Keeping me healthy

The first company on my radar is AstraZeneca (LSE:AZN). I’ve never owned the stock, but several of my friends do. With the share price rallying 24% over the past year, it’s easy to see why.

The business has a strong track record of performance, with H1 2022 results being another good period for the business. I like the fact that the pharma giant isn’t overly reliant on one area for revenue. The largest division (oncology) generated 35.5% of total revenue during H1. The other divisions also made a meaningful contribution towards the group level figure. This means it’s less sensitive to a sudden change in the pharma landscape.

Going forward, I think the way it forecasts Covid-19 medicine revenue could be a risk. For the full year, the guidance is that total revenue from Covid-19 medicines is anticipated to be broadly flat versus the previous year. I think this is optimistic. It’s true that we don’t know what the future will bring for the virus, but I’d rather the business err on the conservative side to avoid over-promising and under-delivering.

So why do I think it’s a no-brainer stock to buy now? Healthcare is a sector that shouldn’t be really hampered if the UK economy struggles this winter. It has shown over time that it can generate sticky revenue thanks to the broad client base and necessity of products sold.

A value stock still down from the pandemic

Another good stock that I think is appealing is Informa (LSE:INF). The FTSE 100 company has a range of operations, including running events and providing content and research.

One of the reasons why I think the stock is a good buy for me now is due to the fact that we’re over the pandemic slump. This means that people are more comfortable going to in-person events and businesses are happier to spend on marketing and attending such exhibitions. I expect this trend to continue into 2023, so I think now is a good time to jump on the bandwagon.

With the share price up 4.6% in the past year and a price-to-earnings ratio of 32, some might say this isn’t a great value stock pick. However, I’m looking at the longer-term view. The business is still recovering from the financial hit of Covid-19. The share price could rally 50% from current levels and still not be at the levels seen before the March 2020 crash. With interim H1 revenues up 59.1% year on year, there’s clear value (in my opinion) in me buying now if this momentum can carry on.

I do think that the business could specialise in one area, as some of the divisions aren’t that linked together, providing some potential inefficiencies. But as a whole, it’s a stock (along with AstraZeneca) I’m likely to buy for Q4.

UK share #1

Argo Blockchain’s (LSE:ARB) primary business is Bitcoin mining. I believe as Bitcoin’s value increases, so does the value of Argo Blockchain’s stock. The recent cryptocurrency craze leads me to believe that as one of the premier coins, Bitcoin could be worth hundreds of thousands of dollars per coin in the coming years.

One of the key factors behind my confidence in the Bitcoin price increasing, and in turn pushing up the Argo share price, is the Bitcoin block halving. Block halving is when the reward for mining Bitcoin is halved. This halving induces inflation and the number of coins in circulation usually decreases. This pushes demand for, and prices of, the coins up. The next halving is due in 2024.

Argo is investing heavily to ensure it can be a lucrative business. It recently decided to expand its mining plans with new machines. This will result in more revenue as more Bitcoin is being mined.

As I write, Argo shares are trading for 84p. At this time last year, the shares were trading for 71p, which is a 18% return. The shares did shoot up to nearly 300p back in February last year. Right now, the shares look cheap with a price-to-earnings ratio of just seven. Results have been positive recently, and analysts reckon revenues are set to grow in the next two years. Of course, forecasts change as events develop.

Argo has come under fire from investors recently. It issued new shares to help expansion plans, diluting existing UK shares. Furthermore, it was criticised by shareholders for overpaying for land in Texas where it will build its new Bitcoin mining facility. In addition to this, many firms are vying for cryptocurrency domination as the world gets to grips with this new phenomenon. Bitcoin is also volatile. All these factors could negatively affect the stock.

Pick #2

Tech exhibition firm Informa (LSEINF) looks to me like a promising UK share for the long term. This is closely linked to the continued reopening of the world economy. The shares are trading for 569p as I write, up 5% from this time last year. More tellingly, they are still some way off their pre-pandemic levels. This is why they look an attractive option for me as I believe they will surpass pre-pandemic levels in the long term.

Informa is benefiting from short-term demand after the pandemic currently. I am more excited by longer-term plans to drive up revenues and by extension, its value too. In July, it announced in 2022 that the US and China would be its core target markets. These two are the biggest exhibition markets in the world. The Middle East was another target which is becoming a lucrative exhibition market and tech hub.

Informa has a healthy balance sheet with plenty of cash to support expansion and growth plans. It has also decided to raise revenue forecasts for 2022. Fresh pandemic restrictions and competition could affect Informa’s progress in the short to medium term at least.

Thanks to this list, I think I will be able to act quickly to take advantage of opportunities when they present themselves. So here are three FTSE 100 companies that I would acquire in a stock market crash. 

Stock market crash shares to buy

The first company on my list is Intercontinental Hotels Group (LSE: IHG). A pandemic recovery play, I would buy this stock in a downturn, due to the strength of its brands. 

Over the past 18 months, I have watched the enterprise struggle through the pandemic and start to claw its way back to growth on the other side. I have been impressed by its resilience and the group’s continued growth in a hostile market environment. 

As the economy continues to recover from the pandemic, I think the demand for hotel accommodation will continue to increase. As one of the largest hotel groups globally, Intercontinental should benefit significantly from this tailwind. Therefore, I believe it could be an attractive addition to my portfolio at the right price. 

Challenges it may face in the future include additional pandemic restrictions and rising costs, which may put consumers off its premium brands. 

FTSE 100 events business 

I would also acquire Informa (LSE: INF) for the same reasons. The business services group experienced a significant downturn last year as its event division witnessed a near-total collapse in sales.

However, the organisation’s diversification helped it pull through the crisis. Informa’s specialist data and information businesses have continued to grow and enabled the group to achieve its target of becoming free cash flow positive from January.

Management expects free cash flow to total £325m in 2021, which is impressive considering its challenges over the past 18 months. 

Additional pandemic restrictions and competition in the data sector could hit these targets. These are the biggest challenges the group faces right now. Nevertheless, I am excited by Informa’s recovery potential and would jump at the chance to buy the stock at a lower valuation. 

Global rebuilding

Throughout the pandemic, one sector that was generally allowed to remain open was the construction industry. And coming out of the crisis, demand for construction and related materials has remained elevated. 

CRH (LSE: CRH) is one of Europe’s largest construction materials suppliers, with substantial economies of scale. As the world has started to rebuild after the pandemic, it has experienced rapid sales growth. Sales for the nine months to the end of September increased 11% year-on-year and, thanks to better economies of scale, the group’s profit margin increased by 0.5% for the period. 

Management is looking to make the most of this windfall. The group has already spent $1.4bn on acquisitions this year and has more deals in the pipeline. 

Despite CRH’s growth, I am wary about the group’s exposure to the construction sector. This is usually the first industry to feel the heat in an economic downturn. So as pandemic restrictions return across Europe, the firm’s growth could slow. 

Finding the best stocks to buy now is the challenging aspect. Two core aspects I consider are the overall macroeconomic environment and a stock’s core fundamentals. By examining what is going on in the economy in relation to a stock’s fundamentals, I believe I can identify whether or not a stock could be a good addition to my portfolio.

With that in mind, I have identified three stocks that I am considering adding to my portfolio right now.

UK shares pick #1

My first pick is FTSE 100 incumbent Polymetal International (LSE:POLY). Polymetal is a top-10 global gold producer and top-five silver producer with core assets in Russia and Kazakhstan. With over 12,000 employees, it has a portfolio of nine producing gold and silver mines as well as a pipeline of future projects too. Currently, Polymetal is the second-largest producer of gold in the whole of Russia.

When the markets crashed due to the pandemic, many investors moved away from stocks and shares and towards commodities and commodities stocks. Precious metals prices are on the rise with gold leading the way. I believe this trend is likely to continue due to inflation fears in all the major world economies. Basically, as the price of precious metals rises, the potential for Polymetal to increase revenues is good. Some of the best UK shares currently are commodities stocks.

As I write this today, Polymetal shares are trading for 1,366p. A year ago, shares were trading for 18% higher, at 1,668p. I see this share price dip as a buying opportunity. The volatility that comes with commodities can explain the share price drop.

I believe Polymetal has good fundamentals too. It has a good history of performance. For example, Polymetal has reported revenue and gross profits have increased year on year for four years. In addition, Polymetal is an excellent dividend payer, which would make me a passive income if I invested. Since its initial public offering (IPO) in 2011, it has paid close to $2bn in dividends to shareholders.

