A decade of supersonic growth

There were several tell-tale signs the stock was going to take off that I neglected to act on.

For starters, it is an incredibly long-standing institution. UK heritage brands like this often posses intangibles that maintain its value over long stretches of time. The London Stock Exchange has been around for centuries. It is the epitome of consistency, long-term value and global repute.  I believe it is an intangible that gives the stock exchange a premium over others.

Furthermore, the company has reinvented itself more times than that queen of reinvention herself, Madonna. The company is well versed in keeping itself relevant to corporate demands. A timely merger in 2007 with Borsa Italiana (the Milan Stock Exchange), put the Group on the fast-track to success. Since then, timely stakes in clearing house LCH.Clearnet and interest rate swap business TradeWeb have future-proofed its offer.

Is another decade of stellar returns imminent?

After a decade of fantastic growth, the LSE continues to perform well. The stock’s value is in positive territory this year — up 3% in a year when FTSE 100 valuations have broadly declined. The FTSE 100, for example, is down nearly 10%.

I also see the stock as a reasonable downside hedge for market turmoil. The Group benefits from market volatility. Elevated trading volumes contribute to the exchange’s income. Meanwhile, annual earnings are forecast to grow in the double digits.

I expect both of these headline factors to be favourably priced into the share price as time passes.

Headwinds to continued success

However, I do foresee clear headwinds regarding the Group’s growth potential over the long run.  A weak pound, Brexit, and a dwindling IPO pipeline are threats to London’s position as a leading equity market. If fewer firms choose to list on the London Stock Exchange, this could limit future growth prospects for the company.

There was already a fear following Brexit that the stock exchange’s reputation as the top global destination for listings would be under threat. So, it has proven. Its share of the total listing proceeds in Europe has fallen 40% in the six preceding years since the vote, according to Bloomberg.

Regret aversion is a negative emotional bias that urges investors to avoid regret, and thus make the wrong decision. I do not want to fall into this trap with the LSE because of my regret of not buying 10 years ago.

However, I am quite positive this is not the case with the LSE. Despite some clear headwinds, I consider it a heritage stock with solid fundamentals. I believe the positives as a defensive long-term growth stock simply outweigh the risks I see.

As such, I intend to buy some shares in the London Stock Exchange before the year is out.

The near future could be turbulent for investors like me. Nonetheless, some Footsie stocks look more resilient than others to weather storms ahead. Here are two I’d buy today.

London Stock Exchange Group

London Stock Exchange Group (LSE:LSEG) was one FTSE 100 share to tick higher in the wake of Chancellor Kwasi Kwarteng’s statement. The company’s been a top performer this year — its share price has risen nearly 8%.

So, why did London Stock Exchange (LSE) shares react positively to the government’s measures? First, let’s examine interest rates.

In light of inflationary pressures, the Bank of England’s chief economist Huw Pill warned that fiscal stimulus injected into the economy “will require a significant monetary policy response“. Some experts forecast the base rate could exceed 5.5% by next spring.

The LSE owns majority stakes in transactional interest rate swap businesses, such as TradeWeb and SwapClear. Rising interest rates are likely to boost growth for these companies. In turn, this should contribute to the exchange’s bottom line.

A second key factor behind the LSE’s positive momentum is market volatility. Elevated trading volumes contribute to the exchange’s income. With further fiscal statements due in the months ahead, the LSE should benefit as traders continue to focus on British shares.

The stock isn’t without risks. A weak pound, Brexit, and a dwindling IPO pipeline are threats to London’s position as a leading equity market. If fewer firms choose to list on the London Stock Exchange, this could limit future growth prospects for the company.

However, London’s been a global financial centre for centuries. I’m not convinced this status will be displaced overnight. Everything considered, I’m bullish on LSE shares — I’d buy.

AstraZeneca

Healthcare is traditionally viewed as a defensive sector and AstraZeneca (LSE:AZN) is perhaps the jewel in the FTSE 100’s pharmaceutical crown. The stock’s outpaced the index, climbing over 15% this year.

AstraZeneca’s diversification allows it to deal with currency risks as sterling yo-yos. The business generates greater total revenue in both emerging markets and the US than in Europe.

