Last weekend, I looked at a number of high-quality FTSE 100 stocks I’d buy in the event of a market tumble (which I think looks increasingly on the cards). Today, I’m doing the same thing but with members of the FTSE 250. Here are three shares I’d hope to pick up at knockdown prices.
FTSE 250 fantasy figurine maker Games Workshop (LSE: GAW) would be a near-automatic buy for me if its share price were to be dragged down by a market-wide correction. The company screams quality, from high margins and returns on capital to a wonderfully robust financial position.
Looking ahead, I also think there’s a lot to be positive about. The move into China and Japan via the opening of Warhammer stores/cafes should ensure that GAW keeps gaining new fans from ‘white space’ markets. The forthcoming launch of video games and live action shows also bodes well.
As things stand, the stock commands a valuation of 31 times forecast earnings. That’s not surprising given that the company was a huge beneficiary of the multiple lockdowns since March 2020. At £4bn, however, it’s a very different proposition than it was a few years ago. So, the biggest risk I see here is the cost of not investing in a faster-growing (smaller) company elsewhere. This is why, for me, GAW is more of an opportunistic buy in troubled times.
Waiting to for the right time
Luxury watch seller Watches of Switzerland (LSE: WOSG) goes down as a classic example of a stock I’ve admired for quite a while but never actually pulled the trigger on. This reluctance has cost me dearly. The share price is up 220% in the last 12 months.
Based on recent updates, I see this continuing. In August, the FTSE 250 member revealed that Q1 revenue had pretty much doubled from that achieved in 2020. It was also 46% higher than in the same period in 2019. Throw in new store openings both here and abroad and WOSG could keep ticking higher.
Of course, all investments carry risk. Having done so well, many early owners may begin banking profits. On top of this, there might come a time when the post-lockdown spending flurry runs out and buying a posh watch isn’t a priority treat.
Overall, I remain very positive on WOSG. Nevertheless, I’d rather buy it for less than the 30 times earnings that the shares are currently changing hands for.
FTSE 250 power play
A third stock I’d buy if share prices fell across the board would be XP Power (LSE: XPP). As a one-time owner of the stock, I banked some good profits a while back and maintain a soft spot for the critical power control components manufacturer.
Like the other stocks, XP has shown itself to be resilient since the pandemic first struck. This performance has continued into 2021 with the company delivering “another period of significant revenue and profit growth”. Backed by a strong order book, the company now expects its exposure to trends such as AI and the Internet of Things to allow it to grow in the future.
At 28 times earnings, XPP is the cheapest stock mentioned. That’s clearly still not a bargain though, especially as the company is exposed to “price and availability pressures within the component supply chain“. As such, I’m happy to delay buying back in for now.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Games Workshop. The Motley Fool UK has recommended XP Power. 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.