Time to get greedy with these 2 FTSE 350 stocks

These two FTSE 350 (INDEXFTSE:NMX) shares could soar in 2017 and beyond.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

While the FTSE 100 may grab most of the headlines, there are a number of mid-cap shares which could deliver strong returns in 2017. Part of the reason for this is valuation. The FTSE 100 has risen by 21% in the last year, while the FTSE 250‘s price level is only 15% higher. This indicates there may be better value opportunities on offer within mid-caps. And since the FTSE 250 has historically outperformed the FTSE 100 in the long run, now could be the right time to buy these two mid-cap stocks.

A return to growth

The resources sector has endured a challenging few years. Lower commodity prices have caused profitability across the sector to decline, with miners and oil & gas companies investing less in developing new assets. This has impacted engineering stocks such as Weir Group (LSE: WEIR), which is expected to report its fourth consecutive fall in earnings when it releases its results for the 2016 financial year.

However, Weir could have a much better future than past. It is expected to record a rise in its bottom line of 34% this year, followed by growth of 23% next year. While its shares are 28% higher than they were six months ago, the market does not yet appear to have priced-in the company’s improving outlook. Weir trades on a price-to-earnings growth (PEG) ratio of only 0.8, which indicates that there is significantly more share price growth ahead.

Certainly, commodity price performance will have a major impact on demand for Weir’s services. But with such a wide margin of safety and the potential for price rises, particularly in the oil & gas sector, now could be an excellent opportunity to buy the company.

Consistent growth

While Weir offers turnaround potential, fellow mid-cap Investec (LSE: INVP) has a track record of stable performance. It has recorded a rising bottom line in each of the last four years, and is expected to do likewise over the next couple of years. For example, earnings are due to increase by 15% next year, followed by 7% the year after.

This consistent performance is perhaps surprising given the challenges faced in South Africa. Its economic performance has been somewhat disappointing in recent years and since it is a key market for Investec, it may have acted as a drag on its overall performance. However, the country also offers long-term growth potential and with Investec having a PEG ratio of 1.4, it seems to offer capital gain prospects.

In addition, Investec may be of interest to income-seeking investors. It currently yields 4.4% from a dividend which is covered twice by profit. This indicates that there is scope for a rapid rise in dividends. Given that inflation could reach 3% or more this year, Investec could become increasingly sought-after during the course of the year.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Weir. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »