THE FTSE250 was thrust into the spotlight today as the UK’s second-tier index hit its highest-ever level on a vaccine-fuelled wave of economic optimism.
The historic high of 22182 points seals an ascent of more than 8% so far this year and is almost 10000 points above the pandemic low of 13008 last March.
It also exceeds the previous record of 21920 reached in the aftermath of Boris Johnson's December 2019 General Election victory and pledge to ‘get Brexit done’’.
The recovery in the mid-cap index which more closely reflects the value of UK domestic companies than its big sister the FTSE100 offers several opportunities for investors.
Chief among those are cyclical plays yet to recover their pre-pandemic levels, particularly the big-hitters relegated from the FTSE100 in last month’s quarterly reshuffle now poised to recover as restrictions ease.
Richard Hunter, head of markets at Interactive Investor, has picked out seven potential winners looking ripe for promotion back to the premier league next quarter - when the factories of FTSE100 robot trackers will be expected to push their prices higher still.
We have also included their five-year low and high watermarks to give a sense of the possible scale of any mid-term gains or losses.
WM Morrison Supermarkets as it grows its online offering to compete with its larger rivals, who fared better through the pandemic. Morrisons missed retaining its place in FTSE100 in the recent reshuffle by a whisker and a small recovery in its price since leaves it as a promotion contender at the next reshuffle in June.
158.22 (November 2020)
250.25 (August 2018)
ITV’s downward five-year trajectory was accelerated into a near-vertical by the pandemic, but it should benefit from economic recovery as advertising spend resumes, while its studios business will be able to return to full-time productions, both of which should boost earnings.
54.42 (April 2020)
212.16 (April 2016)
easyJet also slipped out of the FTSE 100 last month and while its fortunes will depend on the nature of travel restrictions, vaccine passports, “green” countries and the consumer’s propensity to holiday abroad again, the stars could be aligning. It has the headroom to survive from the pandemic and will likely emerge with far fewer rivals in the no-frills sector.
466.0 (April 2020)
1787.68 (June 2018)
Marks & Spencer has the insurance of its jewel in the crown, namely the Food business, while the joint venture with Ocado is off to a flying start. The perennial issues of its General Merchandise/clothing business is where a true recovery could come if the company can at last shake off its unfashionable image in that space.
86.93 (May 2020)
418.63 (May 2016)
Carnival Corporation. Few companies suffered a Covid-19 crash like Carnival, but the cruise operator could be a beneficiary of pent-up demand. Recent announcements from Saga and the Norwegian Cruise Line suggests that demand is in strong evidence and, indeed the tide could be turning.
624.70 (April 2020)
5387.97 (September 2017)
Dunelm. Pent-up demand following the first lockdown was in evidence, which could augur well for the home furnishing retailer. With more wear-and-tear than usual as a result of enforced lockdowns, this could benefit Dunelm if some of the reported pent-up consumer savings are spent on the home, especially if the likelihood of overseas summer holidays remains unclear.
1531.06 (October 2020)
470.56 (July 2018)
JD Wetherspoon is planning to expand its pub estate and has weathered the pandemic storm relatively well, considering the extraordinary circumstances, with net debt remaining stable. The strength of its recovery will largely be driven by the thirst of consumers to enjoy the new-found freedoms once the UK fully reopens the hospitality trade fully next month.
717.18p (Mar 2020)
1694.00 (December 2019)
Neil Wilson, chief market analyst at markets.com, suggested good cyclical plays that have yet to recover their pre-pandemic levels ought to benefit from a big uptick in demand this year.
“National Express and Greencore could be among the names to consider, recruitment giant Hays is nice one to play a hiring boom, and while it obviously comes with some big ESG strings BlackRock Mining Trust could be one to watch if you buy into the commodity supercycle theory.”
He added: “UK equities were set to catch up as they entered 2021 trading at a large discount to European and US peers, but have yet to really achieve their full potential.”
Danni Hewson, financial analyst at AJ Bell, added: “The FTSE 250 is riding an optimism fuelled wave as the UK gears up for life after lockdown.
“Companies as varied as Carnival Cruises, shopping centre owner Hammerson and Upper Crust owners SSP all bounded higher today as investors embraced a new-found confidence that the new normal is out of date.
“The country’s supercharged vaccine rollout coupled with confirmation that the roadmap out of lockdown doesn’t require any last-minute detours just yet is fostering belief that the recovery is sustainable this time.
“There may be a few speed bumps ahead but at least we’ll take them with neatly groomed hair.”