The business also stands to benefit from recent approvals for cancer drugs and Covid-19 treatments. I view this as the reward for a decade of increased R&D investment under CEO Pascal Soriot’s leadership.

In further developments, the Anglo-Swedish outfit recently acquired US-based LogicBio Therapeutics, a genome editing company, paying a handsome 660% premium on its share price.

The deal may look expensive. However, I’m encouraged to see the firm executing ambitious expansion plans while many other businesses are simply treading water.

Admittedly, AstraZeneca has a stubbornly high valuation. This does concern me — that the firm’s strong growth potential in oncology has already been priced in. A 2.2% dividend yield isn’t too exciting either.

Nonetheless, the AstraZeneca share price has nearly doubled over five years. I believe there’s every chance it can continue to perform well over the next five. I’d add to my position today.

When share prices come down, I look to buy stocks that almost never trade at a discount. Two that I’m looking at now are London Stock Exchange Group (LSE:LSEG) and Rightmove (LSE:RMV).

London Stock Exchange Group

The London Stock Exchange Group is a highly efficient business. The company generates just under £1.5bn in operating income using 832m in fixed assets.

Obviously, it owns the London Stock Exchange. But that part of the business only accounts for around 3% of the overall organisation’s sales.

Around 70% of the Group’s revenue comes from its analytics business. This part of the company is built on a huge database that is nearly impossible for competitors to replicate.

The trouble with LSEG stock is that almost never seems to be cheap. Even in a volatile market, the share price is up nearly 8% since the start of the year.

The current share price gives the company a market cap of just over £43bn. It has around £8.37bn in debt and just under £1.4bn in cash. 

On top of this, the business generates almost £2bn in free cash. This represents an investment return of just under 4%.

For my own portfolio, I’m looking for a slightly better value proposition before I invest. But the London Stock Exchange Group is one of the stocks to buy for my portfolio if its share price comes down.

Rightmove

My second stock to buy in a market sell-off is Rightmove (LSE:RMV). I actually bought Rightmove shares earlier this year, but the stock has now reached a level that I’m not comfortable investing at.

I think that Rightmove is one of the best businesses in the FTSE 100. It has a dominant market position and it generates huge amounts of cash.

As the largest UK property platform, Rightmove benefits from a network effect. As more buyers look at the site, the incentive for sellers to advertise there increases and vice versa.

Rightmove’s size also gives it pricing power. Its unrivaled scale provides sellers with access to an audience they can’t get anywhere else and this affords the company the ability to raise its prices.

The strength of Rightmove’s business is illustrated by its financial metrics. The most obvious is its huge operating margins.

Rightmove maintains operating margins around 74%. This comfortably eclipses Alphabet (30%), Meta Platforms (36%), and Microsoft (43%). 

Slowing demand for housing in the UK caused by rising interest rates might well weigh on Rightmove’s profits in the near future. That’s why I’m not buying shares at today’s prices.

Looking forward, however, I’d love to buy more shares at or near the 529p per share mark. So if we see another stock market sell-off, I’ll be looking at buying Rightmove stock.

Royston Wild: BAE Systems 

The BAE Systems (LSE: BA) share price lifted off in February as tragic events in Ukraine unfolded, and it’s stayed strong since then. The war in Eastern Europe illustrates the tense geopolitical backdrop that I think will support sustained and strong demand for BAE Systems’ defence products. 

In fact, BAE Systems has grown earnings in four of the past five years as global arms spending has risen. The only reversal came in 2020 when Covid-19 disruptions hit the bottom line. City analysts expect profits to keep heading northwards this year, and next too, as the West bumps up arms spending in light of recent events.

I think BAE Systems could be a particularly strong performer in May too as rising fears over rampant inflation boost demand for safe-haven shares like defence companies. 

Royston Wild does not own shares in BAE Systems.

Zaven Boyrazian: Alpha FX Group

Alpha FX (LSE:AFX) is a financial services group specialising in currency risk management and alternative banking solutions. The firm helps businesses mitigate foreign exchange risk while simultaneously enabling almost instant enterprise-scale international transactions – something not possible with archaic methods like wire transfers.

