Forget buy-to-let! Here’s how I think these 2 FTSE 250 bargains can help you make a million

The returns from buy-to-let are falling, but these FTSE 250 stocks should report double-digit earnings growth in the next few years, says Rupert Hargreaves.

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Beazley (LSE: BEZ) is a global insurance giant, and that’s why I believe the stock could outperform buy-to-let property over the long term. 

The most significant advantage the company has over buy-to-let property, in my opinion, is its global diversification in a growing market.

As the world economy continues to expand overall (despite trade wars) and many consumers become more affluent, insurers like Beazley are seeing their sales rising with more and more customers turning to the group to insure their assets against disaster. 

Growing earnings

Over the past six years, Beazley’s sales have grown at a compound annual rate of 5.3%. That might not seem like much, but because the market is only growing, over the long term, this steady revenue growth adds up. Over the past 30 years, the company has gone from having almost no income at all to sales of $2.6bn. 

I think this trend can continue, which is why I reckon the stock can help you make a million. Over the past decade, shares in Beazley have returned 20.7% per annum, including dividends, as the company has benefited from global growth and expansion in the US and Asia. 

I don’t think it is realistic to expect this 20%+ per annum return trend to continue, of course, but I believe there is a good chance the company can post annual earnings growth in the 5% to 10% range, which would an annual return in the region of 10% over the long term. This rate of return is enough to turn a £100,000 investment into £1m in just 24 years. 

Shares in Beazley are currently dealing at a PEG ratio of 0.5 for 2019, implying the stock offers growth at a reasonable price. On top of this discount valuation, there’s also a dividend yield of 2.1%. 

Copper champion

Alongside Beazley, I think copper miner Kaz Minerals (LSE: KAZ) could be a millionaire-maker stock. Kaz is one of the world’s largest pureplay copper miners.

Demand for this metal is only expected to rise as renewable energy becomes more widespread, and the world becomes more connected. Indeed, the copper market expanded at a compound annual rate of 4.2% in the decade to 2019, and analysts are expecting a similar rate for the next decade.

I expect Kaz to benefit significantly from this growth. The company is targeting 300,000 tonnes of copper production in 2019 and has a handful of big expansion projects in the works. These include its first mine outside of Kazakhstan, the Baimskaya copper project that it acquired earlier this year and is expected to cost $5.5bn to develop. 

Most mining companies would baulk at such a large commitment, but Kaz has a history of successfully developing large mining projects. I think the probability of the company repeating past success here is high.

At this point, it is difficult to tell how much value the Baimskaya copper project will create, but even without this, shares in Kaz look cheap. The stock is currently dealing at a forward P/E of 6.4 and supports a dividend yield of 1.5%.

I think the shares are worth double considering Kaz’s long-term potential, that’s without taking into account the $5.5bn Baimskaya mine, which could increase the group’s value by as much as 200%.

If the company manages to pull this development off, investors could see a four-to-fivefold return on their money, according to my calculations. 

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.

Rupert Hargreaves owns no share 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.

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