I must note the risks involved with Polymetal too, however. Commodities are volatile, especially in times of economic uncertainty. This volatility can affect performance, share price, and overall investor sentiment too. Also, competition is rife in the commodities sector which could hinder Polymetal’s performance as well.

Pick #2

My next pick is luxury watchmaker and luxury items purveyor Watches of Switzerland (LSE:WOSG).

Despite the current economic uncertainty, WOSG has reported strong growth recently. I believe this is because, like in all periods of financial downturns, the ultra-wealthy are usually the least affected. Furthermore, the number of newly wealthy individuals is on the rise. This is in part driven by a boom in tech stocks and tech-related investments such as cryptocurrencies. I see evidence of this when reviewing the Forbes 400 list for 2021, where tech individuals dominate.

As I write, shares in WOSG are trading for 1,142p per share. A year ago shares were trading for 408p, which is a 179% return. Like Polymetal, WOSG has a good track record of performance. I can see that revenue and gross profit have increased year on year for the past four years. A recent trading update in August was impressive too. It showed that Q1 revenue had nearly doubled compared to the same period in 2020, which tells me WOSG’s momentum shows no signs of slowing down just yet.

WOSG has a good history of performance, a strong brand and a loyal customer base to help boost performance. There are risks involved too, however. My biggest fear for WOSG is that post-pandemic spending could slow down. Buying a pricey timepiece may become less of a priority, even for the ultra-rich. This would affect performance and the WOSG share price.

UK shares in technology are a good bet

My final pick is FTSE 100 incumbent Informa (LSE:INF). Informa is a tech exhibition firm. It runs multiple events across the world for many industries and companies to showcase products and services. The pandemic hit Informa hard as many events were cancelled. My belief in Informa being a good UK share for my portfolio is based on the continued reopening of world economies and pent up demand.

As I write, shares are trading for 522p. At this time last year, shares were trading for 23% less, for 424p.

Informa’s most recent trading update in July was a useful one for me. The half-year report published financial information as well as a clear growth plan that looked exciting to me. Financially, Informa reported that pandemic-related losses were stabilising and substantially less than last year.

From an operational perspective, Informa said it would be looking to grow its exhibitions in the US, China, and Middle East. This is exciting as the US and China are the two largest tech exhibition markets in the world. The Middle East is also emerging as a strong tech hub too.

With a clear plan of growth and attempting to return to pre-pandemic levels of trading, Informa announced it expects to record revenues of £1.8bn in 2022. This is an upgrade on earlier forecasts of £1.7bn, which is a sign of confidence. Informa derives its confidence primarily from the over 100 events it has planned between now and 2022 in the regions mentioned earlier.

I am aware of the risks associated with Informa. The rise in Covid-19 cases could definitely mean the cancellation of events and exhibitions, which would affect performance, financials, and investor sentiment once more. The fact Informa operates around the world means it will have different Covid-19 regulations to contend with, which will make operations much harder day to day as well as events too.

Intertek (LSE: ITRK) delivered first-half results Friday, and the share price fell 9% in early trading, before regaining a couple of percent.

But I don’t see much negative news from the quality assurance firm. There is a small decline in revenue, which fell a very modest 1%. That’s at actual currency exchange rates, and at constant rates we see a 4.8% gain.

Despite that dip, chief executive André Lacroix said: “The Group is on track to deliver a strong 2021 with robust like-for-like revenue growth, year on year margin progression and a strong free cashflow performance.”

Free cash flow dropped in the first half, by 13.6%, and that’s the only other negative I can see. But it’s been an unusual half as we still struggle to shake off Covid-19. And the rest of the figures look good to me. Pre-tax profit is up 23% (even at actual rates), and net debt tumbled by 33%.

I think there’s a risk with any company offering business services when we face economic fragility. But, overall, I’m considering buying Intertek in August.

FTSE 100 turnaround?

Informa (LSE: INF) is among the FTSE 100’s biggest daily falls on Friday. The business services company suffered during lockdown. And its ability to run conferences and exhibitions still largely eludes the business.

As a result, the Informa share price is still down 40% over the past two years, while the Footsie has recovered to a more modest 5% decline. But do I think that makes Informa a good buy now? And will I put it on my August watchlist?

Last time I looked, I decided to hold back from Informa. We had no real idea when Covid restrictions would end, or what would happen afterwards. But three months on, we’re now past so-called Freedom Day. And, fingers crossed, coronavirus cases are not so far showing the massive increases many feared. Informa is still very risky, but I think we could have better clarity by the end of August. This is another I’m watching.

Bricks and internet

Next (LSE: NXT) has come out of the pandemic strongly. It’s falling Friday like the other two. But the shares are up 30% over the past two years, easily beating the FTSE 100. Is bricks and mortar fashion retail regaining some lost popularity? Boohoo is set to start selling some of its Debenhams brands in retail stores in the Middle East. It seems plenty of people do like to browse in stores and properly inspect the goods.

Next has long been a success in internet trading anyway. Online sales accounted for 56% of the total in the first half of 2021. Admittedly, that was during Covid closure. But it does show Next’s capacity. The firm said on 21 July that “sales during the last eleven weeks have been materially ahead of our expectations and, as a result, we are increasing our profit guidance for the full year.“

Next shares might be looking a bit toppy. And we could see some profit-taking in the near term. But the stock remains on my August candidate’s list.

With that in mind, here are two index champions I’d buy for my Stocks and Shares ISA today to capitalise on this trend. 

FTSE 100 investments

The first company I’d buy for my FTSE 100 ISA portfolio is Anglo American (LSE: AAL). 

I believe this mining conglomerate is perfectly positioned to ride the global economic recovery over the next few years. According to the company’s latest trading update, production from its copper and iron ore mines increased 9% and 1% respectively for the third quarter of its financial year. 

This is notable because the prices of both of these commodities have recently reached multi-year highs. Higher production and higher prices suggest Anglo could be on track to report a bumper trading performance this year. 

Of course, the most considerable risk of investing in any commodity business is that prices can fall as fast as they rise. So, while the company might be profiting from rising prices today, that might not last. As such, there’s no guarantee Anglo will report bumper profits this year. 

Still, I think this FTSE 100 blue-chip could be one of the best ways to invest in the global economic recovery, due to its exposure to crucial resources. 

Stocks and Shares ISA buy 

The second FTSE 100 stock I’d buy for my ISA right now is Informa (LSE: INF). 

This company’s been hit hard by the pandemic. The business, which runs events including the China Beauty Expo and the Monaco Yacht Show, had to pull out all the stops last year when most large events were cancelled. 

The largest exhibition group in the world has tried to shift events online, but this hasn’t stopped the bleeding. The FTSE 100 company swung to a £1.1bn pre-tax loss in 2020, compared to a profit of £318m the previous year.

Most might shy away from investing in such a business at this time, but I’m optimistic. Management thinks the company will report sales of £1.7bn this year. Based on that projection, City analysts believe the group will earn a net income of £309m. 

This is the baseline projection, and if the world’s post-coronavirus recovery accelerates, Informa could surpass this figure. I think it will. That’s why I’d buy the FTSE 100 stock today for my Stocks and Shares ISA. 

Of course, there’s also a chance the company will have to revisit these figures if the pandemic drags on. In that case, I think earnings and sales would therefore disappoint, and the stock could fall in value. As such, Informa may not be suitable for all investors but, with a favourable tailwind, I think it could be a great FTSE 100 recovery play. 

The Informa share price crashed heavily in 2020 as a result of Covid-19. But with the shares now up 60% from their 52-week low, I’m wondering whether I should add Informa to my list of FTSE 100 best shares for 2021.

Before I think of the future, what about the past year? Thursday’s full-year results revealed the painful details of what happened in 2020. Earlier guesses suggested a drop in revenue of around 50%, but the reality wasn’t quite that bad. In the end, Informa achieved revenue of £1,661m, down 43% on the 2019 figure of £2,890m.

Some revenue support

The company reckoned its revenue was supported by its subscription-led business model. Clearly, that can only have a limited protective effect against the ravages of the virus-led 2020 stock market crash. But it does suggest there’s a solid business beneath it all that tempts me to see Informa as a share to buy now.

