Late last week, I highlighted three stocks from the FTSE 100 that I’d be watching closely in April. Today, I’m doing exactly the same thing with the more UK-focused FTSE 250.
AJ Bell
Stocks and Shares ISA and SIPP provider AJ Bell (LSE: AJB) releases a Q2 update on 21 April. I’ll be keeping an eye on how the market reacts.
Back in January, the investment platform said it had managed to grow total customer numbers to just over 398,000 by the end of 2021. That’s 27% up on the previous year. And with more and more people recognising the need to take control of their financial futures, I agree with CEO Andy Bell that the FTSE 250 member is “well-positioned” to continue growing.
That said, AJ Bell’s share price is down almost 25% in 2022 so far. Perhaps this is based on the (very reasonable) belief that people will be less inclined to save when the cost of living is galloping higher. There’s also the valuation to consider. As things stand, shares still trade on 29 times forecast earnings. That’s a punchy rating, even during good times.
Having held the stock before, I’m a fan of this company. Even so, I don’t think I’d consider getting involved again before knowing just how good recent trading has been.
Kainos
I have IT consultant Kainos (LSE: KNOS) down to release a trading update on 19 April. If that happens, investors will be hoping that this former market darling can reverse the direction of its share price. Also down nearly 25% in 2022 so far, it would seem that the business has become another victim of the rotation into value stocks.
This fall seems a bit harsh to me. After all, business has been buoyant. The need for organisations to digitalise as much as they can has been given a powerful boost by the pandemic. This can only be good news for the company’s medium-to-long-term outlook.
Then again, maybe the recent selling pressure is justified to a point. Like AJ Bell, the valuation is steep at 33 times forecast earnings for the new financial year that begins at the start of next month. As such, I’d need to be confident that Kainos can go on delivering the goods without any major headwinds.
Dunelm
Homeware retailer Dunelm (LSE: DNLM) is a third FTSE 250 stock that I’ll be checking in on next month.
At 14 times forecast earnings, shares are significantly cheaper than the other companies mentioned here. That potentially makes it a less risky play, especially with markets as volatile as they are at the moment. Returns on capital employed — what a company gets back for the money it puts in — are consistently high too. This tends to be indicative of a quality business.
On the flip side, I’ve always had a nagging concern that the market in which Dunelm operates is just too competitive. Would I refuse to shop anywhere else if I was looking to furnish my home? I don’t think so. In fact, I’d likely shop around even more, given the aforementioned inflationary environment. This makes me cautious on the £2.2bn-cap.
I have little doubt that the Dunelm share price (down 20% in 2022) will recover in time. For now, I’ll watch from the sidelines.
