In 2020, new business sales rose 12% to £2.1bn. This was largely on the back of a buoyant defined-benefit market, where transaction volumes were near all-time highs. The group also reduced its exposure to the UK property market and to lifetime mortgages in particular.

Just Group hasn’t yet released profit figures for the full year. But first-half profits were £245m, up from £102m 12 months before. That’s only 19% below the £302m profit for the whole of the prior year. The current share price means the market cap of the company is less than three times last year’s profit. With this year’s earnings looking likely to exceed 2019’s, Just Group shares looks cheap to me. That’s especially the case as it’s trading at a 60%+ discount to its net asset value. 

Part of the recent surge in profits comes from uplifts in its financial holdings, in response to lower interest rates. When interest rates eventually rise, some of that gain will be lost. Just Group also remains exposed to the UK property market, which could still suffer due to Covid-19 and subsequent economic hardship.

But I still think underlying earnings are strong enough to justify me buying this UK share.

Adding to my holdings of this UK share

One of my favourite shares is IG Group (LSE: IGG). The firm — which provides its customers with access to trade the financial markets — announced impressive results for the six months to the end of November. Its record performance saw revenue and after-tax profits rising 67% and 127% respectively, from a strong period the year before. The number of active clients rose 55% to 238,000.

Even before these results, I thought IG shares looked cheap. They currently trade at a P/E (price-to-earnings ratio) of around 12. But after a stellar H1 performance, they look even more attractive to me.

The unpredictable events of 2020 created a tailwind for the group, with financial market volatility attracting more customers to its platform. A return to normal levels of volatility would no doubt take some of the shine off. But I still think it remains a great UK share for me to buy.

International expansion

The group is growing globally and its international growth looks set to continue, with IG recently announcing an acquisition of US-based Tastytrade, an online brokerage and trading education platform. Tastytrade has registered impressive growth since its inception, and now boasts over 105k active clients.

The acquisition significantly expands IG’s presence in the US, the world’s largest trading market and also among the fastest growing. This acquisition provides product, geographic and regulatory diversification for IG.

There are concerns from some investors that IG has overpaid. On top of that, just as national governments have increased their regulation of the betting industry, they could also turn their attention to spread-betting products. For IG Group, this is a key risk, and it’s one that could impact profits.

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Thomas owns shares of IG Group Holdings. 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.

Throughout 2020, I picked out 36 stocks that I thought would make good investments. The stock selections covered a range of industries and company sizes. They also had varying risk profiles, while the underlying companies where also at different stages of maturity. Some of the stocks were picked twice, so here I’ve only included the returns from the first time I chose a particular share.

How did I do?

Assuming all investments were equally weighted and made on the day I wrote about them, the potential stock picks for my portfolio would have finished the year up 3% (without including dividends). Investing the same amounts, at the same time, in the FTSE 100 would have produced a return of 0%. Meanwhile, investing a lump sum in the FTSE 100 at the start of the year would have lost 14%.

Some 61% of the portfolio gained in value. Of note were the performances of Ferrexpo (+58%) and Goco (+42%), but there were another six stocks that returned over 20%. What this means is that the performance of the portfolio was significantly weakened by just a couple of stocks.

In this case, it was Costain (-64%) and IAG (-52%) that caused the damage. Taking just these two shares out of the portfolio increases the return to 7%. The portfolio’s returns also show a clear divide between before the pandemic began in March and thereafter. Stocks picked before mid-March lost 13%, compared to a gain of 14% from those picked after that point.

In fact, the biggest drags on the portfolio (IAG and Costain) were both picked at the beginning of March. Looking back to that point, it seems clear that I didn’t appreciate the true scale of the pandemic and the lasting effect it would have. But making mistakes is part of investing. Experiences like this allow us to make better decisions in the future.

Investment lessons from 2020

More than anything else, I think these results show how important it is to buy shares at low prices. This provides us with a serious opportunity to make outsized returns. And prices tend to be at their lowest during a stock market crash. That’s certainly what we saw this year. It may seem like a scary time to be investing, but in fact I think it’s a great time to buy.

Another thing to take away from the performance of my stock picks is the benefit of investing regularly over the course of a year, as opposed to investing in one lump sum. This way we buy at a range of prices. Although admittedly, the difference isn’t usually so marked as it was this year. Investing in a number of different stocks also reduces risk and improves our chances of achieving positive returns. After all, 39% of my portfolio lost value. Investing in one of these stocks on their own could have been disastrous.

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Thomas 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.

