Domino’s Pizza

Shares in the fast food company Domino’s Pizza (LSE: DOM) are down 39% over the past year. That reflects concerns that tightening spending by consumers will lead to less demand for pizzas cooked away from home.

But is that the case — and if so does it mean business performance will get worse? After all, Domino’s has been streamlining its operations in the past several years and focussing on its most successful market. It has also been buying back its own shares.

That could mean that even a downturn in revenues does not necessarily mean a drop in earnings per share. Last month’s interim results make the point – although revenues slid 5.6% compared to the same period the prior year, post-tax profits and statutory basic earnings per share both rose.

Buffett thinking applied to a FTSE 250 share

Investor Warren Buffett talks about the benefit to a business of having a moat that can give it a competitive advantage. Domino’s benefits from a strong brand and established network of supply depots and branches. That would be hard for a competitor to replicate cost effectively. That helps explain why in the second quarter of the year, the firm’s share of the UK takeaway market grew from 6% to 6.6%. In a market facing the risk of weakening customer demand, the strongest operators are more likely to survive – and I see Domino’s as one of them.

The shares have a dividend yield of 4%. I think the share price fall means they are now a bargain for my portfolio, trading on a price-to-earnings (P/E) ratio of 14, so I would consider buying them.

Cranswick

Shares in food producer Cranswick (LSE: CWK) have lost a quarter of their value in the past year.

Like Domino’s, I see Cranswick as a high-quality business with attractive competitive strengths. It has built deep relationships with many customers and figured out how to add value to meat products by processing them, enabling attractive profit margins.

Cranswick’s financial record is stellar. Revenue last year grew 5.8%. Basic earnings per share grew 11%. The company raised its dividend by 8%, marking 32 years of unbroken growth in shareholder payouts at the company.

Past performance is no guarantee of what may happen next and the company does face risks. For example, rising input and energy costs could hurt profit margins. But I see this as a great quality business. The P/E ratio of 16 is not exactly cheap in my view, but I do think it is good value for such a firm. I would happily add the shares to my portfolio.

The world’s leading pizza delivery company

As a quick reminder, Domino’s is the UK’s leading pizza delivery brand, with a strong presence in the Republic of Ireland and throughout the world. It opened its first UK location in 1985 but has grown to over 1,200 stores in the UK and Republic of Ireland as I write. With its 35,000 employees, it sold over 105m pizzas last year!

So what’s happening with Domino’s shares currently? Well, as I write, they’re trading for 254p. At this time last year, the stock was trading for 399p, which is a 36% drop over a 12-month period. I’m not concerned by the share price drop, in fact, I view it as an opportunity to buy the dip in a quality business.

A growth stock with risks

Firstly, macroeconomic headwinds at the moment will be playing a part in the Domino’s share price decline. These include soaring inflation, rising costs, and a global supply chain crisis. Rising costs could take a bite out of profits and supply chain issues could affect operations and sales too. Many other UK shares are also suffering due to the issues noted above.

Next, due to the current issues noted, a cost-of-living crisis has emerged in the UK. This could have a material impact on Domino’s performance and level of returns, at least in the shorter term. Consumers may spend less on takeaways, and look for cheap alternatives as they tighten their belts. This is a development I will keep a close eye on.

The investment case

So to the positives then. For any growth stock I am interested in, I review a firm’s journey to date. I am buoyed by Domino’s growth story in recent years as well as its current position in its respective market. It has the experience and know-how to continually move with the times, increase its footprint, and boost its balance sheet. I do understand that the past is not a guarantee of the future, however.

Next, Domino’s shares would boost my passive income stream through dividend payments. At current levels, a dividend yield of close to 4% is enticing for me, although I am aware that dividends are never guaranteed.

Despite shorter-term challenges, I believe Domino’s could continue growing, based on recent trends. I am referring to the rise in takeaway options, as well as the rise in online delivery platforms that consumers use to order food straight to their door. With Domino’s presence, it can leverage this into sales and boost performance and returns, in my opinion.

Finally, Domino’s shares look decent value for money on a price-to-earnings ratio of 15. The recent price drop has made the shares look more attractive and I believe they could head upwards once more.

Overall, I like the look of Domino’s shares and would buy some for my holdings. Food is a staple after all, and based on recent trends like the increasing number of takeaways consumers order, coupled with its profile and presence, I believe Domino’s could be a great growth stock to buy and hold.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

FRP Advisory 

What it does: FRP helps businesses in economic trouble by providing advice on restructuring, debt and pensions.

By Royston Wild. Finding solid growth stocks to buy is becoming increasing challenging for UK investors. Inflation is soaring and economic growth is stalling, putting corporate profit forecasts under increasing strain. 

But FRP Advisory Group (LSE: FRP) is a stock that’s set to benefit from these deteriorating conditions. The business provides a range of advisory services to companies in financial distress, the number of which is soaring in Britain. Higher interest rates mean that businesses are struggling to pay their debts.

According to tax, audit and advisory firm Mazars Accountants, the number of corporate insolvencies has rocketed 70% over the past year, to 19,191. Unfortunately it has warned, too, that “the dismal outlook means more pain for businesses is likely.” 

FRP’s share price has slumped more recently. This is because of rising costs that caused profits to fall in its latest financial year (to April 2022). 

I consider this to be a great dip buying opportunity and expect FRP’s shares to bounce back as trading activity gathers momentum. Revenues at FRP leapt 21% year-on-year in fiscal 2022, and rose 11% on an organic basis. 

Royston Wild does not own shares in FRP Advisory. 

Kainos

What it does: Kainos is a technology company that helps public and private organisations with digital transformation.

By Edward Sheldon, CFA. Kainos (LSE: KNOS) shares have experienced a significant pullback this year as growth shares have fallen out of favour and I think this has created a compelling investment opportunity.

Kainos is benefitting as companies and government organisations embrace technology and this is reflected in the group’s financial performance. Last financial year (ended 31 March 2022), revenue was up 29%. Meanwhile, at the end of the period, the group’s contracted backlog was £260m – up 26% year on year.

Looking ahead, I’m confident that Kainos will continue to grow at a healthy rate. That’s because digital transformation can help organisations lower costs and beat inflation. It’s worth noting that CEO Brendan Mooney recently said that demand for the company’s services has “never been higher”.

Now, this growth stock isn’t cheap. Currently, its P/E ratio is in the high 20s. This adds risk to the investment case. However, I believe that long-term investors in the company, like myself, will be rewarded over time.

Edward Sheldon owns shares in Kainos

dotDigital

What it does: dotDigital is a SaaS company providing an omnichannel marketing automation and customer engagement platform.

By Zaven Boyrazian. The technology sector hasn’t had much love in 2022. Yet, despite the volatility, there remain plenty of attractive opportunities for my portfolio. One that’s caught my attention at the moment is dotDigital (LSE:DOTD).

With the tailwinds from the pandemic slowing down, top-line growth followed suit, upsetting quite a few momentum investors. Yet even without these catalysts, revenue continues to expand at a respectable rate. Meanwhile, its latest trading update showed a 16.8% jump in average revenue per customer.

In other words, clients are spending more money on the firm’s marketing platform. And even with an uncertain economic outlook, marketing email volumes are up 22% to 29.4 billion versus a year ago. This all bodes well for the company, especially given its fierce competition from alternative platforms.

Pairing this with a seemingly cheap valuation makes dotDigital look like an excellent growth addition to my portfolio this month.

Zaven Boyrazian owns shares in dotDigital.

Domino’s Pizza

What it does: Domino’s is a UK-based pizza delivery company and FTSE 250 constituent.

By Paul Summers: At the time of writing, shares in Domino’s Pizza (LSE: DOM) are down by over a third in 2022. That’s not entirely surprising. The squeeze on discretionary income was never likely to be good news for the firm. 