Corporate banks offer similar solutions and are a significant source of competition. However, these are often prohibitively expensive. By charging on a per-transaction basis, Alpha FX enables its clients to overcome this barrier to entry.

With an impressive track record of double-digit growth and its 2022 performance continuing to impress, I think it’s time to add more shares to my portfolio today.

Zaven Boyrazian owns shares in Alpha FX

Edward Sheldon: Smith & Nephew

My top British stock for May is Smith & Nephew (LSE: SN). It’s a healthcare company that specialises in joint replacement systems.

There are a couple of reasons I like the look of Smith & Nephew right now. One is that there’s a huge joint replacement backlog globally at the moment due to Covid-19. So, the company appears to be well positioned for growth in the years ahead.

Another is that the healthcare sector tends to be quite defensive in nature. So, the stock could hold up relatively well if we see a recession.

It’s worth pointing out that Smith & Nephew shares are not cheap. So, this adds a bit of risk. All things considered though, I see a lot of potential here.

Edward Sheldon owns shares in Smith & Nephew.

Stephen Wright: London Stock Exchange Group

I think that my top stock for May is one of the best companies in the UK. It combines a core business that has virtually no competition with other operations that have high margins, low costs, and generate huge returns.

The stock is London Stock Exchange Group (LSE:LSEG). The company operates the exchanges on which financial market transactions take place. These have high barriers to entry. But the company also has various other operations, including data, fixed income trading, and clearing services.

Stephen Wright does not own London Stock Exchange Group.

Michelle Freeman: Wizz Air

It’s no surprise to anyone that airline shares have had a rough time over the last two years. But with Wizz Air (LSE: WIZZ) down over 30% since the start of the year, I think its shares look potentially oversold compared to others. 

Yes, Wizz has more exposure to those Eastern European travel destinations that are impacted from the on-going war. But it has been diversifying its network and increasing capacity recently, including picking up more Gatwick slots from Norwegian.  

With the WTTC reporting triple-digit growth compared to last year, I wouldn’t be at all surprised to see the share price benefit accordingly. 

Michelle Freeman does not own shares in Wizz Air.

Andrew Mackie: Anglo American

My top stock for May is Anglo American (LSE: AAL). This may seem like a strange choice, given the 20% share price fall in the three days following a disappointing Q1 production report.

However, I would look beyond the headlines. At the moment, a lot of miners are suffering with high input costs, particularly diesel, Covid-related absences and production issues. However, all this is likely to do is push up prices even further.

The business remains a cash-generating machine, with a dividend policy of returning 40% of underlying earnings to shareholders.

For me, the commodities cycle is still very much in its early innings. With such a diversified portfolio, the sell-off has presented a good entry point for long-term investors.

Andrew Mackie does not own shares in Anglo American.

Andrew Woods: Tullow Oil

Tullow Oil (LSE: TLW) is an oil and gas exploration and production firm. It operates globally, but it has larger operations in Ghana and Kenya in Africa, and Guyana in South America.

The pandemic hit the business hard, resulting in a $1.2bn pre-tax loss in 2020. It recovered, however, to post a $200m pre-tax profit the following year.

In March, it increased its stake in two oil fields in Ghana, potentially increasing production by 4,000 barrels of oil per day. With oil prices at high levels, I think this firm could be a top stock for me in May.  

Andrew Woods has no position in Tullow Oil.

Paul Summers: XP Power

Having once made a big profit on the stock, I’m starting to think about buying XP Power (LSE: XPP) again. The share price of the critical power solutions provider has tumbled in the last few months due to a resurgence of Covid-19 in Asia, higher costs, and limited component supply.

Despite these headwinds, business is ticking along nicely. XP had a record order book of roughly £260m moving into Q2.

The valuation of 17 times forecast earnings looks pretty reasonable to me. There’s also a well-covered dividend to keep investors happy while the dark clouds pass. 

Paul Summers has no position in XP Power

John Choong: Dunelm

Dunelm (LSE: DNLM) was predicted to falter after Covid restrictions were lifted. But its most recent earnings report showed a 25% increase in its profits, with total sales up 10.6% year over year. Additionally, Dunelm has managed to maintain healthy margins of 10.8% whilst boasting a stellar balance sheet with zero debt.

Although its stock has taken a plummet due to disappointing retail sales figures, the fine print proves that the British retailer remains immune for the time-being, as household goods stores saw a 2.6% increase in sales. This is backed up by Dunelm’s own numbers, with an 8.5% increase in active customer growth.

John Choong has no position in Dunelm.

Roland Head: Redrow

I am picking FTSE 250 housebuilder Redrow (LSE: RDW) as my top stock for May. I think that shares in this founder-backed group could offer impressive value.

The risk of a UK economic slowdown is the main concern here. That could hit sales. But recent trading updates have not suggested any slowdown in demand for new housing.

In Redrow’s latest results, the company increased its sales and profit guidance for 2022 and said that profit margins were rising despite higher costs.

With the stock trading on six times earnings and offering a 6% dividend yield, I think Redrow offers excellent value.

Roland Head does not own shares in Redrow.

G A Chester: Integrafin Holdings 

Integrafin Holdings (LSE: IHP) owns Transact, one of the largest independent platforms serving UK financial advisors and their clients. It may not be as well-known as direct-to-consumer operator Hargreaves Lansdown, but it has a strong record of growth. 

Revenue has increased at a compound annual rate of 12% over the last four years and earnings have advanced at a rate of 14%. Negative market movements in asset prices are a risk, and wage inflation is also currently a friction. 

Nevertheless, after recent share-price weakness, and with a tailwind of structural growth in the UK wealth-management market, Integrafin looks a quality business on sale cheap. 

G A Chester has no position in Integrafin Holdings. 

Alan Oscroft: Kingfisher

At around the 250p mark, DIY specialist Kingfisher (LSE: KGF) looks cheap to me. The owner of B&Q and Screwfix staged a strong pandemic comeback. But that’s reversed in 2022, for a 30% fall over the past 12 months. The shares are now on a trailing P/E of only around seven, with dividend yields above 3.5%.

My main concern is that free cash flow for 2021-22 fell sharply. With net debt of £1.6bn, that could bite. But the company is buying up its own shares right now. I’d do the same.

Alan Oscroft has no position in Kingfisher.

With strong fundamentals and solid earnings forecasts, I believe these UK shares have the potential for substantial gains over the next five years and beyond. Here’s why.

FTSE 100 share #1 – Shell

Shell (LSE: SHEL) stock has enjoyed explosive gains of over 26% this year after superb financial results for 2021. Adjusted earnings beat expectations, rocketing to $19.29bn from $4.85bn the previous year.

Buoyed by sky-high oil prices, the FTSE 100 energy giant will undertake an $8.5bn share buyback programme by the end of Q2. Shell also intends to hike its dividend by 4% to $0.25 per share.

Yet despite its strong recent performance, the Shell share price is marginally down over five years. In addition, the plummeting values of its Russian assets have recently cost the company nearly $5bn since it ceased operations in the country.

Nonetheless, I remain bullish. Shell has sufficient geographic diversification to withstand Russian sanctions in my view. For instance, there’s its substantial on-stream oil and gas projects near Nigeria and Mexico.

Shell stock could also benefit from an agreement with Deutsche Telekom to supply renewable energy for 10,000 electric vehicle charging points in Germany. I regard this as a positive development for the fossil fuel business.

While there are signs of a greener future for the company, I still see oil as the real driver of growth for Shell’s share price. During a booming commodities cycle, the next five years should be significantly better for this FTSE 100 stock in my opinion. I’d buy.

FTSE 100 share #2 – London Stock Exchange Group

Financial infrastructure and data analytics form the core of London Stock Exchange Group (LSE: LSEG)’s business. The LSE share price is up 16% over three months and an impressive 73% over three years. This FTSE 100 company generates 44% of its earnings in EMEA, 42% in the Americas and 14% in Asia.

LSE services 40,000 customers in 190 countries. Last year, the company enjoyed revenue growth in all three of its primary divisions — data & analytics, capital markets and post trade. Adjusted earnings per share almost doubled to 287p.