Just over a decade ago, the FTSE 100 was dominated by banking, mining, oil, telecoms and tobacco. These sectors still make up a significant chunk of the index. But their relative size has gradually reduced over time. The decline started with the banks suffering big losses during the financial crisis and continued with the oil price collapse of the last few years.

FTSE 100 reshuffle

In my opinion, the days of these sectors dominating the FTSE 100 will end in the years ahead. In order to achieve the best investment returns, I think I need to look to new sectors that are growing quickly. Primarily, I think that means I need to focus on companies using technology in novel ways. Historically, the UK index hasn’t benefited from tech companies in the same way that US indices have. But I think that will change. Increasingly, digital technology is at the heart of innovation, and I expect that to feed through to the UK main market in time.

This means it’s all about thinking ahead. What are the up and coming technologies? What kind of impact are they going to have? If I want to invest successfully over the long term, then I need to be thinking about these questions now. I need to be able to spot the individual companies that are going to take advantage of these opportunities. I also need to be able to assess whether their share prices represent good value.

This is where the difficulty lies. For that reason, I’d buy an industry-focused fund or trust, over individual stocks.

Where I’d invest for the long term

But which industries would I look at? There are a few key areas that stand out to me. First of all, I’m interested in companies that are able to add value in the shift to cleaner energy. That means companies involved in the production, storage and distribution of clean energy. I also see a continued focus on large-scale infrastructure modernisation that will make travel easier and safer. 

Away from energy and infrastructure, I’m drawn to digitisation, artificial intelligence and big data. I’m particularly interested in applications that will aid business operations and communications, as well as consumer technologies targeted at the average person on the street. Robotics have already been deployed in large-scale production, but in time I expect this to filter down to every level of business. And as the world becomes increasingly digital, cyber security should grow in importance. 

Meanwhile, this year has shown just how crucial large pharmaceutical companies are going to be in protecting us in the future. The winners of tomorrow all have one thing in common. They’re all investing heavily in research and development today. R&D is the foundation for innovation. And innovation is a precursor to long-run profitability. I think that’s something I need to bear in mind when assessing the value of a stock.

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Thomas 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 the 100 shares that made up the FTSE 100 back in spring, 22 now have a current share price that is at least double what it was in the depths of the stock market crash. That means more than one in five FTSE 100 stocks have returned over 100% in just eight months. Of these, two stocks – Ashtead Group and Intermediate Capital Group – have seen their share prices treble. Intermediate Capital was the best performer over the period, with a £5,000 investment turning into £19,000.

Market crash means superior investment returns

Now, I’m not for a minute suggesting that it’s possible for all of us to achieve these exact returns. That would involve being able to time the market perfectly and buy at the absolute market bottom. This is very, very unlikely, to say the least. But it’s possible to invest either side of the market bottom and still make some pretty impressive returns.

The average inflation-adjusted return of UK shares has been around 5% per year, over the last 50 years (1969-2018). With a current inflation rate of below 1%, it’s apparent just how well UK FTSE 100 shares have performed since the spring. The results very much support the view that buying shares at cheap valuations leads to superior investment returns. And of course, shares tend to be at their cheapest during a stock market crash, especially one linked to a frightful, deadly pandemic.

Cheap FTSE 100 stocks

To take advantage of such investment opportunities, we need to be able to recognise when shares are cheap. I don’t think it really matters if we think share prices are going to fall further. If they look cheap, then I think it’s probably a good time to buy, as long as we’re planning on holding for the long term. Just remember, by cheap I mean that the share price is cheap considering the quality of the company and that we’re getting a lot for our money. 

That’s why my favoured investment method is a cost-averaging approach. That simply involves buying more shares when prices look cheap, and less when they look expensive. This approach would have been highly effective during this year’s stock market crash. And given that we can’t be expected to be able to time the markets to perfection, I think it’s an approach that would have produced the best returns too.

Of course, I don’t think the current recovery is over by any means. In fact, I expect the FTSE 100 to keep rising over the next year, until it gets back to its pre-Covid levels. That’s assuming we don’t get any more nasty surprises. I believe the returns above are only going to amplify over the years to come. For that reason, I think now is still a great time to buy UK shares. Even if the unique opportunities of the stock market crash have mostly disappeared. 

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Thomas 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.

The share rally’s biggest risers seem to have been the companies the suffered the heaviest falls since the pandemic began in earnest, back in March. This includes the travel, hospitality and leisure industries, along with the banking sector. In some cases, share prices have now more than doubled from their spring lows.

