Earlier this month, I picked out a trio of terrific stocks from the FTSE 100 I’d buy without delay if I had the cash to do so. Today, I’m turning my attention to the more UK-focused FTSE 250 index.
Shares in investment platform provider AJ Bell (LSE: AJB) are down roughly 8% in 2023, so far. That’s not entirely surprising.
With inflation still running high, it’s natural to assume that many people will be unable/reluctant to put money to work. Realistically, another hike in interest rates could see sentiment head (further) south.
However, recent trading challenges this view. Assets under management jumped 39% to £3.9bn in the six months to the end of March. Pre-tax profit rocketed 61% to £41.9m.
It’s also worth highlighting that AJ Bell’s price-to-earnings (P/E) ratio of 21 is actually significantly lower than where it once was. In fact, I think the shares could now be something of a bargain, considering the stonkingly high returns on capital and margins the company regularly posts.
The outlook is also encouraging. Chancellor Jeremy Hunt’s decision to increase the annual allowance for tax relief on pension savings from £40,000 to £60,000 could see AJ Bell do very nicely when confidence returns.
Soft drinks giant Britvic (LSE: BVIC) may seem a strange choice, given that the stock has done so well already this year (+15%). Isn’t good investing all about buying while the chips are down?
Not necessarily. Sometimes, it’s simply easier to buy a quality company and sit on the shares ‘ad infinitum’. I think that’s the case here.
Britvic owns a bumper crop of ‘low ticket’ brands that people will buy out of habit. This makes revenue relatively consistent, at least when compared to most businesses. On which note, the hot weather we’ve had/having in the UK can’t be bad for sales!
All this should mean that the dividend stream remains solid. Right now, the shares yield 3.3%. This payout is expected to be covered twice by profit. So it looks very safe.
Nevertheless, that income can never be guaranteed. Risks here include higher taxes on the use of plastic packaging cutting into gross margins.
As always, it pays to remain diversified.
Tritax Big Box
I’ve banged the drum on logistics and warehouse operator Tritax Big Box (LSE: BBOX) for a long time. And I see no reason to change now.
Given the growing demand from clients including Amazon and Tesco, this real estate investment trust (REIT) is surely a great hold for the long term.
Granted, things haven’t been pretty of late. The stock has tumbled by almost 25% over the last year as investors have shunned anything related to property. A reduction in consumer spending has also hit sentiment by association.
The key, I think, is to not focus on what I believe are temporary headwinds. Online retailing is here to stay and retailers need sites to store and distribute their goods.
Knowing this, it’s encouraging that Tritax is continuing to expand. It recently added £58.5m of “high-quality urban logistics assets” to its portfolio.
Rather than worry about when the recovery kicks in, I’d comfort myself with the current 5.3% dividend yield. Importantly, this is far better than the 3.75% offered by the FTSE 250 index as a whole.