It also delivered statutory total income of £6.4bn for 2021 and a 27% increase in the total dividend per share to 95p. This year, the company has ambitious plans to expand its Workspace technology to foreign exchange users at scale, reinforcing its end-to-end FX offering. Overall, the FTSE 100 stock looks well positioned for long-term growth.

However, cautious investors will note recent news concerning heavy selling of LSE shares. Institutional investors sold a total of £450m last month, according to Bloomberg, suggesting the stock could be overvalued. As Brexit tensions persist, further headwinds are posed by EU plans to move its clearing operations away from the London Stock Exchange to the eurozone by 2024.

Nevertheless, I’m optimistic about this British financial company. While not without risks, it’s a highly cash-generative business with truly global diversification. For me, LSE stock is a good investment to buy and hold for years to come.

What happened to the LSE’s share price?

This is exactly what happened for the London Stock Exchange Group (LSE: LSEG), which rallied yesterday. But first, some context. The FTSE 100 stock has had a pretty bad past year. Its price is down by some 25%, even after the latest bump-up. After making gains during the pandemic, when investing activity was heightened, the stock came crashing down following its acquisition of the data and analytics provider Refinitiv. The ambitious buyout probably made investors nervous.

Robust results for 2021

Its full-year 2021 results, however, seem to have led to a boost of confidence in the stock. Its revenue increased by 6% from the year before and pre-tax profits almost doubled. It also increased its dividend for the year. The group, with a 1.4% dividend yield, does not really qualify as a notable income stock on the face of it. But over the years, its dividends can mount up, even though that does not appear to be the case at first glance. It is also confident about its future performance. Its CEO, David Schwimmer said that the company has “good momentum for 2022”, which sounds encouraging.

Valuation red flag for the FTSE 100 stock

However, there are undeniable red flags for the FTSE 100 stock too. First, its price-to-earnings (P/E) ratio is at a super-high 70 times. Frankly, this is unheard of even among some really high-performing companies that I have covered in the recent past. And I find it particularly bizarre right now, when its debt is still somewhat high, in my view. 

To be fair, it has managed to reduce it to sub-two times as a proportion of earnings before interest, taxes, depreciation and amortisation (EBITDA). But it can still be seen as being at an uncomfortable level considering that much of it happened after the Refinitiv acquisition last year. 

What I’d do

Both its valuation and its debt levels are enough to diminish confidence in the stock. If its earnings had risen enough to moderate its P/E, that would have been preferable. There is a an interesting point to be made here though. The company’s adjusted numbers paint a different picture. Earnings are much higher on this measure, which considerably reduces the P/E to around 25 times. And they also reduces the debt ratio. So which earnings figure should I consider? I have tried to dig deep, but it requires more work, since this is the first set of numbers post-Refinitiv acquisition.  

With this in mind, I am taking a step back from my earlier belief in the stock. While I have little doubt that it can still be a rewarding stock to hold in the long-term. I think for now, there could be a better opportunity for me to buy it if the share price dips further and its valuations are more aligned to the FTSE 100. 

I believe they’re quality businesses with excellent long-term prospects. And that the market has overdone its de-rating of them. Today, their shares look very buyable for me and I think they could significantly grow my wealth by 2030.

Road to recovery

Smith & Nephew is a world leader in joint replacement systems for knees, hips and shoulders. Its other specialities are in soft tissue repair and advanced wound management.

The business suffered during the pandemic, due to the postponement of many non-critical surgical operations. There’s a risk that a persistence of delays and of global supply-chain issues could further dent market sentiment towards this FTSE 100 stock. However, I expect management to report an improvement on 2020 in its 2021 results tomorrow. And to guide for a continuing recovery in 2022.

The shares are currently 25% below their 52-week high. They’re rated at 17.5 times consensus forecast earnings for 2022. I think this represents good value for a business that’s nicely aligned with a number of long-term growth drivers, including ageing populations and people’s desire to remain active for longer.

Too cheap to ignore

Rising population and healthcare demand are also long-term tailwinds for Hikma Pharmaceuticals. The company’s portfolio comprises a broad range of branded and non-branded generic medicines. Developing new generics and securing regulatory approval for them can be challenging and protracted. But Hikma’s good record offers me some comfort against this risk.

