I think some of the best stocks to buy now can be found in the UK mid-cap index, the FTSE 250. With that in mind, here are three companies I’d buy for my portfolio today.
Best stocks to buy now
The first on my list is Royal Mail (LSE: RMG). For the past few years, this organisation has been trying to find its feet. However, last year, the parcel and letter delivery group really came into its own.
Royal Mail introduced several new initiatives to help facilitate increased parcel deliveries and collections last year. These initiatives, plus the e-commerce tailwind, have put the group on track to generate astounding growth for 2020/21.
I think the company should be able to use these profits to power its transformation programme in the years ahead. That’s why I believe this is one of the best stocks to buy now and I’d add the FTSE 250 business to my portfolio.
That’s not to say the company’s without its challenges. The group’s key risks are labour disputes and the ever-decreasing number of letters moving around the UK. Both of these factors could have an impact on its profit margins and slow growth.
FTSE 250 bargain
Like Royal Mail, Just (LSE: JUST) has a chequered history. Due to rising losses and uncertainty, the retirement products and services specialist was forced to cut its dividend in 2018. It hasn’t paid one since.
Last year, its fortunes began to improve. The group reported an 11% rise in annual earnings, boosted by solid income growth from new sales. The business also noted a stronger-than-expected balance sheet position, which analysts now believe could lead to a reintroduction of the dividend.
Despite its recovery potential, the stock is trading at a forward P/E of just six. Still, this is based on analysts projections, which always involve a level of speculation.
Indeed, the corporation is exposed to multiple risks. One of Just’s core business lines, annuities, is highly capital-intensive, and a slight change in interest rates could have a significant impact on profitability and the company’s capital position. This could damage its balance sheet and further limit its income potential.
Nonetheless, I think this is one of the best shares to buy today and I’d add it to my portfolio of FTSE 250 stocks.
Income and growth
The final mid-cap stock I’d buy right now is 3I Infrastructure (LSE: 3IN). This company could provide investors with a solid blend of income and growth. It invests in infrastructure assets worldwide to provide shareholders with a total return of 8-10% per annum. This is just a target, and there’s no guarantee the business will achieve this level of returns for investors.
However, 3I has a strong track record of investing in stable assets that provide a recurring income stream. That’s why I believe it’s one of the best shares to buy today in the FTSE 250 today.
The business’s key risks include interest rate increases, which could reduce its ability to raise financing. There’s also the potential of nationalisation infrastructure of assets, which is a slim risk, but investors cannot ignore this potential challenge.
