Centamin

I’m thinking of buying UK gold shares for November. And Centamin’s (LSE: CEY) dirt-cheap share price has put it near the top of my shopping list.

The Egypt-focused metal producer trades on a forward price-to-earnings (P/E) ratio of 8.7 times just now. It also carries a healthy 5.4% dividend yield for 2022.

Centamin’s share price has rocketed more recently thanks to bubbly trading news. Revenues leapt 19% in the third quarter, to $218.1m. Meanwhile gold production soared 23% year on year to 127,512 ounces.

I think the FTSE 250 share is a great buy for the long haul. Having constant exposure to gold is a good idea to boost my wealth when times get tough. Bullion prices tend to increase during economic and political crises, pushing profits at such companies higher.

I also like Centamin due to the quality of its Sukari mine and the work it’s taking to improve productivity and cut costs. The firm advised this month that capital projects here remain on schedule.

As I mention, earnings at companies like this are sensitive to the prices of the commodities they produce. But this isn’t always a good thing. In the short-to-medium term, gold prices could fall if the US dollar continues to rise, for example. This could pull Centamin’s share price sharply lower.

Still, as someone who invests for the long term, this gold producer still looks super attractive. And there’s also a good chance that yellow metal values will increase next month as signs of a global recession steadily increase. 

WH Smith

I’m also considering buying retailer WH Smith (LSE: SMWH) this November. Its share price has tanked in October and I think this presents a great dip-buying opportunity.

At current prices, the FTSE 250 firm trades on a forward price-to-earnings growth (PEG) ratio of just 0.4. A reading below 1 suggests that a stock is undervalued by the market.

WH Smith faces an uncertain outlook in 2023 as the global economy cools. It might see a sharp reduction in customer numbers at its airport and train station outlets. The newsagent might also see revenues slip as people cut back on discretionary spending.

That said, as a potential investor I find recent trading released highly encouraging. The company upgraded its full-year profits expectations over the summer. And last month it praised the continued “strong” performance of its Travel division. Revenues here rose 129% in the six months to 27 August.

WH Smith operates in 29 UK airports and 100 airports internationally. And it remains committed to expanding its Travel division to capitalise on rising passenger numbers. The International Air Transport Association (IATA) thinks the global air travel industry will “expand substantially” over the next 20 years. This provides a significant structural opportunity for the company to exploit.

Go for gold

Having gold exposure is a popular strategy for many investors. The yellow metal often rises during economic, political and social crises. This can help prevent individuals’ investment portfolios from getting washed out in difficult times.

I think buying gold-producing shares is the best way to get this exposure. And I’d do this by investing in FTSE 250 stock Centamin (LSE: CEY).

I’m encouraged by the company’s plans to turbocharge production at its Sukari mine to 500,000 ounces per year. The business is on track to dig between 430,000 and 460,000 gold ounces in 2022.

It’s also taking big steps to reduce costs. Last week it began the final stages of commissioning a solar plant at its Egyptian mine. The plant is already “delivering savings ahead of expectations”, Centamin said.

I also like the exceptional all-round value that the miner’s shares provide today.

The FTSE 250 company trades on a forward price-to-earnings (P/E) ratio of 8.2 times. Meanwhile its dividend yield sits at 5.6% and 6.3% for 2022 and 2023 respectively.

Searching for, developing, and producing from mineral deposits are all complex processes. This allows for a broad range of problems that can happen anytime to push up costs and hammer revenues.

But on balance I think that the potential long-term rewards of owning Centamin shares make it a great buy.

Latin fever

Owning banking stocks such as Banco Santander (LSE: BNC) can be a bumpy ride.

Earnings for such stocks are highly attuned to the broader economic conditions. This means that share prices can slump when times get tough. Dividends can also take a whack during difficult periods.

Santander last week underlined the problems it is facing. Head of its UK business Mike Regnier told The Guardian newspaper that the number of people falling behind on mortgage, loan and card payments is increasing.

But as a long-term investor I’m still considering buying Santander shares.

A sinking share price leaves the business on a forward P/E ratio of 4.8 times. Its 2022 dividend yield meanwhile sits at an enormous 6%.

This offers exceptional value, in my opinion. I think the Spanish bank will soar from current levels once the global economy recovers and banking product demand in Latin America steadily grows.

Santander has operations in major South American economies including Brazil, Mexico, Chile, and Argentina. It is investing heavily in these developing regions too to turbocharge future earnings growth.

An explosion in fintech platforms underlines in part how fast demand for financial products is growing. The number has more than doubled in Latin America between 2018 and 2021 to reach 2,482 last year.

Santander’s shares trade on a forward P/E ratio of 4.8 times. Meanwhile its dividend yield for 2022 sits at 6%. This all makes the bank a highly attractive value stock right now.

Gold miner

As an introduction, Centamin is a gold mining business that focuses on assets in Africa. Its primary asset is the Sukari gold mine located in Egypt.

So what’s happening with Centamin shares currently? As I write, they’re trading for 86p. At this time last year, the stock was trading for 88p, which is a 2% drop over a 12-month period. In the last three months, Centamin shares are up 19% from 72p to current levels. This has netted me a small return to date.

Why I decided to buy this dividend stock

I weigh up the pros and cons of purchasing any stock after conducting thorough research and due diligence.

Looking at Centamin’s risks to start with, I noted that macroeconomic headwinds could hamper my position in the shares. For example, soaring inflation and the rising cost of materials can hinder any returns. Rising costs for any mining business are a concern as they can eat into profit margins. These same profits underpin returns.

As well as rising costs, Centamin shares could suffer at the hands of the reaction to soaring inflation. In times like this, central banks are raising interest rates in an effort to bring down inflation. This raises the price of the main currencies in the world, such as the US dollar. If this happens, the demand for and value of gold could fall.

Moving on to Centamin’s positives, the current volatility is one of the reasons I added the shares to my holdings. When inflation rises, commodities like gold are often seen as safer, defensive options. This is a trend seen throughout the world recently. Many investors have moved away from traditional stocks in sectors such as tech and finance, and move towards commodities.

Next, as a passive income seeker, I wanted an index-beating dividend stock, so sought out Centamin for returns and growth. At present, the dividend yield stands at 7.8%. This is higher than the FTSE 100 and FTSE 250 averages of 3%-4% and 1.9% respectively. I do understand that dividends are never guaranteed, however. In addition to this, the shares look good value for money on a price-to-earnings ratio of just nine currently.

Finally, I noticed that not only does Centamin have a good track record of performance, it has no debt on its books! No debt means more dividends for shareholders like me as well as money for growth initiatives. I am conscious that past performance is not a guarantee of the future, however. Looking back, I noticed that revenue and profit have grown each year for the past four years.

My verdict

I decided to buy Centamin shares for the passive income opportunity. I also wanted to diversify my portfolio with a commodity stock.

Although I don’t expect the current volatility to last forever, demand for gold, as well as Centamin’s fundamentals, including a strong balance sheet, were too good for me to ignore.

But it still leaves a few whose shares are priced at under 100p, with updates coming our way in October.

Software tech

Netcall (LSE: NET) is due to release full-year results on 5 October. The software tech stock has climbed strongly over five years. But in the past 12 months it’s been pretty flat, currently standing at 80p.

Netcall is only making modest profits, and the shares are on a fairly lofty valuation. We’re looking at a forecast price-to-earnings (P/E) ratio of over 30. But with analysts forecasting solid earnings growth, that could come down.

In July’s trading update, the company said it expects to post a 12% rise in revenue, with a gain of approximately 20% in adjusted EBITDA. In particular, Netcall’s cloud offerings should see a revenue increase of 30%.

We’re clearly looking at a growth candidate here, and the shares are not obviously priced cheaply. But I reckon it could be one to watch.

Space investments

Have you ever fancied investing in space technology? I’ve always thought it a bit fanciful, and seriously risky. If I ever went for it, ideally I’d like to spread the risk by going for an investment trust.

And there is one, Seraphim Space Investment Trust (LSE: SSIT), which describes itself as “the world’s first listed SpaceTech investment company“. It will release its full year results on 17 October.

The shares haven’t done brilliantly over the last 12 months, dropping 50%. With a share price of 61p and a market-cap of a little below £150m, Seraphim is pretty small as investment trusts go.

The company’s July update was really all about assets and acquisitions, with net assets of £250m at 31 March.

We have no idea of current net asset value (NAV), so it’s hard to evaluate the share price today. But we should have a NAV update with October’s results. I’d definitely need to see that before making any decisions.

Gold miner

Finally, down to Earth and digging for gold. I’m talking about Centamin (LSE: CEY), on a share price of 86p.

It’s declined by 5% in the past 12 months, and by 40% over five years. Meanwhile, gold is up around 40% over five years as investors seek its safety.

A gold miner is not just a play on the gold price itself. Providing the cost of production is low enough, a miner can make profits even when gold is falling, and that doesn’t happen if we buy the metal itself.

That’s where I think the risk lies. In the first half, Centamin declared a cash cost of production of $931 per ounce produced. But its all-in sustaining costs reached $1,446 per ounce sold.

That might be squeezing margins a bit tightly. Before I’d make any decision, I’d probably wait for full-year results. But a Q3 report due on 20 October should help.

Right now, I’m looking at stocks to add to my portfolio before September. The summer months are traditionally calmer than other times of the year. And now I’m specifically looking for stocks that might fare well amid an economic downturn and higher interest rates.

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Barclays

As interest rates rise, so do net interest margins. Barclays (LSE:BARC) would be doing rather well this year if it wasn’t for a £1.9bn charge to cover the cost of buying back securities it sold in error. H1 pre-tax profits fell 24% to £3.7bn on the back of its trading fiasco and a £300m impairment provision for bad debts amid the cost of living crisis.

In late July, Barclays said that income had come in at £13.2bn, up 17% year on year. This included £800m from hedging arrangements related to the over-issuance of securities.

The stock is currently down 7% over the past year. And I see now as a good time to buy as I anticipate performance to improve in the coming months as interest rates get hiked again. I already own Barclays shares but would buy more today.

Centamin

When the global economy goes into reverse, investors often turn to gold, pushing the price upwards. Centamin (LSE:CEY) performed poorly last year amid falling revenue and an impairment on assets in Burkina Faso. But it has since been on the rise after reaffirming its guidance for the year ahead.

Currently, it gold production forecast for 2022 is between 15,000 and 45,000 ounces higher than total production in 2021.

I think the general trend for gold this year is upwards, although it has fallen this week. Higher price will allow Centamin to cover higher production costs, mentioned in its recent update. I’d buy more Centamin stock today.

Unilever

Unilever (LSE:ULVR) owns brands such as Dove, Vaseline, and Magnum ice cream. And that’s important because household-name brands give the company pricing power. This is a positive defensive quality that we are already seeing pushing the company’s earnings upwards.

In H1, Unilever lifted its prices by 9.8% compared to the same period of 2021. But this had little impact on volume, which only fell by 1.6%. Profits were up during the first half as sales revenue grew 8.1%. For the year as a whole, Unilever now expects to beat its previous forecast of sales growth between 4.5% and 6.5%.

A weak pound may also inflate revenues as the firm sells in over 190 countries.

Naturally, if the recession is really bad, which it shouldn’t be, this will hurt Unilever, but on the whole, I’m bullish. I’d buy more Unilever stock today.

Firstly, with the pound getting weaker against the dollar, the US market is almost uninvestible right now, in my opinion. I’m confident that the pound will eventually appreciate, so any gains I could make on US stocks might be wiped out by sterling strengthening.

But the FTSE has also been unpopular with global investors for a while. And right now valuations are low and dividend yields are generally pretty high.

Amid recession forecasts, I’m buying UK-listed value stocks with defensive qualities to make my money work.

Unilever

In July, Unilever (LSE:ULVR) lifted its sales forecast after hiking its prices to offset higher costs and protect margins. The group owns brands such as Dove, Vaseline, Marmite, and Magnum ice cream, all synonymous with the product category. After all, I’ve never been shopping for a petroleum jelly-based moisturiser or a yeast extract savoury spread. But I’ve been to the shops for Vaseline and Marmite.

The company’s results highlighted its defensive qualities as it lifted its prices by 9.8% in H1, compared to the year-ago period. In fact, during the second quarter, prices were up 11.2% versus the previous year.

Sales volume fell 1.6% during the period, but sales revenue grew 8.1%. Unilever raised its guidance for the year as a whole. Management said it expects to beat its previous forecast of sales growth between 4.5% and 6.5%. The new guidance on sales growth will be “driven by price”, the company said. 

I think the longer-term outlook is positive too, especially when you consider that Unilever has been able to grow revenue by selling less at a time when consumers are really starting to feel the pinch.

Long-lasting inflation won’t be good for any business, Unilever included. There is only so much you can pass to customers, because everyone has a price anchor, regardless of how much you may love a brand.

But, broadly speaking, I’m bullish on Unilever and I see now as good time to buy. It also sells products in 190 countries, so profits will be inflated with the weak pound.

Centamin

Centamin (LSE:CEY) is a UK-listed gold miner with its main asset in Egypt. Investors use gold as a safe haven when there are fears about inflation and the wider economy, and that’s one reason I’m buying more Centamin stock.

Last week, the company reported first half revenue of $382m in its interim report on Thursday. That’s up 4% year-on-year, from gold sales of 203,587 ounces at an average realised gold price of $1,872 per ounce.

The gold price is generally up from 2021. For example, the company achieved $1,778 per ounce in Q1 of 2021.

Costs are going up, and that’s clearly a challenge. The cash cost of production in H1 was $931 per ounce produced, up 15% year-on-year, and its all-in sustaining costs were $1,446 per ounce sold, 22% higher than the same period last year.

But I’m backing this company to succeed as gold rises on the back of economic concerns and as the firm improves its operating position. Centamin recently transitioned to owner-operator mining in Sukari underground, a move which could save it $19m a year.

But we also appear to be entering a period of stagflation, characterised by high inflation and slowing economic growth. This is even though the labour market is still running hot. It’s what I’ve seen called a ‘jobful downturn’.

So, I want stocks that can still perform well amid the current environment and provide me with sizeable yields.

Here are two stocks I’d buy now.

Centamin

Investors use gold as a safe haven when there are fears about inflation and the wider economy. So that’s why I’m looking at Centamin (LSE:CEY).

Most gold miners have done pretty well this year, but in April, Centamin reported a big fall in profits in 2021, hence the share price we see today.

The Jersey-registered miner said that full-year profits had halved on the back of forecast lower revenue and an impairment on assets in Burkina Faso.

But things are looking up. Gold prices have sustained this year, and they could go further if economic concerns grow.

The miner expects production to be between 430,000 ounces and 460,000 ounces. Centamin produced 415,370 ounces in 2021. In Q2 on 2022, gold production rose 11% year-on-year to 110,788 ounces.

Production costs are increasing and that’s a concern, but the company has recently transitioned to owner-operator mining in Sukari underground — Egypt’s largest gold mine. The transition should save the company around $19m a year from 2023 onwards.

Investments in expanding the Sukari mine should also help increase production in the years to come.

Centamin currently has an 8.6% dividend yield, which will help my portfolio fight back against inflation. Meanwhile, profits should increase if gold prices go up.

United Utilities

United Utilities (LSE:UU) is a defensive stock. It doesn’t offer a massive dividend at 4.4%, but it’s a reliable profit maker, because very few things are more essential than water. In fact, it is one of the ultimate defensive stocks.

This company provides water and wastewater services to Northwest England. And in return for providing an essential service, it’s allowed to make a reasonable profit on the water sold. The regulator, Ofwat, sets the prices. So revenue is somewhat pre-determined. After all, it’s in nobody’s interest for a company providing an essential service to be in trouble.

Debt is an issue here and servicing that debt could start eating away at profitability. But it doesn’t appear to be a big concern right now. United Utilities has a healthy balance sheet and more than £300m in free cash flow last year.

JP Morgan recently turned cautious on the water sector, but remained positive on United Utilities over its peers. JPM maintained its preference for overweight-rated United Utilities relative to competitor Severn Trent.

I think United Utilities looks like a good buy right now amid the forecast economic downturn. The group also said it would increase its dividend by the rate of inflation each year through to 2025.

Strong cash balance, little debt

Centamin (LSE:CEY) shares have been volatile to some degree over the past year. In that time, the share price has fallen 26% and is down 15% in the last three months. At the time of writing, the shares are trading at 79p.

The company – a gold mining firm operating in Africa, Egypt, and Australia – has enjoyed solid revenue growth between 2018 and 2021. This has risen from $603m to $733m.

Furthermore, pre-tax profits have increased from $178m to $224m over the same time period. 

The business also appears to be in a strong financial position. In March, the company had a cash balance of $207m. Its debt pile stands at just $634,000, meaning that the firm has the resources to handle debt, while potentially engaging in controlled expansion.  

Despite this, production for the first three months of 2022 was down 11%, year on year. Any pandemic resurgence could cause further production falls due to the possibility of staff shortages.

On the other hand, Centamin shares may be cheap. A glance at forward price-to-earnings (P/E) ratios shows that the business has a lower ratio than a major competitor, Barrick Gold.

This indicates that I would be getting a bargain if I added Centamin to my portfolio soon.

Consistent earnings growth

Secondly, penny stock Hochschild (LSE:HOC) could be a good addition to my portfolio. Over the past year, the share price is down 49% and the shares currently trade at 84p.

The company – a silver miner in South America – has recently been suffering as the underlying price of silver continues to fall. Despite this, pre-tax profit between 2020 and 2021 increased from $63m to $137m. Over the same period, revenue grew from $621m to $811m.

Hochschild had a cash balance of $387m in March, while debt stood at $304m. Furthermore, between 2017 and 2021, earnings per share (EPS) rose from ¢8 to ¢14. By my calculation, this means that Hochschild has a compound annual EPS growth rate of 11.8%. This is both strong and consistent.

It should be noted, however, that past performance is not necessarily indicative of future performance.

There does remain, however, the threat that any pandemic resurgence could cause a halt to mining operations if there are worker shortages.

Overall, both of these penny stocks could provide long-term growth despite the higher risk of investing in these types of companies. I will be adding both firms to my portfolio soon.   

Gold miner

As a quick reminder, Centamin is a gold miner with projects throughout Africa. Its main project is the Sukari gold mine in Egypt.

When inflation rises, commodities such as gold are often seen as safe-havens as their prices rise. The price of commodities such as gold are not directly linked to inflation and have different pressures.

So what’s happening with Centamin shares currently? Well, as I write, they’re trading for 75p. At this time last year, the stock was trading for 104p, which is a 27% drop over a 12-month period. Many stocks have seen shares fall due to the macroeconomic headwinds caused by inflation. In addition to this, the geopolitical events in Ukraine, which caused a stock market correction, have not helped either.

UK shares have risks

Despite buying Centamin shares for my holdings, I must note tangible risks that could impact any returns I hope to make. Firstly, central banks are taking steps to reduce inflation and one of those steps is to increase interest rates. If the US dollar rises as a result, then the value and demand for gold could fall. This would result in gold stocks such as Centamin suffering.

Next, Centamin is at the mercy of the soaring cost of raw materials and the supply chain crisis. Its production costs are quite high already, so this bump in costs and disruption could drive these costs up further. This could impact the company’s returns.

Why I purchased Centamin shares

So to the positives. Firstly, at current levels, Centamin shares look good value for money to me on a price-to-earnings ratio of just 10.

Next, the shares would boost my passive income stream through dividend payments. I can see Centamin shares currently offer a dividend yield of over 7% currently. This is higher than the FTSE 250 and FTSE 100 average yields respectively. I am aware that dividends can be cancelled at the discretion of the business at any time, however.

I noticed that Centamin has a consistent record of performance too with revenue and profit growth achieved consistently in the past four years. This performance helps drive growth and underpins shareholder returns.

Finally, one aspect I really like about Centamin is the fact it has no debt on its balance sheet. This is vital for me. Debt needs repaying, so not having any leaves more cash for growth and returns. This sounds too good to miss for an investor like myself.

Overall I do understand commodities are volatile but with the rewards far outweighing the risks currently, I decided to buy Centamin shares. Furthermore, there doesn’t seem to be a light at the end of the tunnel for the current economic uncertainty and soaring inflation. Due to this, I think diversifying my holdings by adding stocks like Centamin could be a shrewd move.

Looking for FTSE 250 shares to invest in today, the following three would make it on to my shortlist.

A dividend share

I last looked at Jupiter Fund Management (LSE: JUP) in April, when the share price was down. Since then, it’s fallen another 20%. Jupiter shares have now declined by 41% over the past 12 months.

Investment managers tend to fall out of favour when economic conditions turn tough. With interest rates rising and many investors looking for safety, Jupiter has seen an outflow of funds. And that drain on the company might not be over yet.

But the share price fall has pushed the dividend yield to 10.7% now. That’s based on last year’s dividend, which was covered 1.85 times by earnings. I think I see a reasonable safety buffer there, should this year’s dividend decline, while still leaving a good yield.

Should Jupiter reduce its payout, I’d expect the share price to suffer further falls. But I reckon a downturn is a great time to buy FTSE 250 fund managers.

A growth share

With aviation in chaos and airlines in the news, when it comes to growth shares I’m immediately drawn to easyJet (LSE: EZJ).

The latest troubles, including staffing problems, flight cancellations, and threatened strike action, have depressed the easyJet share price further. We’re now looking at a 56% fall over the past 12 months. Oh, and it’s down 70% over five years.

But the airline’s summer update seemed reasonably cheery. It seems that “demand for travel has returned with April and May passengers seven times the same months last year“. In a lot of ways, it’s the quick recovery in demand that’s behind the operational problems hitting airlines now.

The company expects Q3 capacity to be up around 87% of 2019 levels, reaching 90% by Q4. It’s hard to put a valuation on the shares with a loss expected this year. And there are clearly short-term risks. But if volumes do recover as hoped, I think this could be a good time for investors to buy.

A value share

Searching among FTSE 250 shares on low price-to-earnings (P/E) ratios, I’m drawn to Centamin (LSE: CEY).

The gold miner’s share price has dropped 23% over 12 months. On forecasts, that indicates a P/E of only around nine. And the dividend looks set to yield 5.8%.

It’s probably down to the lacklustre performance of gold this year. At $1,830 per ounce, it’s below where we might expect it to be in times like the present, when investors are typically seeking safety.

But if the current economic squeeze should continue, precious metals prices may yet rise significantly above current levels. And that could push Centamin shares to a higher level. On the risk side, Centamin’s production costs are not the lowest in the business. So sustained gold weakness could send it down further.