The FTSE 250 index is up 31% over the last year as the UK economy has gradually recovered from the Covid-19 pandemic. Although devoid of a crystal ball, I suspect some of its higher-quality constituents may further contribute to this rebound in August. Here are three I’d be happy to buy in advance of next month.
Powering on
Having once owned the stock, XP Power‘s (LSE: XPP) progress has served to remind me that it’s often a good idea to really run your winners. As I type, the stock’s up 35% in 12months. While some of this will be due to the wider market recovery, investors have clearly been cheered by the company boasting of a “strong order book.”
XP Power’s shares traded on 27 times forecast earnings on Friday. That’s hardly cheap considering rising Covid infection rates. Foreign exchange movements could also prove a drag for the mid-cap.
To quote Warren Buffett however, I’d rather buy “a wonderful company at a fair price than a fair company at a wonderful price.” XP is a leading manufacturer of critical power control components for the electronics industry. Once onboard, its customers rarely look elsewhere.
So long as I wasn’t attempting to move in and out of the stock quickly (which isn’t the Foolish way), I’d have no issue buying some XPP shares before half-year numbers on 2 August.
A quality FTSE 250 stock
As a holder of the stock already, I’ll also be paying close attention to FTSE 250 member Greggs (LSE: GRG) next month. It reveals interim results to the market on 3 August.
The question isn’t whether Greggs is a great company. It’s got a strong brand, good leadership and has shown an ability to tap into emerging trends (vegan food) before others. Pandemic aside, returns on capital have long been great.
No, the question is whether 27 times earnings is a reasonable price to pay now. Assuming Greggs has benefitted from more people hitting the road for staycations this year, I think it might be. Growth in retail sales over May and June also bodes well.
Sure, the time to really pile into Greggs was last September. And yes, buying now is risky if the Delta variant really gets out of control. Notwithstanding this, I’d still buy into any weakness. The long-term outlook remains solid.
Strong growth ahead
My final pick is real estate investment trust Tritax Big Box (LSE: BBOX). I’d be seriously amazed if next month’s interim results (5 August) weren’t decent. After all, multiple lockdowns and the subsequent explosion in online retail have pushed demand for warehousing through the roof.
None of this has escaped the market’s attention. BBOX shares are up 38% since this time last year. As a result, shares in this FTSE 250 member now trade at a steep premium to their net asset value (the value of Tritax’s property minus its liabilities). Some might think now’s a risky time to buy.
But let’s be frank. Demand for BBOX’s buildings won’t disappear. In fact, I think we’re still in the early stages as far as online shopping is concerned.
On balance, I’d be happy to buy Tritax today to secure the dividend stream, However, I’d also be comfortable adding to my position if the share price subsequently lets off steam.