One result of this stock market rally is that there are now considerably fewer attractive investment opportunities available. Where previously, share prices looked oversold and cheap, many now look more fairly valued. However, I think there are still noticeable areas of the market where value does exist to help me build a portfolio poised for growth.

In my opinion, some of the most attractive investment opportunities right now are the shares that didn’t sell off wildly during the depths of the pandemic. Likewise, they are the shares that didn’t get swept up in the recent rally. Instead, I believe they are the companies that looked cheap before the pandemic and remained so during it.

Overlooked by the stock market rally

I’m talking about the likes of Yellow Cake. The uranium investment company that is valued at a 23% discount to its net assets. This savvy company has spent the last few months selling its uranium holdings to fund a buy-back of its own shares. That way it gains exposure to the uranium price at hefty discount. Yellow Cake looks even more attractive to me after the announcement that Rolls-Royce plans to build up to 16 small modular reactors (mini-nuclear plants) in the UK. This looks set to revitalise the nuclear sector in both the UK and beyond.

Ferrexpo is another share that I like. As well as coming with an 8% dividend, it’s also cheap, trading at just three times last year’s earnings. I’m actually surprised the shares have not been caught up in the stock market rally, since demand for its iron pellets should benefit significantly from a vaccine-enabled return to worldwide economic growth.

Vaccine improves investment prospects

Shares in Finsbury Food Group are also still looking good value to me. The shares are valued at eight times pre-Covid (FY 2019) earnings. A return to normality would surely put the bread and cake manufacturer back on its growth trajectory. Meanwhile, I think both Aviva and Tesco look attractive. Aviva is trading at a 33% discount to its net asset value. Speculation of asset disposals only reinforces the value on offer. Owing to its own disposals, Tesco appears to be on the verge of announcing a huge 20% special dividend payment.

Despite the pandemic, all of these companies are currently performing well. In fact, I think that’s precisely why they missed out on the stock market rally. Investors were attracted to the companies that had been struggling the most, the ones that really needed some positive vaccine news. I believe we now have a situation where the companies that have actually been managing well are now looking under bought and very attractive. They are the shares that I would buy now.

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Thomas owns shares in Finsbury Food Group and Aviva. The Motley Fool UK has recommended Tesco. 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.

Supermarket sweep

The supermarkets have emerged as relative winners from the pandemic and lockdown. In the UK, none come bigger than Tesco (LSE: TSCO). As non-essential shops, bars and restaurants have been forced to shut their doors, our spending has inevitably shifted to the supermarkets. And online delivery means that we don’t even need to leave our homes.

Tesco’s first-half results (up to end of August) showed that group revenue rose 7%, largely due to increased food sales. Sales rose strongest during the first lockdown period back in the spring, which bodes well for the current lockdown and any more thereafter. Its online business seems to have benefited the most, with second-quarter (spring) sales surging 90% from the year before.  

Tesco is in process of selling its Thai and Malaysian businesses. This should bring in around £8bn, of which £5bn will be returned to shareholders in the form of a special dividend. Looking at the current share price, that implies a 20%+ payout. And that’s on top of the current dividend yield of around 4%. Quite frankly, that seems too good to be true. It’s what makes it, in my opinion, one of the best shares to buy now.

First-half net profits were up 44% from last year, at £465m. Impressively, that’s after over £500m of Covid-related expenses. With these such costs already incurred, and with greater experience of the Covid operating environment, margins should improve in the second half. Directing expenditure away from its clothing business and towards food should improve profits further. Taking all that into account, I think Tesco shares look really attractive.

Consumer staples among the best shares to buy now

Another safe company in the current climate is McBride (LSE: MCB), I feel. It manufactures a range of cleaning and personal care products, from hand sanitiser and bleach, to aerosols and dishwasher tablets. As well as selling products under its own brands, the group also produces products on behalf of other companies.

The pandemic and subsequent focus on hygiene have been a real boon to the company’s sales. Bleach and surface cleaning sales rose by 15% in the six months to the end of June, while sales of dishwasher tablets and liquids were up 13%. With there being little evidence of the pandemic abating any time soon, I think this focus on hygiene is here to stay. That should boost McBride’s revenues for the foreseeable future.

£10m worth of exceptional items dragged full-year profits below those of the year before. But without these, profits would have been much healthier and the shares would actually look cheap. A new company strategy centres around increasing revenues to €1bn by 2025. That’s 27% above last year’s revenues. If this growth materialises, then it should feed through to the bottom line. To top it off, McBride also plans to buy back up to 10% of its own shares in the next year. And that’s why I think it’s another one of the best shares to buy now.

