I am looking for mid-cap FTSE 250 shares to buy for my portfolio in 2022. I am looking at this index because I think its constituents could provide more exposure to the domestic economic recovery than their international peers.
With that in mind, here are the five mid-cap stocks I would acquire for my portfolio today.
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Shares to buy for 2022
The first enterprise on my list is the iron ore producer Ferrexpo (LSE: FXPO). This company operates in the Ukraine and sells iron ore worldwide, so it is not a play on the domestic economy.
However, it is a play on the global economic recovery as the price of iron ore has been rising over the past 12 months.
Demand for the vital steel ingredient has been increasing as countries around the world unleashed massive infrastructure spending plans to try and stimulate their economies after the pandemic. This is generating substantial profits for Ferrexpo and the company’s international peers.
Indeed, group profit before tax increased 165% year-on-year in the six months to the end of June.
Management is planning to return a significant amount of this capital to investors. In a recent stock exchange announcement, the group said it will pay out 30% of free cash flow to investors as we advance. The report explains that it could also complement this with special dividends in periods of high profitability.
This cash return policy and the group’s rising profits are the main reasons why I think this FTSE 250 company is one of the best shares to buy now.
Challenges it could face include commodity price volatility and rising costs, which could hit profit margins. If profits begin to fall, shareholder returns may also decline.
Real estate investment
Back here in the UK, I like the look of real estate investment trust Capital & Counties Properties (LSE: CAPC).
This company owns a portfolio of properties in central London. As most of them are commercial, it has suffered a significant decline in income over the past 24 months. But as the UK economy continues to reopen, I expect property values and rental income to rebound.
What’s more, as the majority of the company’s portfolio is located in the capital, I think its portfolio should outperform the rest of the country, which may struggle if the economic recovery grinds to a halt.
Additional coronavirus restrictions are the most considerable risk the corporation faces today. Further restrictions could significantly impact levels of rent collection and weigh on property prices. In this scenario, the FTSE 250 company’s recovery would almost certainly slow.
FTSE 250 recovery play
Speaking of recovery investments, I am also interested in buying the insurance group Beazley (LSE: BEZ).
Over the past two years, this company has been entangled in a battle with business interruption insurance policyholders. Policyholders have been fighting the firm to pay out on policies due to the disruption from the pandemic.
After a lengthy legal battle, the Financial Conduct Authority is forcing the corporation to meet these obligations. The subsequent payouts are having a significant financial impact on the company’s balance sheet.
However, this challenge should only last for so long. At the same time, the international insurer is benefiting from rising insurance rates around the world. Higher rates should translate into higher profits and, as a result, help the company reinforce its balance sheet after the recent disruption.
Considering this recovery potential, I would like to add the FTSE 250 stock to my portfolio in 2022.
The most considerable risk facing the enterprise is the risk of a significant loss from catastrophes. This is a general risk of doing business in the insurance sector. It is something all firms have to deal with at some point. Beazley’s survival could be at stake if the losses are too big.
Even though the latest set of coronavirus restrictions has brought back a work-from-home directive, over the past couple of months, it has become clear that many firms will require staff to return to officers after the pandemic.
This suggests the outlook for Trainline (LSE: TRN) is looking up. Not only will the company be able to capitalise on this return to offices, but the number of leisure passengers using trains has also returned to pre-pandemic levels.
According to its latest trading update, group sales for the six months to the end of August increased 151% year-on-year. As revenues have recovered, the company has reduced its outstanding debts and overall losses.
As the economy continues to rebuild in 2022, I think this trend will likely continue. That is why I would acquire Trainline for my FTSE 250 portfolio as a recovery play for next year. Of course, if the government introduces even more stringent restrictions, I will have to re-evaluate my position. This is by far the biggest risk the company faces right now.
Another FTSE 250 recovery investment
My final recovery play is Restaurant Group (LSE: RTN). The company, which owns a selection of casual dining brands, including Wagamama, is reporting a rapid rebound in consumer spending at its locations.
It has upgraded profit forecasts several times already this year. However, it has not yet commented on how recent restrictions will impact growth. Consumer confidence is likely to decline following the new rules. That will almost certainly impact growth in the restaurant sector.
Still, management believes that the company’s robust trading performance will allow it to make a substantial contribution to reducing debt for the year.
If it can make a material dent in debt levels, Restaurant Group will have more financial flexibility heading into the new year. This could help the company capitalise on the economic recovery by freeing up cash to spend on marketing activities.