Shares to buy: 1 FTSE 250 stock I’d add to my portfolio

The FTSE 250 contains many quality shares to buy. Zaven Boyrazian analyses one stock that’s on course for a potentially massive bounce-back from Covid-19.

| 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.

The Covid-19 pandemic has caused significant disruptions all around the world, especially for industrial manufacturing. However, China recently issued a stimulus package to reboot its industrial manufacturing driven-economy. This is excellent news for one FTSE 250 stock I’m watching. Let’s take a look to see whether I should buy these shares for my growth portfolio.

A fiery opportunity within the FTSE 250

Bodycote (LSE:BOY) is a world-leading provider of thermal processing services. Put simply, it takes some metals, throws them into a glorified oven, and heats them under specific temperatures and pressures to manipulate their material properties. The process drastically improves the strength, toughness, and durability of metals and alloys—an essential trait for almost all machinery components today.

The FTSE 250 company has been around for almost a century. It started out as a small textiles business in 1923. After a long trail of acquisitions, mergers and demergers, Bodycote now serves over 40,000 customers with 185 facilities across 23 countries.

It has successfully built a strong reputation for excellence within the industrial sectors. Given the skill and precision required to correctly heat-treat metals, I believe its reputation has granted quite a high level of customer loyalty, as well as pricing power. Even if a competitor offers cheaper rates, I don’t believe this alone would be enough to convince existing customers to switch.

Playing with fire can be a risky business 

As previously stated, Bodycote’s brand appears to be held in high regard by its customers and the industrial sectors in general. While this has undoubtedly granted it some competitive advantages, it also adds additional pressure. 

Industrial manufacturing companies typically rely on a ‘just-in-time’ supply chain. This is particularly important since Bodycote’s services are quite dangerous to perform. Accidents can happen. And while strict safety precautions help mitigate this risk, it will always be a present threat. If such a tragedy occurs, the disruptions will likely lead to delays in orders that will compromise its reputation.

Another risk to consider is the international operations themselves. By having facilities outside the UK, the business should be quite resilient to any impact from Brexit. However, an unfortunate side effect of operating internationally is exposure to fluctuating currency prices from both a sales and expenses perspective.

Looking for FTSE 250 shares to buy now I'd add this FTSE 250 stock to my portfolio but it does have risks

Bottom line: is Bodycote a FTSE 250 share to buy now?

Treating metals is not the most glamourous sounding business. But the process is essential to industries such as aerospace, energy, and manufacturing. All of these sectors have been heavily impacted by Covid-19, and these disruptions have consequently been passed onto Bodycote. As a result, revenue and profits in 2020 took a significant hit.

But now that factories are re-opening, the demand for thermal processing services is back on the rise. And Bodycote is still a leader within this space. That’s why I think now could be the best time to add the stock to my portfolio.

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.

Zaven Boyrazian does not own shares in Bodycote. The Motley Fool UK has recommended Bodycote. 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.

More on Investing Articles

Investing Articles

5 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he…

Read more »

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »