Russia’s invasion of Ukraine has shocked and appalled us and the rest of the world. It has also left investors with a whole Pandora’s box of unanswered questions to unpack in the weeks and months to come.
In times like this, you can still build a portfolio of attractive individual stocks even if you don’t have all the big picture answers. When markets are as rattled by extreme events as they have been recently, there are always gaps between price and fundamentals that can present opportunities for stock selection.
Burford Capital: pioneering a profitable niche
In uncertain times, owning shares of idiosyncratic businesses can provide valuable diversification away from geopolitical and macroeconomic turbulence. Burford Capital (LSE: BUR) is a great example. It pioneered the niche of litigation finance. Just like a stockpicker, it excels at picking litigation opportunities to bankroll. If you are involved in a major lawsuit and need money to keep the fight going, Burford will provide it. In exchange, it is entitled to a share of the winnings if you prevail in court.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
While Burford doesn’t always back the winning party, it has an extremely good record when it comes to assessing the merits of cases and the risk-reward proposition. As a result of this unique expertise, it is one of the very few companies that is good at litigation finance and its return on invested capital is astronomical. We expect the share price to reward us over our long-term investment horizon.
Kinder Morgan: a natural-gas toll collector
The world was already facing an energy crisis well before Russia’s invasion of Ukraine. Since then, the need for energy security has only become more urgent. This bodes particularly well for natural gas, which investors are starting to realise is critical to the energy transition.
As the operator of the largest natural-gas pipeline network in the US, Kinder Morgan (NYSE: KMI) is basically a toll-collector. About 90% of its business is in long-term take-or-pay contracts with investment-grade customers such as electric utilities.
Co-founder Richard Kinder, who set up the business in 1997, continues to serve as chairman. He is also the largest shareholder with an 11% stake in the company. As further evidence of his shareholder orientation, Kinder is paid just $1 in annual salary and forbids the use of corporate jets. At the current share price, the company offers a generous and sustainable 6.5% dividend yield.
Investing in defence
It’s impossible to know how current events in Ukraine will play out. We would all love to live in a world that did not require defence spending. However, Russia’s recent actions have proved one thing: defence spending is essential to protect our societies.
In recent years, the lack of attention that this sector has received from analysts and fund managers has been remarkable. At a recent virtual presentation we were one of only two attendees. This may now change.
Defence companies such as BAE Systems (LSE: BA) in the UK, Saab (Stockholm: SAABB) in Sweden, and Rheinmetall (Frankfurt: RHM) in Germany should be clear beneficiaries of greater defence spending. At the same time, investors may come to realise that these companies perform an incredibly valuable social role in protecting Europe.
• Listen to Alec discuss these and other stock picks with Merryn on the MoneyWeek Podcast
-
Barclays begins paying up to £100 compensation to customers after banking outageBarclays will pay up to £7.5 million in compensation to customers after its banking services were disrupted by an IT outage
-
Review: Shangri-La Paris – an ode to the world’s best foodNatasha Langan enjoys fine French and Chinese cuisine at the Shangri-La Paris
-
The star small and mid-cap stocks income investors have overlookedOpinion Thomas Moore, senior investment director, Aberdeen, highlights three company stocks as he shares where he would put his money
-
Falling revenues and mounting debt spell trouble for Jumia TechnologiesStruggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.
-
Chemring Group: an explosive investment opportunity in defenceEuropean states are raising their military spending, and Chemring Group looks well placed to profit
-
Next reports £1 billion in annual profits for the first time – what's next for the retailer?Clothing retailer Next has become only the fourth member of its sector to surpass £1 billion in annual profits. What does this mean for the company's future?
-
Best of British bargains: cash in on undervalued companies in the UK stock marketOpinion Michael Field, Chief Equity Market Strategist, EMEA, Morningstar, selects three attractive UK stocks where he'd put his money
-
Building firm Keller presents low debt and ample scope for growthGeotechnical contractor Keller, which supports vital global infrastructure, boasts rising profits and a cheap valuation
-
PZ Cussons share price down 75% in last decade – why it's one to watchOpinion Once-strong consumer-goods business PZ Cussons is out of favour with the market. That spells opportunity for investors, says Jamie Ward
-
Cash in on the biotech sector with specialist trust BioPharmaOpinion BioPharma has an attractive niche in lending to asset-rich biotechnology companies
