3 FTSE 250 shares I’d buy in May

G A Chester discusses why he thinks these FTSE 250 shares are strong businesses, and what he likes about their recent trading updates.

| 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.

Last week was a busy one for company news, and three FTSE 250 shares particularly caught my eye. I believe all three are strong businesses. Here’s what I liked about their updates and why I’d be happy to buy their shares in May.

Considerable appeal

Medical products and technologies company ConvaTec (LSE: CTEC) is a FTSE 250 share I think has considerable appeal. For one thing, it’s a geographically diversified global business. For another, it has leading market positions in the areas it focuses on. Namely, advanced wound care, ostomy care, continence & critical care, and infusion care.

CTEC reported a “strong” performance in the three months to 31 March. Group organic revenue increased 6.7%. And all its business segments contributed to the growth. In addition, management said it “executed effectively” on its strategic transformation, as it targets sustainable and profitable growth.

Trading at 25 times trailing earnings, the market is pricing CTEC for successful delivery of its strategy. Nevertheless, there’s a risk the “significant number of strategic initiatives” the company is pursuing won’t deliver the anticipated growth. If so, the shares could de-rate to a lower earnings multiple. However, I found last week’s update highly encouraging, and I think CTEC could be a good long-term investment for me.

FTSE 250 shares #2

Howden Joinery (LSE: HWDN) is the UK’s leading trade supplier of kitchens. I think its scale and specialisation are competitive advantages. It still has growth to go for in the UK, but is also expanding from a low base in France and Belgium.

Last week’s trading update was for the 16 weeks to 17 April. It was no surprise to see massive increases in revenue compared to the same period last year, which was hit hard by the first Covid lockdown. However, I was impressed by comparisons with the pre-pandemic period in 2019. UK revenue increased 13% (or 9% on a same-depot basis). European revenue increased 38% (or 20% on a same-depot basis).

There are a number of risks to HWDN’s prospects. These include the cyclicality of the construction sector, notably residential housing. Also, the expansion into Europe is still at too early a stage to be sure it’ll be a success. On balance though, I think this could be another good long-term investment for me. HWDN is trading at 32 times last year’s pandemic-depressed earnings.

FTSE 250 shares #3

I’m a big fan of the power of consumer goods brands. PZ Cussons (LSE: PZC) has a strong stable of them. They include Carex, Imperial Leather and St Tropez. The company also has attractive international diversification across both developed and emerging markets.

Last week, PZC reported a 4.7% increase in revenue (at constant currency) for the 13 weeks to 27 February. I liked that all regions grew revenue and profit. This continued the “renewed momentum” in the business after a long period of struggling for growth under its previous chief executive.

PZC has been investing heavily behind its brands in the initial phase of the new CEO’s strategy to return to sustainable profit growth. As it’s still early days, there’s no guarantee the recent momentum will continue. As with CTEC, the shares could de-rate if the strategy doesn’t deliver the growth implied by PZC’s rating of 21 times trailing earnings. However, I like the company’s brands and the new CEO’s approach. As such, this is another FTSE 250 share I think could be a good long-term investment for me.

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.

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Howden Joinery Group and PZ Cussons. 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

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

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

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »

Investing Articles

What might the 5-year price chart tell us about BT shares?

Christopher Ruane considers what clues the long-term performance of BT shares might offer him about business performance and whether to…

Read more »