see plenty of bums on seats. 

It is also my belief that Cineworld could enjoy a Darwinian post-pandemic survival. While many cinema chains will not survive this pandemic, Cineworld could mop up the market share left behind by these closures. 

My concerns about Cineworld’s share price

There are already rumours circulating of the increased severity of the Indian Covid variant. We have already seen in cities such as Glasgow that Cineworld has been prevented from reopening over fears of rising cases. This situation could swiftly escalate, causing more cinemas to close once again.

And even with a reopening, success wouldn’t be guaranteed. Before its March 2020 drop (when it sat at 182p), Cineworld’s share price was already 44% off its 2017 all-time highs of 325p. Streaming has been disrupting the cinema industry for years. 

Even returning to profitability may not be enough for Cineworld to pay off its debt faster than interest accrues at such enormous amounts. 

So, should I invest in Cineworld?

There is a reason that Cineworld is such a heavily shorted stock — so few investors believe it can stage a comeback. I don’t hold out much hope for the cinema industry as a whole, or Cineworld. With such massive debt as well as the looming threat of more lockdowns, it’s a no from me.

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Jamie Adams has no position in Cineworld Group. 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 a value investor, this recent jump has attracted my attention. I’m always looking for cheap shares that can diversify my portfolio, but I need to understand first if BT’s stock surge will likely continue.

Looking at BT’s financials

Like most businesses and individuals, 2020/21 has been tough for BT due to Covid-19. Rising costs related to the pandemic as well as fibre investments have hit BT’s bottom line. This was evident in its results for the year ending 31 March 2021. 

Revenue fell 7% year-on-year (YoY) to £21.3bn due to these increased costs, pre-tax profit plummeted 23% to £1.8bn, and free cash flow slumped by 27% to £1.46bn. 

It’s important to note though that much of this expenditure was necessary for growth. By investing heavily in full-fibre connections, BT is ensuring that it can keep up with the latest broadband offerings. That’s why management warned investors of further investment to come in 2021.

BT’s share price potential

BT appears to be making some brave decisions in relation to its media business lately. Having dived head-on into television media in recent years, BT is now considering the sale of BT Sports. Talks have apparently been held with mega-companies such as Walt Disney and Amazon, although it is still early days. 

With a rumoured £12bn price tag on its sports offering, the sale could provide BT with a much-needed financial breather. The timing would be perfect too. The telecom leader is fully engaged in its capital-intensive project to roll out a large fibre optics network in the UK, to provide 25m households across the country access to high-speed Internet.

By reducing its exposure in the media sector, where it does not have much scale for growth, and increasing its efforts in the telecom industry, where it is a leader, BT could reduce losses and increase income. 

Risks to BT shares

With roughly £18bn in debt, BT’s balance sheet is not the healthiest looking. Annual interest payment are nearly £800m. If this problem persists, it will have an impact on the business’s ability to grow.

If BT fails to find a solution to the money drain that is its sports division, these problems will only mount.

So, is BT Group a buy?

While there is never a guarantee of more to come for BT’s share price, I am cautiously optimistic. The company is clearly intent on getting back to what it does best: telecommunications. With 5G now firmly in the picture and BT’s dominance in the British market, where it holds an estimated 35% market share, a turnaround could well be on the cards.

I’ll be keeping an eye on BT’s share price over the coming months. If it manages to offload BT Sports, I will seriously consider investing.

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Jamie Adams has no position in BT Group. 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.

A look at Superdry’s financials

Financially, it was not the most successful year in Superdry’s history, leading some to speculate on whether its nascent recovery would continue or not. Releasing a trading statement for the financial year to 24 April last week, we saw how its performance was it hard. Revenue fell 21% year-on-year (YoY) from £704m to £557m. Store-generated revenue took the brunt of this, falling 51% from £287m to £141m, due to obvious, Covid-related, reasons. 

However, most retailers suffered in the past year and Superdry still had its e-commerce card to play. Online retail sales grew 34% to £203m, from £152m a year ago.

CEO Julian Dunkerton was impressed with this e-commerce performance, saying the strengthened e-commerce presence helped mitigate the impact from enforced store closures.

He also said the firm returned to revenue growth in Q4 — which was an important development — and its full-price stance over the period meant a “significant online margin improvement”. 

And of course, revenue generated through online retail will be supplemented by the reopening of stores nationwide as lockdown easing continues. 

Superdry’s share price performance

Last Thursday, Superdry stock soared 16% following its update for FY21. With revenue falling, I could be asking myself why?

Well, as explained above, e-commerce holds a lot of promise for the company, as does the ongoing economic reopening. What’s more, Q4 2021 was a promising preview of what that economic reopening means for the business moving forward. Group revenue for Q4 increased by 0.8% to £118m, with a 26.6% rise in e-commerce sales and a 13.5% rise in wholesale offsetting a 51.5% drop in store sales. 

And despite its dramatic full-year drops in revenue, company liquidity remained strong. Net cash came in at £39.4m vs £36.7m in the previous year.

My biggest concern about Superdry’s share price

Fashion is a tough industry and product missteps can devastate sales. The rise of pure-play online retailers, such as ASOS, has provided Superdry with stiff competition. This has also posed a threat to the power of its brand, which is not quite what it used to be, in my opinion. Should Superdry be unable to buck its current long-term downward trend, it may have further to fall. 

Growth potential

Yet I have been very impressed with Superdry’s ability to get through Covid-19 and remain liquid. Despite such heavy revenue losses, the fact that it can maintain positive cash flow and boost its online segment presents a lot of hope for its long-term potential. 

And with Superdry’s share price currently just a fraction of its five-year-high (2,074p in January 2018), I believe its potential to return to those heights would make it a worthy investment for me if I had £1,000. 

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Jamie Adams holds no position in Superdry. 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.

When I saw the recent results of retailer Superdry, I wanted to find more long-term buy-and-hold opportunities in the clothing retail sector. I looked at JD Sports (LSE: JD) and Next (LSE: NXT). 

JD Sports Fashion

When it comes to British leaders in sports fashion, JD Sports is up there. This FTSE 100 retail stock has been — like the rest of the retail sector globally — undergoing a significant shift to omnichannel, while its share price has jumped almost 70% in the past year, from 539p to 916p.

Impressively, despite the widespread closure of its physical locations, JD Sports made an enviable pre-tax profit of £421.3m in 2020 — down just 5% year-on-year (YoY). What’s more, rapid e-commerce growth helped overall revenue increase 1% YoY to £6.16bn. 

I am very excited by the prospect of store reopenings, which should further boost JD Sports’ income stream. The FTSE 100 member has already proven that it can be a dual-front e-commerce/brick-and-mortar revenue-generating machine. This could grow even more thanks to international growth, with 55% of total sales now coming from both mainland Europe and the US.  

A couple of things concern me though. The sports fashion industry is hugely competitive, and in order to expand internationally, as it has been doing, it will need to spend more money. This could lead to overstretched resources if JD is not careful. Another concern is the rumours that long-time executive chairman/CEO Peter Cowgill may be stepping down from day-to-day control and handing over to a new CEO. This could cause some short-term volatility as is common following upper management shake-ups.

I’m still very bullish on this retailer, and at around 916p now, I believe it still has some runway for growth as the economy reopens. 

Next

Considered to be one of the top UK reopening stocks to buy, the Next share price is on the rise. In the past year, the British retail firm has risen more than 70% from 4,796p to 8,320p. 

This top FTSE 100 retailer, like JD Sports, fared well in 2020, despite the pandemic. While its stores were closed, online sales surged, which saw revenue fall just 17% from £4.27bn to £3.53bn. What’s more, it managed to retain a pre-tax profit of £342m, despite increased Covid-19 costs. 

Next’s management’s bullish forecast for the coming year. It recently raised its central guidance for a full-year profit before tax by £20m to £720m. In fact, according to its first-quarter results, Next is already back to pre-pandemic levels of business, with a comprehensive expansion policy in place. This includes standalone premium beauty stores, deals with Laura Ashley and Victoria’s secret, more third-party brands added to its Label offer, and growing its e-commerce solution for external businesses.

Much like JD though, Next operates in a massively competitive market. It will need to invest heavily in its marketing and online retail just to stay ahead of the competition, all of which will impact its ability to generate meaningful profits.  

I am still bullish about Next though, and its brand power, which has seen it rise to the top of its market and remain in the FTSE 100.

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Jamie Adams holds no position in any companies mentioned above. The Motley Fool UK owns shares of Next. 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.

In fact, shares in Lloyds have risen almost 60% in the past year, from 30p to 48p. With that in mind, it’s still one of the first banking stocks I’d buy right now.

Lloyds Banking Group’s financials

Lloyds Banking Group is the archetypal high street bank. It makes its money through retail and commercial banking, investments, and long-term savings, like most of its competitors.

Why am I so bullish about it though? After all, Lloyds had a poor 2020. Profits fell 70% year-on-year to £1.2bn due to ultra-low interest rates and lower spending — just two of the many consequences of Covid-19.

But there was a lot to be optimistic about. For the quarter ending September 30 2020, Lloyds held more than £200bn in reserves, a 30% increase year-on-year. Its tier 1 capital ratio — the ratio of Lloyds’ total equity capital to its total risk-weighted assets — was a healthy 15.2% at the end of its last fiscal year.

A rising Lloyds share price 

At its Q1 earnings call in late April, profits were well above estimates. Underlying profits hit £2.1bn, well above the £74m it reported in the same period last year when loan loss charges almost wiped out earnings.

Lloyds also showed its confidence by releasing £323m from a cash pile that was originally intended to cover bad debts in Q1 this year. This was a stark contrast to the £1.4bn charge it took in Q1 2020 and signals subtle confidence that the UK economy will recover well amid ongoing vaccination success.

Not only that, but these are all strong signs that Lloyds is returning to some kind of pre-Covid normality. I also believe that pent-up wanderlust will lead to a rise in holiday and other loans as the British public seeks to truly shake off the shackles of lockdown. 

Risks to Lloyds’ share price

But while the bank’s close-knit relationship with the UK economy is positive for now, that could quickly turn. The global economy as a whole has been devastated by Covid-19, with the recovery expected to be long and arduous. The UK is no exception, and should there be a wave of vaccine-resistant Covid-19, then Lloyds could be back with the issues it faced in 2020. 

What’s more, uncertainties around whether the company will pay a dividend in 2021 are still fresh in investors’ minds. Due to Covid-related Bank of England regulations, the company was forced to set an ex-dividend date (the day on which all shares bought no longer come with the right to be paid) of April 15, with a final payment to come on 25 May. However, as soon as these restrictions are lifted, Lloyds has stated its intention to resume its pre-Covid dividend policy. The only question now is ‘when’ this will happen.

Lloyds’ growth potential

Lloyds is still among the top banks in the UK. It has come through a tough 2020 with plans to expand its small business offering as well as its focus on larger corporate clients. This will reduce its overexposure to loans and interest rates, and could create new avenues to grow profits. I believe that it is an exciting time to buy shares in this bank.

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Jamie Adams has no position in Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking 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.

With that in mind, I’m looking into two top ESG plays for me, Coca-Cola HBC (LSE: CCH) and GlaxoSmithKline (LSE: GSK). 

Coca-Cola HBC

This Switzerland-based bottler of the Coca-Cola product and its ESG rating have me asking myself if I should invest. 

