2 beaten-down FTSE 250 shares I’m buying and holding for the long term

Andrew Woods explains why he’s adding two FTSE 250 shares to his portfolio in the middle of a market sell-off.

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The FTSE 250 can be a treasure trove of exciting growth stocks. Given the recent dip in share prices, I’m keen to find beaten-down stocks before the market rebounds. Let’s take a closer look to see what this index offers.

A tasty growth share

The Greggs (LSE:GRG) share price is down 35% in the past year and has fallen 18% in the last month. At the time of writing, it’s trading at 1,920p.  

The company – a retailer of baked goods – swung to a £13.7m pre-tax loss in 2020. This was mainly the result of the closure of shops due to pandemic lockdowns.

As economies have reopened, however, so too have Greggs’ shops. In 2021, the firm posted pre-tax profits of £145m. This swift rebound was encouraging, but the share price remains low.

This is because of a recent market sell-off, combined with concerns over inflation. Furthermore, Greggs has been feeling the pinch from the increased cost of energy and ingredients in recent months. These factors could begin to start eating into future profit margins. 

Supply chain issues also caused a suspension of the sale of the company’s famous vegan sausage roll, due to the inability to acquire some ingredients.

Despite these risks, however, Greggs has been seeing strong earnings growth. Between 2017 and 2021, earnings per share (EPS) rose from 64.5p to 115.7p. By my calculation, this results in a compound annual EPS growth rate of 12.4%. This is both strong and consistent.  

Steely earnings growth

The Clarkson (LSE:CKN) share price is also down over the past year, having fallen 14% in that time. However, it’s up 10% in the past month. At the time of writing, it’s trading at 2,950p.

The shipping and financial services firm reported a pre-tax loss of £16.4m in 2020, owing to pressures on freight from the pandemic. By 2021, this had swung to a £69m pre-tax profit.

Like Greggs, Clarkson also has consistent earnings growth, with a compound annual EPS growth rate of 7.2%. It should be noted, of course, that past performance isn’t necessarily indicative of what might happen in the future.

Yet in recent months, high demand for commodities has bolstered the firm’s broking segment and the company has a large forward order book for 2022. In addition, market volatility has been positive for the financial business.

On the other hand, any pandemic resurgence could be bad news for the global freight market and could hit Clarkson in a similar way to 2020.

Overall, both of these businesses have suffered over the past couple of years. Recent stock market sell-offs have also sent their share prices lower. But I view this as an opportunity to load up on two quality growth stocks to hold for the long term. I’ll be adding both companies 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 considered so you should consider taking independent financial advice.

Andrew Woods 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.

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