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.
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
-
Equity release jumps 4% amid growing inheritance tax concerns and sticky inflationThe amount of money withdrawn by equity release has increased, but the total number of plans has fallen
-
Nest Pensions abandoned by 10 million workers – why are savers ditching the UK’s biggest workplace pension?Savers are halting contributions and leaving millions of small pots behind them, Freedom of Information (FOI) data provided exclusively to MoneyWeek shows. We look at why and what it means.
-
The Stella Show is still on the road – can Stella Li keep it that way?Stella Li is the globe-trotting ambassador for Chinese electric-car company BYD, which has grown into a world leader. Can she keep the motor running?
-
Global investors have overlooked these solid stocks going for growthOpinion Nisha Thakrar, investment specialist at Nedgroup Investments, selects three undervalued stocks with long-term growth potential
-
LVMH is set to prosper as the wealthy start shopping againAfter two years of uncertainty, the outlook for LVMH is starting to improve. Is now a good time to add the luxury-goods purveyor to your portfolio?
-
Japan is still rising to new highs – here's how to investOpinion Political ructions in Japan are no obstacle to gains, and the return of inflation may even benefit stocks, says Max King. What is Japan doing right?
-
Investors need to get ready for an age of uncertainty and upheavalTectonic geopolitical and economic shifts are underway. Investors need to consider a range of tools when positioning portfolios to accommodate these changes
-
Investing in UK universities: how to spin research into profitsUK universities are a vital economic asset, but they are also Britain's 'equivalent of Gulf oil.' There are opportunities here for investors
-
AI is a bet we’re forced to makeIt’s impossible to say yet if AI will revolutionise the world, but failure would clearly be very costly, says Cris Sholto Heaton
-
The MoneyWeek Wealth Summit 2025: how to invest for a volatile eraMoneyWeek's 25th birthday conference’s agenda offers investors a wide array of compelling themes
