Today I’m hunting through the FTSE 250 mid-cap index for bargain shares to buy. I’ve restricted my search to companies that are trading within 10% of their 52-week lows.
I’ll start with a word of warning. These unloved companies are sometimes cheap for a good reason. But I’ve often found good buying opportunities by looking for underperforming companies facing manageable short-term problems. Here are three shares I’d buy today.
Long-term growth opportunity
My first pick is Spirent Communications (LSE: SPT). This tech firm specialises in producing equipment used by network operators for testing and service assurance. Customers include mobile network operators and big data centres operators such as Amazon Web Services.
Spirent’s share price hit the buffers in January, when the company warned that some customers had delayed purchase decisions. Although there had been no cancellations, some profit was expected to be pushed back into the second half of 2023.
When profits are unexpectedly weighted to the second half of the year, it’s sometimes a warning of problems to come. Initial delays could become cancellations, hitting profits.
However, on a medium-term view, I think that ever-larger and more complex networks are likely to support Spirent’s continued growth.
The stock’s forecast price-to-earnings ratio of 15 doesn’t seem expensive to me, given the company’s high profit margins and debt-free balance sheet. I see Spirent as a long-term buy.
A buy-and-forget stock?
Consumer goods firm PZ Cussons (LSE: PZC) owns brands such as Carex, Imperial Leather, and St Tropez. This 139-year-old group remains under family control and is also a member of my own share portfolio.
PZ Cussons’ share price slumped recently after the company warned of continuing cost pressures and a higher expected tax charge this year. However, the group’s pre-tax profit guidance for the year is unchanged. On balance, I don’t see too much to be concerned about here.
The main risk I can see is that CEO Jonathan Myers’ efforts to kickstart growth in this business will be unsuccessful. Although performance has improved since Myers took charge, profits are still lower than they were 10 years ago.
Personally, I’m encouraged by the changes Myers has made so far. There are no guarantees, but I see this as a fairly low-risk investment at current levels.
A strong recovery
Irish firm C&C Group (LSE: CCR) owns the Bulmers, Magners, and Tennent’s cider and beer brands, as well as a number of other smaller labels. C&C is also a distributor in the UK, supplying the trade with a wide range of drinks.
The company had a tough pandemic, as pub closures hit the trade hard. But this business seems to be recovering quite well. Revenue was up by 20% during the key month of December compared to the previous year. Operating profit for the year to 28 February is now expected to be close to 2019 levels.
C&C’s debt has now fallen back to more comfortable levels and City analysts expect the firm to restart dividend payments this year. Although there’s a risk that pub sales could weaken during a recession, I think the shares look reasonably valued on 11 times forecast earnings.
As with PZ Cussons, I see C&C as buy-and-hold stock that could deliver attractive returns from current levels.