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Thomas has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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 best share to buy now

One company that achieves this is Ferrexpo (LSE: FXPO). The company is one of the world’s largest miners of iron ore pellets, operating primarily out of Ukraine. Its high-grade pellets are used by steel producers the world over. In the last four years, revenues have increased by over 50%, to £1.1 bn last year. Over the same timeframe, after-tax profits have more than doubled.

The group is looking to increase its capacity from the 10m tonnes that it produced last year, to 12m tonnes by 2021. In the medium term, the plan is to ramp up to 20m tonnes. With impressive net profit margins of well over 20%, this extra production should feed through to the bottom line.

A Ukrainian base has its advantages. It allows the group to sell to customers in both Europe and Asia, with China accounting for 60% of global steel production. Ferrexpo looks set to benefit from Chinese economic growth and increased demand for higher-quality inputs. High-grade pellets are deemed to be more environmentally friendly than the alternatives. As emissions regulations tighten in China and the rest of the world, this should boost demand for pellets. Meanwhile, iron ore supply disruptions in Brazil look set to continue, supporting prices.

As well as being a growing and profitable company, it also looks considerably undervalued to me. The shares trade at just three times last year’s earnings and at a 20% discount to net assets. There’s also a huge cash balance of £130m and very low net debt. To top it off, this year’s dividend yields a very generous 8%.

Resilient and agile

So far, the group has been unaffected by Covid-19. Ferrexpo even managed to increase production in the first half of the year. While there was some impact to its end markets, revenue fell just 1%. This was in large part due to the group’s ability to pivot its sales from Europe to China, where the recovery from Covid was both swifter and longer-lasting. In fact, sales to China made up 66% of total sales in the first half, up from 30% in 2019.

All in all, this looks to me like one of the best shares to buy now. But I must first sound a warning. The company is in an ongoing legal tussle with the Ukrainian courts. Such UK-listed Eastern European mining companies have in the recent past been plagued with corporate governance issues. We actually need to beware of investing in something that seems so interesting. Sometimes, it can cloud our judgement. Often, the best investments are the most boring ones.

With that in mind, I’d only buy this share as part of a wider portfolio. As always, diversification is crucial.

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Thomas 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.

Investing in quality during the pandemic

These are testing times for virtually every company. Most companies will suffer to some degree. But the strongest may survive and prosper. These are companies that have strong brands, pricing power and high profit margins. They’re the household names that we stock in our fridges and the supermarkets that we shop in. They’re the things that we can’t do without, even in a pandemic. 

As well as having competitive advantages, the best companies also have strong balance sheets. They have huge cash balances that they’ve saved for a rainy day. This cash can be used to support the business while it’s going through choppy waters. Companies that don’t have adequate cash will be forced to either borrow or raise equity. Either way, this could be costly for shareholders.

As well as having stacks of cash, the strongest companies also have little debt. When crises hit, highly indebted companies will find they can no longer cover their interest payments. Companies may be forced to issue more debt just to cover their payments, with the debt potentially spiralling out of control. 

Avoid stricken sectors

Successful investing during the pandemic is predicated on us being able to filter out the riskiest investments. Some sectors have been hit harder by coronavirus and the subsequent lockdown. I’m talking about the travel and hospitality sectors in particular. They’ve had months of revenues wiped out, in many cases leading to giant losses. This looks set to continue at least until next spring. For the companies that operate in these sectors, things could get a whole lot worse before they get better.

While it may appear that dramatic share price falls have created buying opportunities, I would leave these for only the most adventurous investors. The pandemic may have created permanent changes in consumer behaviour. Even if it hasn’t, some companies in troubled sectors have taken on so much debt just to survive that it’s going to be eating into profits for years to come. I believe investing in these sectors is inherently more risky and more likely to lead to investment losses. That’s why I’d avoid them during the pandemic and instead look to areas that have been relatively unaffected.

Look for value

Another way to reduce the risk is to focus on undervalued shares that appear cheap. The value of the shares provides a buffer of protection against further price falls. If the underlying company is of sufficient quality, there’s only so far its share price is likely to fall before its value becomes attractive and its price recovers. Simply put, buying quality shares when they’re improves the likelihood of achieving superior returns in the long run. Sooner or later, such share prices catch up with reality and reflect a company’s true value.

This is a simple set of rules. But it’s one that could help me to successfully invest during the coronavirus pandemic. I just need to make sure I stick to them.

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Thomas 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.

