I’d aim to build a FTSE 250 portfolio starting with these 5 stocks
The UK’s FTSE 250 index of mid-cap companies has been recovering along with the rest of market since the lows of October 2022. And I reckon many of its stocks look attractive now.
To me, the index has a greater emphasis on growth than the larger FTSE 100 index. Indeed, many of the 250 or so constituents are building their earnings at a faster rate than the Footsie’s mature businesses. And along with that faster growth, FTSE 250 companies tend to come with higher valuations.
But if the trajectory of a mid-cap enterprise is up, I’m happy to view a richer valuation as a mark of quality. And, in many cases, I don’t believe a higher rating diminishes a stock’s potential to deliver meaningful long-term portfolio gains for me.
Stocks on my watch list
I’m fully invested right now. But if I had spare cash to invest would consider building a long-term portfolio with 10 FTSE 250 stocks.
The first is IMI, the company engineering and manufacturing products to control the movement of fluids. The directors delivered a strong trading update in November 2022 with a positive outlook statement.
We’ll find out more about recent operational progress with the full-year results report due on 3 March.
Meanwhile, I’d also consider the fast-moving consumer goods business PZ Cussons. Last September’s full-year report contained a competent set of figures and an optimistic outlook statement. The half-year report is due soon on 8 February and I’ll be looking out for it with interest.
But I’m also keen on Hill & Smith. The business provides galvanizing, steel, composite, and other products and services serving industry and infrastructure projects.
On 25 January, the company released a robust trading statement saying operating profit was ahead of analysts’ expectations. And we can find out more with the full-year results due on 8 March.
Potential catalysts for growth
In the meantime, I’m tempted by fantasy miniature figures and games maker Games Workshop. The company has a robust multi-year record of trading and financial figures.
And in December 2022 it announced an agreement in principle with Amazon to develop Games Workshop’s intellectual property for film and television productions. Also, for Games Workshop to grant Amazon associated merchandising rights.
I’m hopeful that the situation may lead to increased revenue and profits in the coming years, although positive outcomes are not guaranteed.
Finally, I’d explore the possibility of adding DiscoverIE to my portfolio. The company designs and makes customised electronics for industrial applications.
On 25 January, the third-quarter trading update reported “good trading momentum”. And the firm also recently completed its acquisition of a company called Magnasphere. The move aims to strengthen its footprint in the US.
All these five stocks look interesting to me now. However, there’s no guarantee that any of them will go on to deliver decent long-term gains for shareholders just because I like them. Indeed, operational setbacks can affect any business at any time.
On top of that, I wouldn’t buy any of them without first diving in with deeper research. Nevertheless, these stocks are high up my FTSE 250 watch list and I’m keeping a close eye on them.
The post I’d aim to build a FTSE 250 portfolio starting with these 5 stocks appeared first on The Motley Fool UK.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon.com, Games Workshop Group Plc, IMI, and PZ Cussons. 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 2023