This new year can offer a fresh start, particularly for those who haven’t yet started investing. Stock-picking can potentially give investors a source of passive income (through dividends) and also deliver strong capital gains. The stock I outline in this article offers both in my opinion.

Getting started 

With the markets having bounced back hard from the March 2020 lows, it may appear to be the wrong time to start investing into equities. Even though the FTSE 250 is nearing pre-Covid levels and the US market has broken all-time highs, the FTSE 100 still appears very undervalued. I believe there is plenty of opportunity out there, even though there are also more risks as well. 

Whilst it is always important for any investor to get diversification in their portfolio, I believe it is also important to get exposure to stock picking and individual equities too. Diversification can be achieved through buying Exchange Traded Funds (ETFs), which are baskets of shares that follow specific market indices. These are generally known to be a lower-risk option than investing in individual equities. However, I also believe many equities in the FTSE 100 offer low risk at current levels, one of these being BT Group (LSE:BT-A).

BT Group

BT Group’s share price has been declining for many years. At its highest point back in 2000, BT shares surpassed £10 during the dot-com bubble; now they stand at just £1.35. 

A lot of the FTSE 100 company’s poor performance can be attributed to the prolonged mismanagement of operations. BT has, for a long time, had a near monopoly on broadband across Britain, but did not use this to its advantage and other entrants have grown market share. 

Instead of investing heavily into new fast fibre and onboarding customers for the long run, BT turned towards multi-billion pound TV sports deals and international partnerships, neither of which has arguably paid off to date.  

The future opportunity 

Now, with sentiment low, there is a turnaround opportunity in BT shares. The company still remains a cash cow delivering an operating profit of £3.5 billion for 2020, leaving BT with a lucrative P/E of just 5x. Whilst BT’s debt pile is sizable at £27 billion, the company has 4x coverage on the interest bill through its operating profit, so this debt is more than manageable.

With the world becoming increasingly integrated and demand for broadband services booming, I believe BT is one of the most promising FTSE 100 shares. BT’s recent move to plough £12 billion into rolling out fibre in the UK should put the company in good stead to reduce debt and improve cash flows. Whilst no dividend was paid at 2020 year end due to Covid-19 headwinds, I am confident dividends will return as cash generation improves going forward. As a result, BT is an investment I would consider if I was new to investing.

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Noah Riley holds 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.

The market has been split recently, with many investors advocating buying into growth shares and others arguing that value shares offer the best long-term potential. This has created significant uncertainty surrounding the future of the market. I have identified two FTSE 250 companies that I think tick both the growth and value boxes, and am considering for my own portfolio.

Cranswick offers a good opportunity  

FTSE 250 food producer Cranswick (LSE: CWK) has had a relatively stagnant year compared to its long-term history of growth. This price consolidation could offer an excellent entry point in my opinion.

Cranswick is a highly diversified food producer with a portfolio spanning poultry, pork, convenience foods and gourmet products. In 2019 Cranswick continued to diversify, acquiring three companies that expanded its non-meat offerings, increasingly reflecting consumers’ changing consumption habits. The company is a strong cash generator, focusing on efficiency and supply chain management.

Cranswick sources much of its food from its own fully-owned farms. By doing this Cranswick is able to keep a tight control on costs and improve margins while delivering ‘farm to fork’ quality control. It also gives the company long-term sustainability as Cranswick remains in control of the whole supply chain, reducing the risk of disruptions.

Due to its increasingly diverse revenues and well-managed operations, Cranswick has delivered 30 consecutive years of dividend growth, creating substantial shareholder value. This has been achieved through the company’s incredible top-line revenue performance, which continued into 2020. Considering this strong sales growth combined with a solid dividend yield, a P/E of about 20x makes for an attractive entry price which I am considering acting on for my own portfolio.

Another great FTSE 250 share

Premier Foods (LSE: PFD) owns some of Britain’s best loved food brands, including Mr Kipling cakes, Bird’s custard and Oxo stock cubes. These household staples underpin a solid FTSE 250 business that has a consistent history of delivering revenue growth.

