One FTSE 250 stock and one small-cap I’d consider buying with £2,000

Harvey Jones picks out two stocks that have been cheerfully defying the negative sentiment hitting their sectors.

| 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.

Outsourcing has been a tough line of business lately, given the troubles afflicting the likes of Carillion, Interserve and Kier Group.

Serco, so good

International service company Serco Group (LSE: SRP) has done far better with its share price, up 37% in the last 12 months. It’s up another 4% today after its trading update for the first half of 2019 showed 20% growth in underlying trading profit and 6% for revenues.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Serco also reported a £3bn order intake, including the award of its largest-ever contract, with AASC. 2019 will be the third year in a row in which order intake exceeds revenues.

Top end

The share price also benefited as it reported FY19 revenue is expected to be around the top end of the previously-stated range of £2.9-3bn, while underlying trading profit guidance was maintained at around £105m.

Group CEO Rupert Soames said the £1.73bn FTSE 250 company enjoys the “strategic advantage of having a strong international footprint” with 4% organic growth driven by the Americas and Asia Pacific divisions. Its UK division posted an improved trading performance, boosted by the Carillion health facilities management acquisition completed in 2018.

Fighting back

There’s one “but” though. When Rupert Hargreaves looked at Serco stock in February, he concluded it was too expensive, trading at a vastly optimistic forward P/E of 19.9, and feared that even a slight disappointment in earnings could punish the share price. Now it trades at a whopping 24.8 times earnings, making it even more expensive.

Soames has done a great job of turning Serco around since his appointment five years ago, when the group was struggling. He’s returned the company to growth and driven through plenty of M&A activity, and deserves plaudits. The downside is that it looks a bit pricey, plus there’s no dividend.

Liontrust roars

Fund manager Liontrust Asset Management (LSE: LIO) has also had a good spell, its stock up 26% in the past six months. But it’s flat today despite impressive final results showing a 10% rise in adjusted profit before tax to £30.1m and record inflows of nearly £1.8bn.

Revenues also rose 10% to £85m while profit before tax rose a bumper 55% to £19m, helped by a £4m drop in costs to £11.1m. Record net inflows for the year to 31 March totalled £1.78m, up from just over £1bn last year, particularly impressive given recent market bumpiness. CEO John Ions said a 21% increase in assets under management emphasise another successful year for Liontrust.”

He pinned this success on building an impressive group of investment teams, along with a great distribution franchise and a strong and distinctive brand.” Lionstust has always been respected by the brokers I talk to (mind you, so was Neil Woodford). 

Watch it

The share price is a bit less toppy than Serco’s at 13.5 times earnings and investors get a 3% yield and a progressive management attitude as well, with the total dividend per share lifted 27%.

Edward Sheldon also rates this small-cap champion, whose market-cap is just £367m. He even suggests it could be a takeover target. Fund managers are highly exposed to stock market fortunes. Maybe one to stick on your watch list for the next dip?

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Harvey Jones 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.

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Lloyds shares are down 10% in 2022. What next?

Lloyds shares have dropped by almost a tenth so far in 2022. But the bank is in good shape to…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How to aim to use the Warren Buffett method to make a million, starting today

Why do investors love Warren Buffett so much? His 3.6 million percent investment return since 1965 probably has a lot…

Read more »

Various denominations of notes in a pile
Investing Articles

3 big income stocks hiding in plain sight

There are plenty of high-paying income stocks flying under the radar right now. Paul Summers offers three examples he likes.

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

2 FTSE 100 shares I’m buying in July

Andrew Woods wonders whether these two FTSE 100 shares could bring growth to his portfolio and if he should add…

Read more »

positive mental health woman
Investing Articles

2 dirt-cheap stocks investors should buy to hold until 2030!

Recent market volatility means lots of UK shares now offer brilliant value. Here are two ultra-cheap stocks on my radar…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

My top 7 dividend shares to buy as inflation soars

Dividend shares can be an excellent way to earn some passive income. Our writer considers seven top picks to help…

Read more »

Woman looking at a jar of pennies
Investing Articles

I think the JD Sports share price is a bargain. Here’s why

Our writer explains why the JD Sports share price has led him to buy more for his portfolio.

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is this tech stock one of the best shares to buy now?

Jabran Khan is on the hunt for the best shares to buy now for his holdings and takes a closer…

Read more »