Many investors concentrate on the FTSE 100 when looking for attractive investments. I think that can be a mistake. Indeed, I believe there are just as many attractive investments in the FTSE 250.
With that in mind, here are five FTSE 250 stocks I’d buy for my portfolio today.
FTSE 250 stocks on offer
The first company on my list is the Watches of Switzerland Group. This retailer has reported explosive sales growth over the past 12 months as stuck-at-home consumers have splashed out on luxury watches and jewellery.
According to its latest trading update, group revenue for its 2021 financial year increased 81.8%. Management is planning to reinvest this profit back into the business by opening new stores and boutiques. I think this spending should help sustain the company’s growth. That’s why I’d buy this FTSE 250 stock.
However, the risk of over-expansion is the biggest threat hanging over the firm right now, so that’s something I’ll keep an eye on going forward.
Away from the luxury goods sector, I’d also buy construction sector companies Volution and Wickes. Both of these businesses seem to be benefiting from the building boom currently underway across the UK and other Western markets. Sales at the former rose nearly 11% for the six months ended 31 January.
Wickes is yet to report a trading update as an independent business. Still, considering the performance of peers such as B&Q, which have reported double-digit sales growth this year, I’m optimistic about its potential.
That said, while the construction sector is currently benefiting from a mini-boom, it’s usually the first to feel the pain in any downturn. As such, another economic slump could see both businesses report a slow down in trade.
I’d also buy Mr Kipling owner Premier Foods for my portfolio FTSE 250 stocks. This company reported strong growth last year as consumers reconnected with its brands.
The surge in profitability has allowed the group to reduce debt and earmark more funds for reinvestment. This should help the company reduce costs and increase efficiency and brand awareness over the next few years.
These tailwinds may work together to support growth in the years ahead. However, rising costs could weigh on profit margins, and this is probably the most significant change the enterprise will face as we advance.
The final investment I’d buy for my portfolio of FTSE 250 stocks is Ultra Electronics. This company provides application-engineered solutions for IT systems. Demand for its services has exploded over the past year, and this growth continued into the first quarter of 2021. According to its latest trading update, growth in the opening quarter was “well ahead” of the same period in 2020.
As the world becomes more connected, I think demand for services provided by enterprises such as Ultra only grow. That’s why I’d buy the stock today, although I am also aware the sector is incredibly competitive. If the company fails to keep up with its peers, growth could hit the rocks.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2021