The FTSE 250 has recovered ground lately but at recent levels remains some way off the record peaks close to 22,000 points reached around the turn of 2020. In fact it’s crashed by almost 6,000 points from those heady heights.
It makes sense that investors have taken a step back as the world faces unprecedented social, economic, and political uncertainty. However, an absence of healthy stock picker appetite does – at least in my opinion – leave a lot of companies from the UK’s second-tier share index looking seriously underbought.
The gold standard
Petropavlovsk (LSE: POG) might not have crashed in value during the past few months. But this one of those FTSE 250 stocks I reckon is too cheap to miss at current prices. A forward price-to-earnings ratio of around 7 times doesn’t reflect the recent explosion in gold demand. It’s a phenomenon that could turbocharge profits growth at this Russia-focussed miner in 2020.
Latest data from the World Gold Council shows that inflows into gold-backed ETFs rose for a sixth straight month in April. Total holdings in these investment products sailed to record peaks of 3,355 tonnes as a consequence. There’s a galaxy of reasons why demand for bullion should continue to gain ground in the short-to-medium term at least, too.
Looking away from gold price forecasts, though, Petropavlovsk’s profits will also benefit from the start up of its Pressure Oxidation (or POX) hub at its Pokrovskiy asset now and in the future.
Another bargain from the FTSE 250
It’s always a good idea to have gold exposure in your investment portfolio. Recessions are nothing new, after all, and shares like this are a great hedge to help protect your wealth. So I’d buy Petropavlovsk at current prices and hold it for years to come.
I reckon power station operator ContourGlobal (LSE: GLO) is a brilliant buy for the same reasons. Its operations have remained unmoved by the Covid-19 breakout. They will remain largely unaffected by the upcoming global downturn, too, reflecting the immense defensive qualities of utilities providers.
8% dividend yields
It’s why City analysts remain convinced that earnings here will more than double in 2020. It’s a prediction that leaves the FTSE 250 company carrying a rock-bottom price-to-earnings growth (PEG) ratio of 0.1.
ContourGlobal offers a monster dividend yield north of 8%, too. Don’t just think of the power play simply as a great pick for the next year or so, though, as the global economy crashes. Acquisitions (like that of two gas-fired combined heat and power plants in Mexico last year) have helped to drive profits and dividends sky high recently.
And investors can expect much more action on this front, too, the company commenting in March that “we see many opportunities for further growth, including organic, greenfield and acquisitions”. I expect returns from GlobalContour to continue soaring as its global expansion plan clicks through the gears.