It has consistently ranked at the top of the FTSE4GOOD Index series since its inception in 2000. This is due to its advancements in working with recycled materials. By 2025 it plans to be using 50% recycled PET (the type of plastic it uses for packaging) in its European operations and 30% across the company as a whole.

Due to the pandemic, sales fell 12.7% to €6.1bn in 2020, but things are looking up. As vaccinations continue across the world, I’m growing more bullish on the stock and its recovery. In a recent statement, the company said: “We expect to see a strong FX-neutral revenue recovery in 2021”. This has led analysts to provide expectations of revenue growth of 8.3% and 6.7% for FY21 and FY22, respectively.

There is still the risk of renewed Covid-19 cases though, which would throw a spanner in the works of any recovery. Considering the rapidly growing infection rates across major European countries, it’s very possible that business could take another hit. 

The Coca-Cola HBC price is currently 2,488p, up 27% in the past year from a price of 1,952p, and giving it a price-to-earnings ratio of 25. Should the current speed of economic reopening continue, I will be more confident to invest in Coca-Cola HBC as the risk of re-closure reduces.

GlaxoSmithKline

As far as ethical investing goes, you probably weren’t thinking of one of the FTSE 100’s top pharma stocks. However, GlaxoSmithKline has proven to be an ESG leader thanks to its work in providing access to medicine. 

The pharma giant, whom activist firm Elliot Management recently took a large stake in, is ranked highest in the Access to Medicine Index. This index measures Big Pharma’s efforts to make its products available to more vulnerable populations. What’s more, this top British firm has promised to have a net-zero environmental impact by 2030. 

And although GlaxoSmithKline missed out on 2020’s pharma rally, I believe it could be on the up. New pharmaceutical sales rose 12% to £2.5bn in Q3, accounting for 30% of all revenue. It also remained very profitable, with an operating margin of 22%. It is the sixth-largest pharma company in the world with a strong brand and dedicated workforce.

Unfortunately, its planned corporate restructuring and dividend reduction could spell volatility for its share price. By reducing its dividend for the first time in 15 years and welcoming a heavy-hitter such as Elliot Management on board, it could be too much, too fast. 

GlaxoSmithKline is currently priced at 1,333p, down 20% in the past year from a price of 1,668p, and giving it a P/E ratio of 13. As it is still well off its all-time highs, I would be interested in it as a long-term dividend payer. 

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Jamie Adams holds no position in stocks mentioned above. The Motley Fool UK has recommended GlaxoSmithKline. 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, past performance is not an indication of future results, but I’m still excited about what’s next for this interesting crypto play.

A look at Argo Blockchain’s financials

First, you might be wondering how exactly Argo makes money? The popular blockchain uses massive banks of computers to mine large amounts of cryptocurrency. It then sells this mined currency for fiat money. With cryptocurrency’s popularity on the rise, as evidenced by Coinbase‘s recent direct listing in the US, I’m excited to buy this stock. 

As for its current financials, in early April, Argo released a very promising operational update. This top stock to buy had successfully mined 165 Bitcoin and equivalents. This represented a 28% increase over the previous month, and brought its total holdings to £6.57m. What’s more, due to the low-cost nature of the company’s operating expenses, roughly 84% of this revenue was pure profit.

Why is Argo’s price so volatile?

But why do Argo shares seem so volatile? Having tripled this year, they’ve also dipped at times. Argo Blockchain’s entire revenue stream is based solely on the cryptocurrency market and its largest asset, Bitcoin. In fact, the two are so intrinsically linked, that it’s hard to look past the fact that by investing in Argo, I am essentially investing in the performance of the hugely volatile crypto market. 

However, I choose to look at this as a positive, as I am a fan of Bitcoin. Although Argo is linked to the crypto market as a whole, Bitcoin is the biggest player. The bullish arguments for both are one and the same. Although that is a point of concern for many, for those investing in Bitcoin, it’s a positive.

