As the UK economy starts to recover from the pandemic, many mid-cap FTSE 250 stocks are reporting earnings growth.
I believe buying a basket of these companies could be one of the best ways to gain exposure to the UK recovery. As such, here are two FTSE 250 stocks I’d buy today.
FTSE 250 growth champions
The first company on my list is Pets at Home (LSE: PETS). This is the largest retailer of pet products in the country. Figures show the number of pets across the country has ballooned since the beginning of the pandemic. And it looks as if consumers are more willing than ever to splash out on their furry friends.
According to the company’s most recent results, revenues across the group increased 8% for the financial year ended 28 March. Underlying profits rose 6.1%, excluding a £40.4m charge. The business will be using this cash to fund the expansion of its vet practices across the country.
Unlike many other companies that have experienced a pandemic boost, I think it’s unlikely this will be a flash in the pan for the FTSE 250 stock. Pet ownership isn’t usually something that lasts for a couple of months. Many pets, of course, can live for years, suggesting the company has access to a whole new range of customers that’ll be returning for years.
As management looks to build on this growth, I’d buy the FTSE 250 company for my portfolio right now. That said, retail is an incredibly competitive industry, and Pets will likely face competition from online retailers and other high street peers in the future. If the company ignores this challenge, it could lose customers.
While I’d buy Pets as a growth play, I’d also acquire fellow FTSE 250 casino operator Rank (LSE: RNK) for my portfolio. Rank’s physical casinos have been closed for much of the pandemic. Luckily, the company’s online business has provided much-needed cash flow during this period.
Now the country’s fully open again, management can start to rebuild the group’s shattered operations. According to a trading update published at the beginning of July, even before reopening, the firm’s venues were trading “above cash breakeven.” In the company’s Grosvenor casinos outside London, gaming revenue had already returned to 2019 levels.
However, I’m aware this stock may not be suitable for all investors. Gambling is a highly regulated industry. As such, there’s always going to be a risk that companies like Rank could have their licences revoked. If they fall foul of regulations or licensing laws, authorities are usually quick to act.
Still, based on the above update, I’m confident we will see a further improvement in the company’s trading during the second half of the year. That’s the reason why I’d buy the FTSE 250 stock right now.