2020 looks like a record sales year for the company as it has benefited from a UK lockdown-driven spike in demand. Previous headwinds have been overcome, with a definitive pension agreement set to save the company £115m to £145m in potential deficit contributions.

The company has also reduced its net debt by £40m to £429m over the past year. This reduction has de-leveraged the company’s balance sheet, bringing down the net debt/EBITDA ratio to 2.7x, ahead of the previously stated target of 3x announced back in 2017.

The past two to three years have also seen a major restructuring of the company and this has delivered a sizeable positive impact to company profits. Following these changes, Premier Foods looks set to combine solid revenue growth with consistently improving earnings. At a P/E of about 11x, this is a share that I am eyeing up for a long-term investment.

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Noah Riley holds no positions 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.

The CMC Markets (LSE:CMC) share price has rocketed over the last year, with the shares now standing up around 140% year-to-date. CMC has benefited massively from the volatility across the markets that has been generated by Covid-19 uncertainty, turning itself into one of the top growth shares in the UK market.

After recent vaccine news, this volatility only looks set to continue as the US markets surged more than 1,000 points on the 9th of November following Pfizer’s vaccine news. Today, I am going to explain why I am bullish regarding CMC Markets’ future prospects even after the huge share price run-up.

A Covid-19 winner

Since March, CMC has been among the top UK growth shares, delivering consistent outperformance for its investors. In fact, its performance has been so strong that gains have exceeded those of other quoted spread-betters in its industry, such as IG Group and Plus500.

CMC is set to deliver trading revenues of £200 million in H1 according to its October trading update, which will be up 91% from the prior year. This was significantly boosted by the volatility generated by Covid uncertainty.

The extra cash generated will allow CMC to increase investment into its institution-focused platform, which adds a growing B2B business to the company’s main B2C revenues. This mix differentiates CMC from its peers IG and Plus500 who predominantly focus on retail clients. While CMC also delivers services for its retail clients, institutional clients are the real source of growth going forward.

CMC is also seeing strong performance in its stockbroking offerings, with revenues for H1 expected to be £26 million up from the £14 million reported the prior year.

CMC is a growth share that offers a good hedge against broader market uncertainty and the future volatility that continues to be generated by Covid concerns. It also offers a solid dividend of 5% a year, which can provide passive income to investors. This dividend looks relatively safe considering CMC’s high cash generation and large cash pile of over £100 million.

A bright future ahead

In my opinion, the future of CMC is looking extremely positive. Volatility in the market looks unlikely to subside any time soon, particularly following the vaccine news. Many investors were concerned about a second market crash and still believe there is a real risk of it. This mix of views means markets are likely to remain volatile for the foreseeable future, and volatile times deliver profit for CMC.

The company is good at client retention, which is expected to be above 80% in H1. And it is clear that CEO Paul Cruddas remains a believer as he holds 60% of the shares in issue.

Combining these promising broader market conditions with CMC’s well-diversified product offerings puts the company in a very healthy position. A large number of the clients acquired as a result of the current volatility will also likely stick with CMC as their trading platform over the long run, and that will increase the company’s recurring revenues. Alongside this core business, the company will look to scale up its numerous pipeline opportunities including the institutional platform and the stockbroking wing. Even after the huge run-up in share price, the company still trades on a lucrative P/E ratio of just 11.

CMC is a growth share that I am looking to add more of in the coming months.

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Noah Riley own shares in CMC Markets. 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.

Hollywood Bowl offers plenty of potential

The first cheap share I’m interested in buying more of is Hollywood Bowl (LSE:BOWL). I believe there is much appeal to Hollywood Bowl at current levels as the leading bowling alley operator in the UK. The company is desperate for some way out of this pandemic and the new vaccine may have just provided that.