How did profit hold up? Well, Informa revealed a statutory operating loss of £880m, from an operating profit of £538m in 2019. That is largely down to a whole host of Covid-related one-offs. And on an adjusted basis, the company reports an operating profit of £268m, down from £933m. Any underlying profit in 2020 seems good to me for a company like this. But I think it’s important to remember that the Covid-19 damage is still real.

For me to consider a stock among the best shares to buy, I’d want to see decent cash. On that score, Informa’s 2020 operating cash flow was positive, and I like that. It was greatly reduced, from £965m a year previously, to £231m. But I’d say any cash flow is good for the year we’ve just had.

Best shares to buy?

I think I’m looking at a good company with solid long-term potential. But it’s not one I’d buy at any price, so how is its valuation looking? The Informa share price is still down around 30% since the start of the pandemic, but it’s recovered quite strongly since September. From its 52-week low, we’re looking at a gain of 60%. That looks healthy, but I wonder if it might be too much, too soon.

On today’s share price, the 2020 adjusted EPS figure of 9.9p gives us a P/E of 56. That might not be too meaningful against such a one-off bad year. And based on 2019’s EPS, we’d see that multiple come down to around 11. Should Informa get back to 2019 earnings levels soon, it might deserve a place on my best FTSE 100 shares list.

But we have no idea when the conferences and exhibitions business will get back to full strength. And I don’t see anything approaching that in 2021. I think there’s a strong possibility of weakness for another year or two, and I just don’t see enough safety margin in the current share price.

I won’t buy now, but I’ll keep watching.

To me though, Cineworld still seems like a company with a bleak future. That’s why I think the share price rise is overdone. 

Challenges for the Cineworld share price

The big challenge is a structural one. As streaming rises in popularity and cinemas possibly get worse deals with film studios, it becomes harder and harder to make the business model work. The future of film lies with Netflix and its competitors, not with Cineworld, in my view. Therefore, there’s only so much investors can possibly be willing to pay to buy in to a company that’s in long-term decline.

When I add on top of that Cineworld’s huge debt, it’s clear the group has a major problem. The debt is around $5bn. That’s far larger than the market cap of the company, even after the recent share price revival.

Institutional investors recognise this, which is why even in the era of Reddit investors and short squeezing, they are confident enough to short the stock. In other words, there are hedge funds betting the shares will fall in value.

Possible reasons to buy Cineworld shares

Probably the only reason to buy shares in Cineworld is as a play on a consumer spending-led recovery from the pandemic. A recovery when it comes would very likely include significant leisure and entertainment spending.

So, could the share price rise be sustained?

Possibly. It’s clear if the roadmap out of lockdown progresses as planned then value shares like Cineworld could do well. Longer term though, I don’t see it as a good investment for the reasons outlined above. For me, the cons far outweigh the pros when it comes to the Cineworld share price.

A better alternative

When looking for a share that can better bounce back from being hit hard by Covid, I’d look instead at shares in Informa (LSE: INF). The group is well known for its conferences, which have obviously been dented by the pandemic.

However, the subscriptions part of the business (which includes research journals and data services) should continue to grow. That part of the business can grow regardless of the pandemic, so is more resilient and diversifies Informa’s earnings. Subscriptions created £300m of adjusted operating profit for the group in 2020.

Conferences should bounce back post-pandemic too.

But there’s a big risk for the company in this area. Businesses now are used to not having to attend expensive conferences. It’s possible they may well have re-allocated budget to other activity. They’ve also very likely found digital solutions for networking, sales, marketing and other business development, which may have worked for them and been cost-effective. It doesn’t mean they won’t attend future events, but such events may be less lucrative. Whether that’s the case is one of the post-crisis unknowns at present.

Despite those challenges, I’d be more confident adding Informa to my portfolio than I would Cineworld.

A FTSE 100 stock to avoid 

Informa is one of the world’s largest events businesses. It also provides business intelligence services. 2019 was a bumper year for the group. Sales hit an all-time high of nearly £3bn and net income rose to £225m. 

Unfortunately, the music stopped in 2020. The global pandemic forced event organisers to cancel their plans virtually overnight. As a result, sales at the FTSE 100 business fell off a cliff. City analysts reckon the company will report a 50% decline in revenues for its 2020 financial year. 