For a long-term growth investor like me, however, this is looking like an opportunity to acquire the stock at a cheaper-than-usual valuation. A forecast price-to-earnings (P/E) ratio of 14 for the current year is below the 5-year average of 16. There’s also a 3.5% dividend yield to reinvest while I wait.

I’m not expecting a rip-roaring recovery in earnings over the next year or so. Nonetheless, decent interim numbers at the beginning of August coupled with encouraging news on the search for a new CEO could herald a change in market sentiment.

Paul Summers does not own shares in Domino’s Pizza.

Safestore

What it does: Safestore is a leading provider of self-storage facilities in the UK and Continental Europe

By Christopher Ruane. I continue to see value in Safestore (LSE: SAFE). Its shares are down 20% since April, although they are still 7% ahead of where they were this time last year.

In the first half, revenue grew 15% compared to the same period last year, diluted earnings were up 67%, operating cash inflows grew 25% and the dividend also grew 25%.

That is excellent growth – and I expect more of the same in future. Self-storage remains a fairly undeveloped industry in the UK compared to the US, for example. I see lots of space for growth. Safestore’s strong brand and proven operating model could help it capitalise on that. One risk I see is competitors trying to woo customers with low prices, pushing down profit margins across the industry.

But I think Safestore has a great, simple formula in a market with strong long-term growth prospects.

Christopher Ruane owns shares in Safestore.

CMC Markets

What it does: CMC Markets specialises in online trading, providing exposure to a range of different asset classes. It has a global presence.

By Andrew Woods. A glance at the historical earnings data for CMC Markets (LSE:CMCX) immediately indicates rapid growth over the past five years. For the year ended March, between 2018 and 2022, earnings per share (EPS) rose from 17.3p to 24.8p.

By my calculations, this results in a compound annual EPS growth rate of 7.5%. For me, I find this attractive in a growth stock. Over that time period, revenue also grew from £209m to £325m.

It’s quite clear that the firm benefited from increased trading activity during the pandemic. As customers enjoyed greater disposable income and had more time to devote to investing, the business saw its profit surge. What’s more, greater volatility in the stock market enabled the firm to derive more income from price spreads.

However, revenue fell by around £100m between 2021 and 2022, suggesting that customer interest and activity may have declined following the pandemic. Nevertheless, revenue and pre-tax profit are still higher than pre-pandemic figures.  

Andrew Woods has no position in CMC Markets.

Diageo

Due to its simplicity, global reach and bumper portfolio of brands, I reckon premium spirits purveyor Diageo (LSE: DGE) is one of the best companies in the FTSE 100. Notwithstanding this, shares in the company are down 13% year-to-date. Glass half-full, that looks like an opportunity to me.

Will Diageo shoot the lights out when market confidence returns? Probably not. The drawback with defensive stocks like this is that they tend not to jump in price on the way back.

However, I’ve never regarded this lead index beast as one to buy for quick gains. More as one that gradually but confidently builds my wealth over time.

Sure, the price could fall, especially if we get some earnings downgrades as a result of drinkers’ tightening their belts in the face of rising costs. But unless I believe consumers will never return to their favourite tipples (I don’t), this should be nothing more than a temporary blip.

Domino’s Pizza

Also making my list of stocks to buy now is Domino’s Pizza (LSE: DOM). In case you weren’t aware, Domino’s is the UK’s leading pizza brand, boasting over 1,200 restaurants across here and the Republic of Ireland. According to the company, it sold over 105m pizzas last year.

Of course, an easy-to-understand business doesn’t guarantee anything in terms of performance. Like Diageo, Domino’s’ price has lost height in 2022. The rise in the cost of living is likely the biggest contributing factor. Despite recovering slightly in the last couple of months, shares are still down 25%. News that CEO Dominic Paul is off to Premier Inn-owner Whitbread probably isn’t helping sentiment.

Still, at 14 times earnings, I think a lot of negativity looks priced in. In June, the company said it continued to expect full-year earnings per share to be “in line with current market expectations“. A 3.7% dividend yield should make up for the short-term headwinds.

Rentokil Initial

A final ‘simple’ stock I’d be happy to buy today is Rentokil Initial (LSE: RTO). While its line of work isn’t the most pleasant, it strikes me as the sort of company that will rarely see a dip in demand. The £9bn-cap is the world’s leading commercial pest control and hygiene services provider.

Another thing I like about Rentokil is that 90% of its revenues come from outside of the UK. In theory, this would help to reduce some risk in my portfolio by taking the strain off of my more home-focused picks.

The question mark for me here is the valuation. Despite falling 12% in 2022, the shares still change hands at almost 26 times earnings. Although I can’t expect to pay a low price for a very defensive company, there’s a risk other investors will continue selling growth-oriented stocks if the tough economic times continue.

But, naturally, no one knows what happens next. So perhaps drip-feeding my money would be most appropriate here?

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Music to my ears

Let’s kick off my best-shares-to-buy-now list with an under-the-radar stock operating within the world of music. Focusrite (LSE:TUNE) is a global audio product manufacturer. It designs high-quality audio equipment within the music industry, both for studios and live events, under numerous brands, including Novation, AMPIFY, and Sequential.

Since the start of the year, the shares have dropped by nearly 20%, despite early trading results being promising. Management expects revenue for the first half of the year to land at around £91m. That’s actually down from £95.3m a year ago. But considering the operating environment with ongoing supply challenges for electronic equipment, seeing an almost flat comparative performance is quite encouraging.

If the group misses this target, it could open the door to further volatility. However, since these hurdles appear to only be a short-term problem, the drop in the stock looks like a potential bargain. That’s why I think they could be an excellent addition to my Stocks and Shares ISA.

Bouncing back

Domino’s Pizza Group (LSE:DOM) hasn’t had the greatest start to the year, falling by 17% over the last three months. But those days may soon be over. For several years, management has had to deal with a minor conflict with its franchisees over certain aspects of their agreements. But that was under old leadership. And the new administration seems to have finally fixed this multi-year problem.

With more aggressive advertising budgets, new technological innovations, and additional customer collection options, the business seems to be on track to significantly expand its top line, taking profit margins with it.

That certainly sounds like the best shares to buy now, in my opinion. But there are, of course, risks to this new strategy. With the company relying more heavily on digital systems, any cyber security breach could severely disrupt operations, creating opportunities for competitors. Nonetheless, the potential returns make this risk worth taking, in my mind. And that’s why I’m considering this business for my Stocks and Shares ISA today.

Kitchen king

After the pandemic created a jump in demand for home improvement, Howden Joinery Group (LSE:HWDN) came onto my radar. The firm is a vertically integrated kitchen and joinery product manufacturer for the home construction sector.

That may not sound like the snazziest stock out there. But with a track record of delivering an average 11% annual revenue growth with a degree of consistency, now could be the perfect time to add it to my Stocks and Shares ISA.

Supply chain disruptions combined with rising labour costs could significantly impact profit margins. And with larger fish in the pond, passing on the cost to customers may prove difficult if they can simply switch to a cheaper competitor. Yet, this impact has yet to materialise, which is why it’s on my best shares to buy now list.

Royston Wild: SSE

The possibility of more extreme stock market volatility would encourage me to buy FTSE 100 stock SSE (LSE: SSE) for April. Soaring inflation in the UK means that many consumers may have to trim their spending. But light and heat are two of the last things people will want to cut down on, meaning profits at companies like SSE should remain rock solid. Utilities shares like this could become popular lifeboats for investors as macroeconomic and geopolitical fears increase.

I think SSE’s essential operations make it a great investment for investors seeking healthy passive income streams like me, too. Dividend yields here sit at a bulky 5.2% and 5.4% for the financial years to March 2022 and 2023 respectively.

Royston Wild does not own shares in SSE.

Stuart Blair: National Express

It finally seems that National Express (LSE: NEX) is overcoming the worst of the pandemic. In fact, in 2021, the coach operator managed to report an underlying operating profit of £87m, in comparison to a £50m loss in 2020. At the same time, free cash flow became positive, reaching over £120m. While the dividend has not yet returned, this is expected next year.

Risks include the rising costs, due to soaring prices of oil and wage inflation. But National Express has fully hedged oil through 2022 and 2023, which reduces its current exposure to the high prices. I’ll continue to buy this FTSE 250 stock for my portfolio.

Stuart Blair owns shares in National Express.

Stephen Wright: Endeavour Mining

My top stock for April is Endeavour Mining (LSE:EDV). The company owns and operates gold mines in West Africa. I like this stock because I think that the underlying business has some really attractive qualities.

With mining companies, I look for an ability to extract its product cheaply. Endeavour has one of the lowest costs of operations of any gold miner. The last time I checked, Endeavour’s cost per ounce was around $873. With the price of gold currently at $1,915 per ounce, I think that Endeavour is in a strong position.

Stephen Wright does not own shares in Endeavour Mining.

Zaven Boyrazian: Domino’s Pizza Group

With the pandemic loosening its grip on the world, Domino’s Pizza Group (LSE:DOM) has resumed its traditional double-digit growth in gross pizza sales. And now that the long-standing dispute with franchisees has finally been resolved, the group is primed to boost its total sales to as high as £1.9bn!

What’s more, the digitalisation of operations has simultaneously improved customer experience, as well as profitability. This does make the group more susceptible to cyber-attacks. But with the engine seemingly firing on all cylinders, Domino’s looks like it could be an excellent addition to my portfolio.

Zaven Boyrazian does not own shares in Domino’s Pizza Group.

Rupert Hargreaves: Intercontinental Hotels

My top stock for April is Intercontinental Hotels (LSE: IHG).

This is one of the best companies to play the global reopening trade, in my opinion. Analysts expect the group’s earnings to jump 60% this year and 25% in 2023. Based on these projections, the stock is dealing at an undemanding forward price-to-earnings (P/E) multiple of 20.

Of course, this growth is far from guaranteed. The pandemic is not over yet, and there could be further disruption on the cards for the global economy. Rising prices may also hit the firm’s bottom line.

Despite these risks, I would buy the stock today.

Rupert Hargreaves does not own shares in Intercontinental Hotels.

Christopher Ruane: JD Sports Fashion

With a simple business model, strong brand and large potential market, I continue to like the look of JD Sports (LSE:JD). But the shares have lost around a third of their value so far in 2022 and are down 15% in the past year at the time of writing.

That fall partly reflects concerns of reduced consumer spending hurting revenues and profits. But I think it gives me a buying opportunity in a well-run company with global ambitions. Its brand and retail expertise help set it apart from rivals.

Christopher Ruane owns shares in JD Sports.

Roland Head: HSBC Holdings

I think Asia-focused banking giant HSBC Holdings (LSE: HSBA) could benefit from rising interest rates and the easing of pandemic restrictions over the coming months.

The FTSE 100 bank’s underlying profits returned to 2019 levels last year. I think the changes being pushed through by CEO Noel Quinn should help to support more focused and profitable performance in the future.

The risk of a global slowdown is a concern, as are reports of further lockdowns in China. But I think HSBC shares continue to offer good value, trading below book value with a dividend yield of 4.2%.

Roland Head does not own shares in HSBC Holdings.

Andrew Mackie: Glencore

My top stock for April is Glencore (LSE: GLEN). Having recently hit a 10-year high on the back of soaring base metal prices, analysts have been rushing to upgrade their outlook for this leading commodities producer and marketer.