Even after the recent c.45% surge in share price, shares still stand down around 35% since late February. Prior to the pandemic, Hollywood Bowl was performing very well and delivered increasingly strong financial results. Full year 2019 revenues had increased 7.8% year-on-year and profit before tax was up 15% to £27 million. The company had even taken action to trim its already low debt by 15% to £2.1 million.

It was no surprise, then, to see that Hollywood Bowl’s share price was hitting all-time highs before Covid gripped the market. I believe there is still a strong market position for the company in the post-Covid world, where consumers will be seeking post-lockdown entertainment. With a historic P/E of just 10, I believe Hollywood Bowl is an attractive cheap share for the post-vaccine world, and am pleased to see that my Foolish colleague Roland Head agrees.

Why Everyman looks like a cheap share

The other share on my list is the niche cinema chain Everyman Media Group (LSE:EMAN). Everyman has a fascinating business model with a fresh, revolutionary offering. The cinema chain places a focus on quality of experience in each of its venues and therefore charges a higher price for tickets. Everyman wants to curate this experience for cinema-goers through a greater emphasis on comfort and quality of food and drink to attract a higher spending up-market clientele.

Like Hollywood Bowl, Everyman was performing well before the pandemic, steadily growing both its top and bottom line with a programme of new cinema roll-outs. Due to the pandemic, the cinema industry was one of the hardest hit – but this has put Everyman at a favourable valuation currently. Even through the pandemic, I favoured Everyman as it has fewer cinemas and is therefore far more versatile than peers such as Cineworld that have higher fixed costs.

Unlike Cineworld, Everyman only closed its cinemas when forced to do so by government guidelines. The new vaccine promise has given Everyman shares relief, surging around 35% from their recent lows. However, even after this rise, I believe Everyman is a cheap share at current levels. Whilst the P/E is higher than Hollywood Bowl’s, this a high-growth, exciting, niche-focused firm. I believe Everyman’s historic P/E of less than 40 is cheap, particularly with the strong vaccine potential.

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Noah Riley owns shares in Hollywood Bowl and Everyman Media Group. The Motley Fool UK has recommended Hollywood Bowl. 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.

Due to this volatile market trading, significant turbulence has gripped the market. The risk of a second market crash has become a real concern for many as many shares have now obtained lofty valuations. This is heightened by the fact there has been a large rise in Covid-19 cases in both the UK and US over recent weeks and months.

Second crash risk

There has been a large amount of recent speculation regarding a second market crash and I believe there is good reason for this. There are still a significant number of Covid-related headwinds facing many listed companies.

This was shown by the recent actions taken by the UK government, where they introduced a lockdown across the whole of the UK. This has created a great deal of uncertainty as all non-essential shops, pubs and restaurants have been forced to close. Due to this uncertainty, investors may opt to take a more cautious approach. However, I believe there is one FTSE 250 share that will be a winner in both a bull and bear market.

IG Group

IG Group (LSE: IGG) was a Covid-19 winner. As volatility gripped the market, IG saw client trading activity surge. Client activity was so strong in Q4 that IG was able to report its best ever year in terms of both revenues and profitability in 2020. This is significant because IG had experienced a large drop-off in revenues in 2019 as new ESMA regulations were introduced, which sent its shares spiralling lower by nearly 50%. Since then IG has recovered well and the shares are nearing all-time highs, which I believe they will break soon.

I also prefer IG in comparison to competitors due to the company’s low risk approach, which means IG hedges 99% of client positions, essentially allowing the company to take on nearly no risk. This means that even without the volatility created by Covid-19, IG can focus on building sustainable revenues over the long run through diversifying its offerings and fuelling geographic expansion. IG is achieving this through transitioning more clients to more profitable loyal professional clients and moving more traders to its stockbroking account which allows IG to build long term customer relationships.

Well positioned for second market crash

Under a second market crash, IG would actually benefit and is still currently benefiting from the volatility that is gripping the market and the impact that is having on client trading activity. I believe this extra cash generation will allow the FTSE 250 share to increase its already-tasty 6% yield in 2021. I’m a happy shareholder.

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Noah Riley owns shares in IG 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.