3 FTSE 250 shares to buy and hold until 2030

Rupert Hargreaves takes a look at three FTSE 250 shares to buy for 2022 and beyond, considering their growth prospects and market positions.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Trader on video call from his home office

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I have been looking for FTSE 250 shares to buy for my portfolio over the past couple of weeks. I am looking for companies with the potential to compound shareholders’ capital consistently for the next decade. 

These businesses are few and far between as not many will be able to maintain their competitive advantages for the next 10 years. Numerous companies in the FTSE 250 are cyclical businesses, which struggle when times are hard. 

Only a few organisations have the qualities required to ride out the peaks and troughs of the economic cycle. With that in mind, here are three shares I would buy for my portfolio to hold until 2030. 

FTSE 250 international giant

The first company on my list is international shipping broker Clarkson (LSE: CKN). I think this business has a tremendous long-term outlook as the shipping industry continues to expand. A combination of rising trade volumes and low levels of capacity has sent demand and prices surging across the industry. 

As a result, Clarkson’s profits have also jumped. According to its latest update, trading in December was “stronger than anticipated“. The company is now expecting to report pre-tax profit for the 2021 financial year of more than £69m.

To put this figure into perspective, due to the volatility in the global shipping market throughout the pandemic, the company lost a total of £41.7m during 2020 and 2019. 

Vital role

Clarkson fulfils vital roles in the global shipping industry. It helps companies buy and sell ships, arrange financing for new vessels, and predicts future industry trends. Therefore, the group has multiple defensive qualities. Shipping corporations rely on its research and services to help them manage their operations.

These are the qualities I believe will help the business prosper over the next decade. As well as its growth prospects, the stock also offers a dividend yield of 2.2%, at the time of writing. 

The biggest challenge the company will face as we advance is competition. Clarkson is a leading enterprise in the shipping sector, but it is not the only operator. It will have to fend off competition from challenges, who may want to grab market share from this FTSE 250 enterprise. 

Shares to buy for growth

One of the most defensive sectors of the market is utilities. As there will always be a demand for electricity and water, so companies in this sector will always have a guaranteed market. 

That is the primary reason why I would acquire Drax (LSE: DRX) for my portfolio of FTSE 250 shares. The corporation is the largest publicly-traded power plant operator in the UK. In recent years, it has transformed its facilities to burn biomass rather than hydrocarbons to help it meet the UK’s strict climate change commitments

Thanks to its position in the market, Drax has capitalised on surging UK energy prices over the past six months. The company sells its power on forward contracts, which are agreed far in advance. Therefore, it has not benefited from rising power prices immediately. Nevertheless, the corporation has been able to lock in higher prices for 2022 and 2023.

It seems likely this initiative will produce a windfall for the enterprise in the years ahead. City analysts expect earnings per share to rise 121% next year. 

Unfortunately, I do not think it is sensible to suggest that this environment will last indefinitely. Power prices are likely to fall sooner or later, which will impact the company’s earnings potential. 

Energy transition

Still, in the long run, the group’s biomass and pumped storage generation assets will play a vital role in the UK energy transition. The assets will help the country stabilise the electricity grid during periods of low renewable energy generation.

Thanks to this crucial position in the energy market, I think the company will prove to be a solid investment for my portfolio over the next decade. The stock also offers a dividend yield of 3.2%, at the time of writing. 

Risks Drax could have to deal with in the months and years ahead include higher input costs for its biomass power plants. Higher costs could eat away at profit margins. Regulators may also restrict how much profit the group can generate and place stricter environmental requirements on the enterprise. All of these challenges could increase costs and reduce growth. 

FTSE 250 retailer

The final company that makes it onto my list of FTSE 250 shares to buy for the next decade is Pets at Home (LSE: PETS). 

The UK pet population has exploded over the past couple of years, leading to a surge in demand for related products. Historically, the pet and pet care industry across the UK has been highly fragmented, with small stores and partner-owned vets making up the bulk of the market. 

Pets at Home is changing this. It is consolidating the market and using its size and scale to grab market share. It has also rolled out a series of online and subscription products to crystalise its position in the minds of consumers. 

Considering its position in the market and the general lifespan of pets, I think the company will remain a force to be reckoned within the retail industry for the next decade. There is also plenty of room for the group to continue expanding in the market as it takes over smaller peers. 

The most significant risk to this growth is that of competition. Considering the organisation’s success, I do not think it will be long before competitors start to attack. Private equity and venture capital companies could launch their own pet-focused retailer and begin to nibble at the group’s market share. 

Even after taking this challenge into account, I would be happy to buy the FTSE 250 stock. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

How I’d invest my first £20k ISA to target £4,900 a year from dividend shares

Looking for dividend shares in a new Stocks and Shares ISA, and want diversification too? Here's how I'd go about…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »