I own a mix of large and mid-cap stocks in my portfolio. I’m planning to buy more companies as the UK economy reopens and returns to growth. With that in mind, here is one FTSE 100 and one FTSE 250 stock I’d buy to add to my portfolio.
FTSE 100 stock
The first company on the list is pharmaceutical giant AstraZeneca (LSE: AZN). Best-known for its coronavirus jab today, there’s much more to this business than its vaccines division.
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Astra also has a large and growing oncology business, which I think is far more exciting. The group has developed several treatments for major cancers that are currently on the market. These drugs could become billion-dollar brands over the next few years.
And management is focusing on developing this area of the business. It’s likely to be a key profit centre for the group in the future because of the new treatments in the pipeline and the rising prevalence of cancer in the global population.
The key risks facing the company are competition. It’s not the only firm developing cancer treatments. These treatments are also costly to develop and don’t always work. A string of development failures could cost the group huge sums and would dent its repetition.
Despite these risks and challenges, I’d buy Astra for my portfolio as an FTSE 100 blue-chip investment.
FTSE 250 champion
As well as Astra, I would add to my holdings of broadcaster ITV (LSE: ITV).
A former FTSE 100 constituent, ITV crashed out of the index last year when the pandemic decimated its revenue. However, I now see the company as a recovery play.
As the UK economy reopens, advertising demand is increasing. According to its latest trading update, the company believes advertising demand will be 85% to 90% of 2019 levels by June.
In the meantime, the group is benefiting from increased demand for its studios operation. Total external revenue increased 2% in the first quarter of 2020, with the growth almost entirely driven by the studios business.
Total advertising revenue for the first half is predicted to rise 26%. As well as improving advertising trends, ITV is on track to deliver its £30m cost-saving target this year. This should help increase overall profit margins.
All in all, ITV is seeing increased demand for its studios business, recovering advertising revenues, and lower costs. Looking at these three tailwinds, I believe the outlook for the FTSE 250 stock is incredibly appealing. That’s why I would buy more shares for my portfolio today.
That said, I am worried about ITV’s debt load. Net debt, which includes leases, was £558m at the end of March, compared to £545m at the end of December. That’s a little higher than I would like, and I think the company’s elevated level of borrowing could impact its ability to invest for growth. I think that’s the biggest challenge the group faces right now.