My top FTSE 250 pick for long-term growth

I think this FTSE 250 stock has plenty of long-term potential and looks like a great buy for my portfolio.

| 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.

Older Man Reading From Tablet

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.

sdf

National Express (LSE:NEX) is one of my favourite picks on the FTSE 250 right now. The stock offers plenty of upside potential having suffered during the pandemic and in its aftermath.

My portfolio is largely filled with dividend-paying stocks that help to counter the current inflationary pressures. But I’m also on the lookout for stocks with great long-term potential, even if they’re not offering passive income at the moment. That’s where National Express fits, although it has indicated that it will pay a dividend in 2022.

Discounted share price

National Express is currently trading just above 230p a share. That’s considerably down on its year high of 337p per share and less than half of its pre-pandemic peak.

The intercity and inter-regional bus and coach operator saw its share price nosedive when the pandemic hit. Two years of Covid-induced underperformance have been compounded by soaring fuel prices following Russia’s invasion of Ukraine. The National Express share price briefly dipped under 200p a share in early March before quickly recovering.

Growth prospects

Evidence suggests that National Express has weathered the worst of the pandemic already. In 2021, the coach operator managed to report an underlying operating profit of £87m, representing a considerable improvement from the £50m loss recorded in 2020.

The Birmingham-headquartered firm has said that it intends to resume dividend payouts in 2022 as forecasts indicate that revenue will near pre-pandemic levels during the year.

But while Covid will continue to impact demand for their services in the short term, I believe the coach operator has great long-term prospects. I think the firm will benefit from the green agenda as people swap car journeys for other forms of transportation.

In fact, the UK Climate Change Committee predicts that between 9% and 12% of car journeys will switch to journeys made by bus by 2030. Such a transition could be accelerated by the soaring fuel prices we’re seeing right now.

Headwinds

Covid is still dampening demand for travel and National Express’s bus business continues to receive state aid. But like any company, it will face challenges beyond the pandemic. Wage inflation and rising fuel prices are two of those.

In the short term, high fuel prices caused by the Ukraine crisis are unlikely to have much impact on the business. National Express is fully hedged on fuel through to 2023, reducing its exposure to the current high prices.

It’s also worth noting that future waves of Covid-19 infection and new variants may cause temporary reductions in demand.

The company also recently received a setback after a planned buyout of rival Stagecoach faltered. However, National Express has insisted it doesn’t need the deal in order to deliver its growth objectives.

I’ve been watching the National Express share price for some time, but now I think the only way is up for this stock. That’s why I’ll be adding it to my portfolio soon.


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.

James Fox has no position in 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

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

With a 30% increase since the start of the year, does the Barclays share price still offer good value?

In light of an impressive Barclays share price rally, our writer considers the attractiveness of the bank’s stock relative to…

Read more »

British coins and bank notes scattered on a surface
Investing Articles

How much passive income could we earn from UK shares with just £10 per day?

Even with modest amounts of money to invest, we can still consider investing in the UK stock market to generate…

Read more »

Night Takeoff Of The American Space Shuttle
Investing Articles

3 booming growth shares in the Scottish Mortgage portfolio

Our writer highlights a diverse trio of red-hot shares from the portfolio of Scottish Mortgage Investment Trust. Are any worth…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

2 growth stocks absolutely smashing the FTSE 100

If you think the wider FTSE 100 is having a good year (and it is), check out the gains holders…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

FTSE 100: next stop 10,000?

As the FTSE 100 briefly hits 9,000 points, investors are already looking forward to when the next 1,000-point level might…

Read more »

Investing Articles

Is Burberry ‘back’ as a solid update drives its shares to 17-month highs?

Burberry shares have risen by more than 60% since May's forecast-beating financials. Can the FTSE 250 luxury giant keep rising?

Read more »

Two gay men are walking through a Victorian shopping arcade
Investing Articles

The Burberry share price continues to rise despite falling sales!

Our writer looks at how the Burberry share price responded to the company’s first-quarter trading update, which was released earlier…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

What a crazy day for the share price of this FTSE 250 retailer!

Our writer’s taken time to digest the latest results of the FTSE 250’s Frasers Group. And he likes what he…

Read more »