In its full-year results, it declared a combined dividend and share buyback amounting to $0.30 a share. At today’s price, that equates to an impressive dividend yield of 4.7%.

As institutional investors continue to rotate out of growth and into value stocks, together with many of the 60+ commodities that it produces playing a critical role in the energy transition, I expect to see its share price continue to rise not only this month, but well into this decade too.

Andrew Mackie owns shares in Glencore.

Paul Summers: Polar Capital Holdings

The share price of investment manager Polar Capital Holdings (LSE: POLR) has tumbled in value in 2022 so far, partly due to investors’ sudden aversion to high-growth tech stocks. I’m tempted to begin loading up.

The valuation of 10 times forecast earnings is certainly attractive. Throw in a monster dividend yield of 7% for FY23 (at the time of writing) and a strong balance sheet, and I can think of worse places to leave my capital.

Although a swift rebound in the shares is far from guaranteed, this is one ‘value’ stock I’d be happy to own.

Paul Summers has no position in Polar Capital Holdings

Andrew Woods: Rio Tinto

My stock pick for April is Rio Tinto (LSE:RIO). This is a mining company specialising in iron ore, copper, and aluminium. It operates in Australia, Guinea, and Brazil.

During the 2021 calendar year, pre-tax profit nearly doubled to $30bn. The firm then paid a record dividend of $10.40 per share.

As commodity prices remain high due to global events, I fully expect this trend to continue, with demand outweighing supply.

What’s more, many metals and minerals mined by the company may be used in decarbonisation efforts, with copper being a central component in electric vehicles.

Andrew Woods has no position in any of the shares mentioned.

Alan Oscroft: Purplebricks

Why would I buy into an estate agent whose share price has crashed over the past 12 months? Well, at the interim stage, Purplebricks (LSE: PURP) revealed a disappointing operating loss. But it reported only a very small underlying EBITDA loss.

Oh, and company insiders have bought up nearly a million shares between them in the past couple of weeks.

It’s obviously risky buying into a property business while inflation is soaring and interest rate rises are pushing up mortgage costs. But Purplebricks’ year ends in April, and I’m cautiously optimistic for decent results.

Alan Oscroft has no position in Purplebricks.

But with the April deadline fast approaching, what are the best UK shares for me to buy in my ISA right now? Let’s explore.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Profiting with pizza

Domino’s Pizza Group (LSE:DOM) has been on quite a run. Since the start of 2019, shares are up over 50%, thanks to impressive growth in pizza sales. The pandemic certainly helped in that regard. But the momentum has since continued.

And now that management has resolved its long-standing franchisee conflict, growth might be about to accelerate even faster. Or at least, that’s the impression I got when the firm announced its £1.9bn sales target versus £1.5bn today.

A good chunk of this growth can be attributed to the continued digital transformation of the group. But of course, that does create a potential vulnerability. Suppose a successful cyber attack takes its systems offline, even for a short time? In that case, it could lead to a substantial loss of orders to competitors. Nonetheless, with its shares falling by 20% since the start of 2022, courtesy of market volatility, the UK business looks like a bargain buy for my portfolio.

UK shares fuelling the renewable energy era

With global warming becoming an ever more present threat, the world has begun making the necessary shift towards renewables. But to achieve this ambitious transition, a lot of raw materials are going to be needed, especially essentials such as battery metals including cobalt and vanadium.

This has created quite the tailwind for UK mining shares. And while there are plenty to choose from, my personal favourite is Anglo Pacific Group (LSE:APF). The royalties business provides the funding for larger mining firms to establish drilling sites in exchange for a portion of the extracted materials.

This approach has proven to be significantly more profitable, with operating margins currently standing at over 45%. It’s obviously still susceptible to the risks of fluctuating commodity prices. However, with a diversified portfolio consisting of essential renewable energy metals, I think the stock could be perfectly positioned to deliver long-term growth potential to shareholders. Even more so when considering it’s still trading at a 20% discount to pre-pandemic levels despite superior financial performance.