Tighter restrictions mean that pubs will now close in the highest-risk areas. Nobody knows how long these restrictions will last. Likewise, with Covid cases escalating rapidly in most of Europe, companies that rely on travel look set for a prolonged bout of misery. There are now very few places abroad that UK citizens can travel to freely.

While this undoubtedly affects a great many companies, Wetherspoon and Carnival could be impacted immediately. If I held either of these two FTSE 250 shares, I reckon I’d sell out now and invest in something that would help me sleep a bit better at night.

Last orders

Wetherspoon was quick to reopen after the initial lockdown closed all of its pubs back in March. By the end of August, more than 95% of its pubs had reopened. But not even Rishi Sunak’s Eat Out to Help Out scheme was enough to maintain revenues at last year’s levels. From the beginning of July to mid-August, like-for-like sales were 17% below the prior year.

Following lengthy pub closures and the erosion of profit margins, the company expects to make a loss for this year. That’s not exactly surprising. But Wetherspoon’s shares still look overpriced, in my opinion. The shares trade at 16 times last year’s earnings, a period that was unaffected by Covid. That wouldn’t be cheap in a normal year. New restrictions mean the group will remain unprofitable for longer and will take longer to recover. In my mind, that’s still not reflected in the Wetherspoon share price.

Carnival shares have further to sink

Carnival has been more affected by Covid than most, with its cruise business effectively shut down for six months. Only in the last month has the company resumed a very small number of its cruises. This is reflected in its financial performance. In the nine months to the end of August, the group made a whopping net loss of over £6bn, with revenue down 67% from the year before.

A deteriorating Covid outlook has forced the group to cancel the majority of its cruises until next spring. It still has £6bn in cash, but a monthly cash burn of over £500m means that might not last long. What’s more, the group has borrowed so much just to survive the next year that repayments are going to eat into profits for the foreseeable future. It owes £5bn in repayments in 2023 alone. The Carnival share price has already fallen over 70% this year, but I think it’s got further to fall yet.

Holding Wetherspoon or Carnival shares isn’t just about whether the companies will survive the next year or two. It’s also about what the travel and hospitality sectors will look like in a few year’s time. I have no doubt that the hospitality sector will eventually recover. But I do have doubts about what the cruise industry will look like in the future. For a good night’s sleep, I think it’s best to sell shares in these companies now. There are so many better companies to invest in.

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Thomas has no position in any of the shares mentioned. The Motley Fool UK has recommended Carnival. 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.

Remarkably, it’s possible to build a robust income portfolio, even in the middle of a global pandemic. Since the worst of the pandemic back in the spring, companies have slowly been reinstating their dividends. Some never stopped paying them.

The ultimate income portfolio

In fact, it’s possible to build an income portfolio that not only keeps up with inflation, but that satisfies the most demanding income-seeking investors. What’s more, the income on offer is comparable with pre-Covid levels. There may be fewer options available, but they still exist.

The portfolio I’ve come up with contains eight large-cap UK stocks, and has a dividend yield of over 5%. It’s made up of IG Group (dividend yield 5%), Aviva (expected to be 5%+), Airtel Africa (7%), BAE Systems (4%), GlaxoSmithKline (5%), British American Tobacco (7%), M&G (10%), and BP (7%). As well as delivering an impressive income, this portfolio is also pretty-well diversified, covering a range of unrelated market sectors. That should reduce risk. While one sector may suffer, another may step up and outperform.

This income portfolio is also fairy evenly split into defensives and cyclicals. Defensives are likely to outperform if the current situation becomes worse. They’re also more likely to continue paying dividends come what may. Cyclicals on the other hand are better positioned to do well if things improve. There are also a couple of growth companies in there, which are either unaffected or even boosted by the pandemic and subsequent lockdown.

Cheap income stocks

On top of the impressive dividend yield of over 5%, this income portfolio also looks pretty cheap to me. All of these shares are either cheap on a price-to-earnings (P/E) or net asset basis. Aviva and M&G shares are priced at just four times last year’s earnings. BP is priced at a near £20bn discount to its net assets. The value of these shares should protect investors. Their low share prices mean that there’s less room for prices to fall.

Personally, I’d much sooner invest in this income portfolio and earn 5% interest, than put my money in a savings account where it earns less than 1%. Not only do these income stocks produce an impressive dividend, but they also have the potential to deliver share price appreciation. That’s exactly what I expect to happen. In a world of low rates, I think investors will be grabbing any chance they can get to earn these kind of returns, pushing share prices up in the process. And the NS&I savings rate cuts have only strengthened this belief.

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Thomas owns shares of IG Group, BAE Systems and Aviva. 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.