Of course, my optimism could be misplaced, and should the crypto market collapse, my Argo investment will fall with it.

My biggest concerns about Argo Blockchain’s share price

Cryptocurrencies appear to be getting banned by state governments left and right. In 2021 alone, both Turkey and India (one of the largest markets in the world) outright banned all things crypto. They join a growing group that also includes the world’s fastest-growing economy, China, along with Saudi Arabia, Bolivia, and more. 

Much of these states’ concerns derive from the lack of regulation surrounding the currency, upon which Argo Blockchain relies. We’ve got a long road ahead of us before cryptocurrencies will be embraced as a major global new asset class. Prices could still plummet as they have in the past.

Growth potential

But despite bans, its popularity is growing elsewhere, particularly in the US. With Tesla, Square, and more taking stakes in Bitcoin, it is becoming more and more mainstream. Tesla even allows customers to purchase its vehicles now using Bitcoin. This is why I’m all the more excited about Argo’s plans to open a state-of-the-art mining facility in Texas.

By exposing itself to the US market with a top-range facility, it is opening up a whole new world of growth for itself. If I could only buy one crypto stock right now, it would be Argo Blockchain. 

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Jamie Adams has no position in Argo Blockchain. 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.

Auto Trader

First up is Auto Trader (LSE: AUTO). I already own shares in this digital car sales business. However, I like where it’s going and want to increase my position. 

In the past year, Auto Trader’s stock price has risen approximately 25%, from 450p to 565p. While it clearly dominates the car advertising space, it also stands to reap the benefits of a booming industry. This is evidenced in the 39% week-on-week increase in online traffic that Auto Trader experienced when car showrooms reopened across the UK this month. It looks like this British share could return to pre-pandemic levels sooner than expected. 

However, my one concern is that this boom may be short-lived. A societal move to working from home will have reduced many consumers’ need for cars. Less commuting means less need for transport, and after the economic hit the world has taken, perhaps a vehicle is just one more expenditure that can be cut.

Despite this, I’m still bullish on Auto Trader as the economy reopens. I believe that this top UK share is large enough to see out any downturns and continue to grow.

Pets at Home Group

The pandemic has turned Pets at Home (LSE: PETS) into a real growth possibility for me. 

In the past 12 months, Pet at Home’s share price has jumped 80% from 244p to 439p. It has benefited from Covid-19 as a total of 3.2 million households in the UK acquired a pet since the start of the pandemic. The BBC even reported a pet food shortage across supermarkets last month! 

PETS’ retail stores generate almost 90% of total revenue, with more than half of that from pet food sales alone. And despite Covid-19 related restrictions, revenue has continued to grow by 17.5%.

I have one very real concern about the company’s lack of distribution centres. It only has two of them, serving the north and south of Britain. If a disaster were to occur at only one of these sites, it would cause massive supply issues and cost a huge chunk of revenue.

However, I’m optimistic about PETS and believe that it will benefit from a generational move towards higher pet ownership and interest in pet wellness.

Saga

Things look promising for Saga (LSE: SAGA) too, I feel. Saga shares have risen more than 60% in the past year, from 221p to 357p.

With vaccinations underway, the travel and insurance group’s core customer base of over-50s — who are typically loyal and have more money to spend — are spending again. Following a dismal 2020 due to Covid-19, cruise bookings have risen 20%, indicating a pent-up demand for travel. For 2021/22 and 2022/23, it has £154m of total cruise bookings, up from £128m year-on-year. 

I do worry about the company’s growing debt though. As of January 31, the company had long-term debt of around £820m on its balance sheet versus equity of £681m. This adds risk to the investment case, particularly given uncertainty in relation to the travel division.

The optimist in me truly believes that over-50s travel will be a huge market following lockdown, however. Saga could be a risky but profitable investment for me right now.

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Jamie Adams owns shares of Auto Trader. The Motley Fool UK has recommended Auto Trader. 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.