The business has been more than resilient through the pandemic. It reported 15% growth in earnings in 2020. And I’m expecting further double digit growth when it announces its 2021 results on Thursday. I think a bright outlook statement for 2022 is also on the cards.

The shares are currently 27% off their 52-week high. They’re rated at just 12 times 2022 consensus forecast earnings. Given the momentum in the business and the long-term tailwinds for growth, this FTSE 100 stock looks too cheap for me to ignore.

Transformational acquisition

London Stock Exchange Group transformed itself with the $27bn acquisition of Refinitiv in January last year. Today, it’s not only an exchange operator (a highly attractive business in its own right), but also owns lucrative data and analytics infrastructure at the heart of financial markets.

Initial investor enthusiasm for the deal has waned since it completed. The shares are currently down 33% from their 52-week high. Mega-acquisitions come with risk. And one of those risks — integration costs higher than originally anticipated — soon raised its head.

However, I was encouraged by a trading update in October. Management said it had made good progress on the integration and was comfortably on target for cost synergies ahead of original phasing.

Integration and other acquisition risks haven’t yet been definitively relegated to the rear-view mirror. But priced at 21.5 times 2022 consensus forecast earnings, I think the size of the long-term growth opportunity for the combined businesses makes this another FTSE 100 stock that could significantly increase my wealth by 2030.

A FTSE 100 stock for reliable passive income

If I would like to earn a reliable passive income for a long time, I think it would be a good idea to consider stocks that are more likely to give me continuous returns rather than big one-off payouts. And this holds even if their current dividend yield is underwhelming. Over the years, the dividends could keep rising and so would the dividend yield on my initial investment, which is nothing but the dividend amount as a percentage of the share price. 

Take the case of London Stock Exchange (LSE: LSEG). The stock has a present yield of just 1%, which is significantly below that of the average FTSE 100 stock at 3.4%. However, if I had bought the stock 10 years ago, the dividend yield on my investment would be a much bigger 9.5% today. And that gives me solid real returns even accounting for the 4% expected inflation level for 2022 in the UK.

London Stock Exchange’s meteoric share price rise

Moreover, LSE is a very good growth stock. In the last 10 years, its share price has risen by almost 10 times. And this is even after the fact that over the past year, the stock has tumbled fast. Of course, it goes without saying that past growth in the stock price might not indicate what happens in the future. This is especially true of the stock right now. Investors are jittery after its massive acquisition of data analytics provider Refinitiv, which has also led to a decline in its price. 

But at the same time, I cannot overlook the fact that London Stock Exchange has not just performed well in terms of its share price increase, but its financial performance has been largely good over time. This gives me confidence, because it shows a company that knows how to grow. And while there is no doubt that I would like to keep a watch on how the Refinitiv acquisition works out, the company’s management has earned my faith as an investor because of its past performance. 

What I’d do

The FTSE 100 stock has long been on my investing wishlist, and 2022 is the year when I intend to make it part of my portfolio, both to earn a passive income and for growth in my capital. 

Three FTSE 100 fallers I’d buy

These three FTSE 100 stocks are among the index’s worst performers over the past 12 months:

I regard all three of these fallen FTSE 100 shares as potential recovery plays, partly based on their terrible performances since early 2021. The best performer, London Stock Exchange Group (LSE: LSEG), has seen its shares tumble by 20.4% over 12 months. Meanwhile, Polymetal International (LSE: POLY) shares crashed by 31.4% in one year.

Why I’d buy LSEG

London Stock Exchange Group is a leading operator of stock exchanges and provider of financial data. For me, LSEG is a rare bird: a potentially undervalued FTSE 100 fintech firm. At their all-time peak, LSEG shares hit an intra-day high of 10,010p on 16 February 2021. However, they have since tumbled after the group struggled with integrating data provider Refinitiv (bought for $27bn in 2019). Yet I regard LSEG as having a powerful competitive moat around its business — something that billionaire investor Warren Buffett loves. Over the past five years, LSEG stock has soared by 141.5%, before crashing in 2021. Were LSEG to return to growth, I would expect its share price to respond accordingly. However, it faces stiff competition from very strong rivals, including several US giants.