Based on these projections, shares in the group are currently changing hands at a forward price-to-earnings (P/E) multiple of more than 50. I think that’s far too high. Investors seem to be very optimistic that Informa will be allowed to restart its events next year and earnings will quickly recover. In my opinion, this valuation leaves no room for error if the business isn’t able to meet these expectations. 

As such, I think the risk/reward ratio of owning the stock at current levels isn’t appealing. That’s why I’d avoid this FTSE 100 stock right now. 

Booming sales 

At the other end of the spectrum, I think the outlook for paper and packaging producer Smurfit Kappa (LSE: SKG) is highly encouraging. 

The e-commerce market is booming. Online retail sales as a percentage of overall sales have jumped to around 36%, from 20% before the pandemic. All of these items need to be packaged. Smurfit is one of the largest providers of this packaging in the world. 

Over the past decade, the FTSE 100 group has bulked up with a series of acquisitions. These deals have helped the company achieve economies of scale, pushing down costs and increasing profit margins. 

The group also has a competitive advantage because it owns its own forestry and recycling operations. This helped the firm navigate the pandemic’s impact on its supply chain. 

City analysts are forecasting €563m of net income for the group for 2020. That’s compared to €476m for 2019. I think that shows how the booming e-commerce market has been a boon for the business over the past 12 months. Earnings are projected to increase further to €640m for 2021. 

These growth estimates are exciting, and I think they pale compared to Informa’s mixed and uncertain future. Based on its growth potential, I believe Smurfit deserves a higher valuation than Informa. That’s not the case. Shares in the packing company are trading at a forward 2021 P/E of 16.4. That seems far too cheap to me. What’s more, the FTSE 100 business offers a dividend yield of 3.1%, at the time of writing. 

The FTSE 100’s risers and fallers

For the record, of the 100 shares in the FTSE 100 for a year or more, 45 have climbed in 2020, and 55 declined. Remarkably, the average change across all 100 shares is positive: +2.3% over a year. Yet the index itself has dipped by 9% over 12 months. That’s because many top gainers are smaller companies, while the biggest losers include heavyweight giants dragging down the index. That’s why I look for cheap shares among the biggest fallers.

Cheap shares: Value trap #1

My first value trap is Informa (LSE: INF), the UK-based publisher, exhibitions group, and provider of business intelligence. Informa has global reach, with over 11,000 staff in more than 30 countries. Its five operating divisions “deliver events and exhibitions, create intelligence-based products and data-driven services, convene communities in person and digitally and provide access to cutting-edge research for customers working in specialist markets, worldwide.” At its current share price of 566.4p, Informa has a market value of £8.4bn. But I don’t think its shares are cheap enough.

The Informa share price hit a 52-week high of 875.4p on 27 December last year. During the spring market meltdown, it crashed to 326.7p on 23 March, so it’s bounced back hard since. To deal with the Covid-19 crisis, Informa cancelled its dividend and also raised £1bn in April in an emergency share sale. I think Informa is a great business, but it faces a tough couple of years. That’s because large-scale, in-person conferences and events cannot resume until widespread vaccinations are complete. For now, I’d steer clear of these ‘cheap shares’ as a value trap.

Value trap #2: Rolls-Royce

My second value trap is a venerable British institution: aero-engine maker Rolls-Royce Holdings (LSE: RR.). Like Informa, I think Rolls-Royce is an outstanding business and a global leader in its field. However, and as with Informa, Rolls-Royce’s destiny is largely out of its own hands for the next couple of years. With airmiles flown collapsing catastrophically in 2020, Rolls-Royce’s miles-flown operating model has been smashed to smithereens. What’s more, with air travel unlikely to return to 2019 levels before, say, 2023–24, Rolls-Royce faces strong headwinds. What’s more, its shares are not cheap enough.

What’s amazing about the Rolls-Royce share price is how steeply and quickly it soared recently. On 30 October the share price closed at 64.9p, but then came news of three effective Covid-19 vaccines. Since this low, the share price has rocketed as high as 137.45p (on 9 November) and stands at 127.55p today. In other words, this stock in a troubled business more than doubled in less than a fortnight. That’s far too much optimism for my blood, so I would not buy these ‘cheap shares’ at anything near the current price. To me, Rolls-Royce shares are a value trap waiting to catch unwary investors!