I’m always on the lookout for bargain basement FTSE 250 stocks. While the FTSE 100 gets more attention, the FTSE 250 outperforms it over long periods of time.
Actually, since 1998, shares on the FTSE 250 have offered more than double the returns of those on the premier index.
And with rampant inflation and the cost-of-living crisis, I think many of its stocks are changing hands for below fair value at the moment. Here are three I’m looking at buying before their prices shoot up.
The J D Wetherspoon (LSE: JDW) share price could be seriously undervalued. It’s down 57% from its 2019 all-time high before Covid took a wrecking ball to the hospitality sector.
And while the shares have lost half their value, sales are rebounding nicely. The latest Q3 revenue figures were up 12.7% compared to the last financial year before the pandemic.
The full year that’s “likely to be a record” is more evidence the pub chain is back on its feet.
Looking ahead, the Wetherspoons business model seems well-suited for high inflation. The company uses its size – around 900 pubs – to negotiate cheap deals with suppliers.
This could be a double-edged sword though. Cheap prices meant a 2022 gross margin of 5.8% and a net margin of 1.1%, which offer little room for flexibility.
The Greggs (LSE: GRG) share price surged 58% in the last six months. That’s a stellar return compared to the FTSE 250 average of 13%.
The company has grown rapidly in recent years, going from £804m revenue in 2014 to £1,512m in 2022. And the management team has an ambitious plan to double revenue again within five years.
Parts of the plan include vegan options, later opening hours (to 8pm), and further collaborations with Iceland and Primark.
It trades at a fairly high 22 times earnings at present, which is a risk. But for a company with such ambitious growth plans, that price could turn out to be as cheap as its sausage rolls.
Marks and Spencer
Marks and Spencer (LSE: MKS) shares jumped 15% recently on the back of excellent 2022 results. Its £1.88 share price now looks like a snip compared to previous highs of over £7.
Revenue up 9.6% and pre-tax profit up 21.4% both show the company is heading in the right direction. This is especially true when other retailers are posting lower sales because of the cost-of-living crisis.
M&S used to sit proudly in the FTSE 100 as a founding member. And the brand name still carries enough weight to win Yougov’s ‘most trusted brand’ title for 2022.
The retailer fell out of the Footsie in 2019. But as the current market cap has leapt up to £3.6bn, it could be sooner rather than later that M&S rejoins the index.