The FTSE 250 tends to beat the FTSE 100 in good times. But the converse is true in tough times, and the smaller-cap index has fallen 15% over the past 12 months. Investors seem to be looking for the safety of larger, blue-chip investments.
And that makes me think now is a great time to search for cheap FTSE 250 buys. Here are three that I think look good value now.
Paragon Banking Group (LSE: PAG) released half-year results on 14 June, and the share price perked up nearly 7% on the day. Over the past 12 months it’s fallen 7.3%, which is certainly not great. But it does beat the index’s drop of 16%.
The economic outlook might be tough for the banking sector. But Paragon still reported record first-half profits. Underlying earnings per share grew by 29%, and the dividend rose 30%.
Paragon’s capital position looks strong. And CEO Nigel Terrington said “…we have extended this year’s share buy-back by an additional £25 million“.
What’s the downside? The economic squeeze is probably only just starting. And a tough lending environment could put pressure on Paragon in the second half.
But annualising these figures hints at a price-to-earnings ratio of under eight. And forecasts indicate a full-year dividend yield of 5.5%. I’d buy.
FTSE 250 housebuilder
Housebuilder Crest Nicholson (LSE: CRST) also put out first-half figures on 14 June. And I think the dip we’re currently seeing provides some nice buying opportunities for the sector.
The Crest Nicholson share price is down 34% over the past 12 months. It has been rebounding a little since May, though, including an 11% jump on results day.
Crest saw a 12.3% rise in revenue, after completing 7.8% more homes in the period. The company spoke of the “underlying strength of the housing market,” which counters the pessimism I’m seeing from other quarters.
This is another stock that could be pressured if there’s a borrowing squeeze. And though Crest is upbeat about the second half, we could still see falling demand. But it’s another cheap long-term buy for me.
Hedge fund manager Man Group (LSE: EMG) has bucked the FTSE 250 trend, gaining 26% over the past 12 months.
Even after that, we’re looking at a trailing P/E of only 8.7. Apart from a Covid dip in 2020, dividends have been steadily progressive over the past few years too. Current forecasts suggest a 4.4% yield this year, and that should be very well covered by earnings.
On the downside, hedge fund investing can be volatile. And Man uses gearing through borrowing too, so there’s clearly some risk there.
But so far, the company’s computer-based investing strategy has been producing the goods, with strong cash generation as a result. Man is buying back its own shares too, so I’m not the only one to think they’re good value now.
Would I spread £5,000 across these three? Definitely.