Two more losers I’d buy

Second is Flutter Entertainment (LSE: FLTR), a FTSE 100 provider of gambling and betting. Flutter’s top brands include PaddyPower, Betfair, FanDuel, FoxBet, Sky Betting and Gaming, and PokerStars. Flutter employs more than 14,000 people, servicing 14m customers in 100 different markets. At their 52-week high, Flutter shares peaked at 17,130p on 19 March 2021. Ten months later, they cost 11,275p piece. That’s a collapse of 34.2%. Flutter’s recent earnings dipped following punter-friendly sporting results in October. Also, it temporarily withdrew from the Netherlands market and has exited other minor markets. But Flutter has heavy exposure to the US, where legal gambling is exploding and where it has a commanding 42% share of online sports betting. However, Flutter shares haven’t paid a dividend since payments were suspended since May 2020. Even so, I’d still take a punt on Flutter stock today.

Polymetal International is the third potentially cheap stock I’d buy now. Polymetal is a complicated beast: an Anglo-Russian miner of gold and silver, registered in Jersey and with headquarters in Cyprus. To me, this FTSE 100 share is the most conventionally cheap of the three. Currently, it trades on a lowly price-to-earnings ratio of 6.8 and an earnings yield of 14.7%. What’s more, the dividend yield of over 8.3% a year is one of the FTSE 100’s highest. Granted, precious-metals prices had a poor 2021, but who’s to say that this will continue in 2022-23? Based on its modest fundamentals, I’d buy Polymetal today.

Warren Buffett stock #1: Unilever

Warren Buffett is a big fan of consumer-goods giant Unilever (LSE: ULVR). Indeed, he teamed up with other investors in January 2017 in a failed bid to buy the Anglo-Dutch business when Unilever stock was trading around £32. Today, it stands at 3,932p — roughly £7 higher five years on and valuing the group at £100.8bn. However, pre-pandemic, Unilever shares had soared much higher. At its all-time high, ULVR hit a peak of 5,333p on 4 September 2019. While it’s true that Unilever’s sales growth has slowed in recent years, it was still 1.9% in 2020.

Today, this stock trades on 22.8 times earnings, for an earnings yield of 4.4%. The dividend yield of 3.8% a year is less than the FTSE 100‘s 4%, but still competitive. I’d gladly buy and own shares in this great business for the next decade, despite the headwinds facing this heavyweight firm.

Value share #2: Legal & General

To be honest, I write about Legal & General (LSE: LGEN) a lot — perhaps more often than I should. But I genuinely believe that this provider of life assurance, savings, and investments is a high-quality, Warren Buffett-style business. Today, L&G — a household name since 1836 — manages over £1trn of assets for more than 10m customers. It has an outstanding brand, a great management team, and a long record of success. Even during the depths of 2020’s coronavirus crisis, L&G kept paying out cash dividends, despite rivals cancelling their payments.

At the current share price of 305.5p, L&G stock trades on a modest rating of 8.1 times earnings and an earnings yield of 12.4%. The stock offers a market-beating dividend yield of 5.8% a year. However, if asset prices dive in 2022, this could harm L&G’s earnings and share price. Even so, I’d happily buy into this £18.2bn business today.

Buffett stock #3: London Stock Exchange Group

In February 2018, Warren Buffett said, “The best chance to deploy capital is when things are going down.” This brings me to London Stock Exchange Group (LSE: LSEG). This operator of stock markets and financial-data provider had a tough 2021. Indeed, its share price is down 21.6% over one year, making it one of the FTSE 100’s five worst-performing stocks since early 2021. Yet LSEG has something Buffett loves: a fantastic ‘competitive moat’ around its complex, interlinked businesses. As a result, this stock has leapt by 146% over five years. At the current share price of 7,216p, LSEG is valued at £39.4bn. But this stock briefly exceeded £100 on 16 February 2021, so I believe it has room to rebound. Thanks to capital expenditures and write downs, LSEG trades on an elevated price-to-earnings ratio of 80.4 and a lowly earnings yield of 1.2%. Also, the dividend yield is just 1.1% a year. Nevertheless, I view this as a growth stock poised to recapture former glories!