Will we have a new stock market crash in 2024? Will FTSE 250 stocks take the brunt of any new one and punish investors again?
Well, it might happen, but I really doubt it. Not in a year when earnings and dividends from UK stocks look set to climb.
And in the past couple of months, the mid-cap index has started to outstrip the FTSE 100 again. It’s done that a lot in the past when the stock market mood is turning bullish.
Mid-cap bargains
I try to keep away from judging a stock based on its index, as it all really depends on individual valuations.
But if we get the good stock market year in 2024 that might be just round the corner, I do see a few FTSE 250 stocks that I think could do well. Here’s a few on my list of potential buys.
A Persimmon top-up is definitely a possibility. I’m bullish on the housebuilding business in the long term — is there anyone who isn’t? Crest Nicholson Holdings is another I like the look of.
The sector could stay in the dumps for a while yet, and we might see more pressure on dividends. But when a cyclical sector is down, that’s a good time to buy, right?
Financial buys
Like their FTSE 100 counterparts, I rate some of the smaller financial stocks as good value too.
In particular, I like the look of Ashmore Group and abrdn. We’re looking at forecast dividend yields of 8% and 7.9% respectively. That’s for 2023, and so close to the end of the year I’d say there must be reasonable confidence in those.
Forecasts for the next couple of years show steady dividends.
Not all the FTSE 250’s big dividend stocks fill me with glee though.
20% dividend!
Look at the biggest, for example. It’s oil stock Diversified Energy Company, and some forecasts show a 21% dividend yield. With the company’s expansion policy and the costs it brings, I don’t see that as sustainable.
Some analysts have already slashed their forecasts down close to zero. Oh, and there’s been some big dilution through new equity issues too. It’s not for me.
Harbour Energy might be though. I can see volatility due to uncertain oil prices and demands. But it’s one of those rare oilies with net cash. And there’s an 8.2% dividend on the cards. I’m tempted.
Investment Trusts
If we enter a bull market but can’t decide on the best stocks to buy, I think investment trusts can be a good choice.
Target Healthcare REIT is on my list. It might be valued based on its properties, but its true worth must surely be down to long-term demand for its care homes.
Supermarket Income REIT is also tempting, with forecast dividend yields of around 7%. There’s definitely some property-related risk with these two, mind.
Still, if I had enough cash, I think I’d put some into most of these. As it is, they’re on my list for further analysis.