The small-cap behind modern technology

With the world’s dependence on technology growing even bigger, XP Power (LSE:XPP) is currently enjoying a pretty massive tailwind. The group is a designer and manufacturer of electronic components for equipment used throughout the industrial engineering, healthcare, and semiconductor industries.

The latter is particularly exciting as supply chain disruptions are currently driving substantial investments into this space. That’s obviously a highly lucrative opportunity and has so far resulted in a 46% jump in its semiconductor division revenue last year.

However, it’s not without its flaws. With 80% of revenue originating from its factories in China and Vietnam, the UK shares have recently been under a lot of pandemic related pressure in that region of the world. But while this problem may continue to plague the business in 2022, it’s ultimately a short-term issue. That’s why the stock’s recent 32% tumble since the start of the year looks like an excellent buying opportunity for my portfolio today.

Is the purple patch over?

It’s interesting to see Kingfisher (LSE: KGF) so high up the table of most hated stocks. Thanks to the explosion in the popularity of DIY over the pandemic and a very healthy housing market, investors might assume that short-sellers would have no interest in the B&Q and Screwfix owner. Then again, recent share price activity suggests otherwise.

Kingfisher certainly hasn’t had the best of starts to 2022. In sharp contrast to index peers like BT and BP, the valuation here has fallen 10% year-to-date. That’s not nearly as bad as the drops seen in tech companies, but it still implies that some in the market think the FTSE 100 member’s purple patch might be over.

Given the above, it’s clear that next month’s full-year results will receive a lot of attention. Back in November, Kingfisher’s share price wobbled after the company revealed like-for-like sales of £3.2bn in Q3 were down 2.4% compared to the same period in 2020.

Is this indicative of more people spending money on other things they couldn’t do previously? Or is it simply a natural fluctuation in earnings that all companies experience? We’ll find out soon enough.

In the meantime, Kingfisher’s stock was trading on a P/E of 11 as markets opened. It also comes with a 3.7% yield. That looks pretty reasonable to me. As things stand however, I’m content to sit on the sidelines and wait to see just how tricky the last quarter has been. 

Shorting target

Another FTSE share that makes the ‘most hated’ Top 10 list is Domino’s Pizza (LSE: DOM). Again, this seems a bit surprising.

Back in December, the company announced it had reached a resolution to a long-running feud with its franchisees. As part of the deal, Domino’s will invest £20m over three years in stores and online apps. Marketing will also be stepped up.

In return, franchisees are expected to open a minimum of 45 stores per annum in the next three years, test and roll out new tech, and get involved in national promotions.

As might be expected, this news sent the shares sharply higher. Unfortunately, a good proportion of these gains have since been lost. Shares have fallen back 16% year-to-date.

But maybe this selling pressure (and shorter interest) does make sense. Like Kingfisher, the trading tailwind from multiple UK lockdowns is now over. The sharp rise in the cost of living could also be relevant. When times are tough, it seems likely that more of us will shun a takeaway in favour of a cheaper, shop-bought alternative. 

As a side note, Domino’s net debt has climbed significantly in recent years. I’d prefer it to be going in the other direction.

But companies with franchise business models often prove to be great wealth-compounders over the long term. Domino remains a highly-cash-generative business and P/E of 19 is also roughly in line with the company’s average P/E over the last five years.

Domino’s has now been added to my watchlist. I wonder if this attention from short-sellers might prove short-lived.

Grabbing a slice of something nice

Consumer spending is coming under pressure, but I think Domino’s Pizza Group (LSE: DOM) could be poised to thrive. It might even benefit if people switch down from going on more expensive nights out to staying indoors and ordering takeout.

I’d buy Domino’s because the UK online food delivery is tipped for strong and sustained growth. And this particular operator has the brand power to make the most of this opportunity. Researchers at Statista think the British takeaway delivery market will be worth £12.6bn by 2024. That compares with the £10.5bn it was valued at last year.

Domino’s Pizza has a long record of unbroken annual earnings growth behind it. And City analysts expect the company to keep this going with bottom-line rises of 2% and 4% respectively. Sure, these numbers aren’t exactly spectacular. But in uncertain times like these I think a reliable growth generator like this UK share could be worth its weight in gold.

I am going to keep in mind that a shortage of drivers at Domino’s has been affecting its ability to meet orders and to push up costs. This is a problem that could take a big bite out of profits going forwards. It’s interesting to see that the company’s US cousin is offering customers a $3 incentive to pick up their pizzas instead of opting for home delivery!

One of the best counter-cyclical stocks to buy?

Unfortunately the cost of living and operating a business in Britain is rocketing. It’s a scenario that threatens to send the number of corporate insolvencies through the roof. So I expect demand for financial services business Begbies Traynor Group (LSE: BEG) to remain strong.

The Federation of Small Businesses (or FSB) commented last month that “thousands of small businesses are on a knife-edge” following a tough Christmas period. It looks like things could continue to get worse before they get better, too, as energy prices increase and interest rates rise. As the FSB notes, Bank of England action this week “will heap pressure on many indebted businesses”.

This is particularly concerning as corporate insolvency rates are already ballooning. Government data shows that there were 1,486 such insolvencies in December, up 20% year-on-year and 33% higher from levels recorded in December 2019.

It’s no surprise that City analysts think Begbies Traynor — which provides insolvency services and other support to distressed firms — will remain busy. They’re expecting earnings to rise 28% and 10% in the financial years to April 2022 and 2023 respectively. Stronger-than-expected economic improvement could hit these profit forecasts and dent my returns as a potential investor. 

I think it’s a great stock to buy for my portfolio, but not just for the near term. Its acquisitions have delivered strong profits growth for the past half a decade, and the company remains committed to expansion through M&A activity. 

Why I bought Domino’s Pizza

My purchase of Domino’s Pizza (LSE: DOM) stock was an investment of the second kind, in a cyclical stock. This is because our spending as consumers is likely to be higher on eating out or takeaways when incomes are rising than when they are not. And we are now in a phase of recovery, after a long drawn out battle with coronavirus. So ideally, I should expect the FTSE 250 stock to keep rising. 

What has changed

But something has changed in the past couple of years. The pandemic forced many of us into far more online shopping than we had done ever before. This resulted in, among other things, a boost to food delivery apps like Just Eat Takeaway and Deliveroo. They continue to report strong results even though the worst of the pandemic appears to be behind us. Domino’s is a standalone delivery provider, that in effect competes with these apps. I think it is fair to believe that the competition will only intensify over time. And with a vast array of delivery options available for consumers, I am not sure if the company can keep its edge.

Besides this, its share price trajectory has been unpredictable over the past five years, so I am not entirely convinced that it will continue to rise over the next few years as well. This is particularly because its price-to-earnings (P/E) ratio is at 21 times, which is not exactly low. And if there is a post-pandemic hit to its earnings as we start eating out more than ordering in takeaways, it is likely to look even higher at the current share price. In any case, its profits have not risen consistently in the past few years. 

Potential upside to the FTSE 250 stock

It is possible that the trend could change, though. In mid-December 2021, it reported a new growth strategy in partnership with its franchisees. This will involve increased investment and opening of stores at a fast clip, among others. This resulted in a 19% increase in its share price in a single day. And it has remained relatively elevated since then. Clearly, investors are bullish on the stock now. 

What I’d do

But as they say, the proof of the pudding (or the pizza, in this case) is in the eating. I would very much like to see results from its new strategies, instead of assuming that they will yield results. I have made a profit on my investment in the stock, but I will only be convinced to buy it again if I can see a clear path ahead for the FTSE 250 stock. Until then, I am focused on more promising picks.