After sifting through the dogs of the FTSE 250, here’s what I found

Jon Smith talks through two FTSE 250 stocks that are down at least 15% over the past three months and weighs up whether to buy the dip.

| More on:
Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The dogs of the FTSE 250 refers to the worst performing stocks in the index over a period of time. I’m looking at the time period of the past three months to see whether it makes sense for me to buy the dip or spot a value stock. Here’s one that I’m avoiding, but also one that I think could be a smart purchase.

Troubles from war

Let’s start with the one I wouldn’t touch. It’s Ferrexpo (LSE:FXPO), the iron ore pellet producer. The stock is down 38% over the past three months, extending the 55% drop over the past year.

The firm has been in a sorry state, negatively impacted by the war in Ukraine. Given that the business has three iron ore mines and an iron ore pellet production facility in the country, operations have been extremely difficult.

To put the financial impact into perspective, back in 2021 the full-year revenue was just over $2.5bn. For 2023, this fell to $651m. It’s a huge drop, with the 2023 report stating that “our people and our
business continue to be severely affected”
.

Although I’m not criticising the company, I don’t see how I can invest in the firm until we get a resolution to the war. Until then, I can only see the share price falling further.

Granted, I could be wrong, with the share price potentially rallying due to a significant boost to iron ore prices or some unexpected events.

A dip to consider

On the other hand, I do like Bridgepoint Group (LSE:BPT). Even though the stock is down 15% over the past three months, I think it’s a dip worth buying. Over the past year, the stock is up 8%.

There doesn’t appear to be any clear cut reasons behind the slide lower in recent months. True, the 2023 results that came out in March weren’t as strong as some might have expected. Profit was up 12% versus the previous year, which is still a solid performance in my eyes.

I do get that some investors don’t want to get involved in private equity and private credit right now. With the stock market being quite uncertain, having money tied up in private equity that can’t easily be sold for cash isn’t that appealing. Plus, with higher interest rates, the potential for default on credit can increase.

Even with these risks, the business is doing very well. In fact, assets under management (a key metric for growth) increased by 7% from last year, to hit $44.7bn. Given the size that the group has, spread with offices around the world, I think it’s very well placed to push on. When I zoom out, the picture is still rosy.

On that basis, I’m thinking about buying the stock for my portfolio shortly.

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 assessed. Consider taking independent financial advice.

Jon Smith 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.

More on Investing Articles

Young black man looking at phone while on the London Overground
Investing Articles

1 delicious penny stock I reckon can deliver juicy returns and growth

This food delivery penny stock has experienced a surge in performance and uptake recently. Our writer is excited by its…

Read more »

Investing Articles

If I’d bought Rolls-Royce shares the day Tufan Erginbilgiç joined here’s what I’d have now

Harvey Jones is startled by just how fast the Rolls-Royce share price has risen since its transformative CEO took over.…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

How much do I need to invest in Lloyds shares to earn income of £1,000 a year?

Harvey Jones is getting income and growth from his Lloyds shares but wished he'd bought more of them. So he's…

Read more »

Illustration of flames over a black background
Investing Articles

Down 75%! Will the Saga share price ever be loved again?

The last few years have been incredibly difficult for those watching the Saga share price. But what does the future…

Read more »

Investing Articles

What kind of return could I expect by investing £100 monthly in a Stocks and Shares ISA?

Using a Stocks and Shares ISA to avoid capital gains tax could grow a £100 monthly investment into a second…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Can strong operational momentum keep the Informa share price rising?

FTSE 100 company Informa has been performing well, but this may be just the beginning of a multi-year trend for…

Read more »

Market Movers

What’s going on with the Britvic share price?

Jon Smith flags up why Britvic's share price is surging on Friday, but believes that the company is in a…

Read more »

Cheerful young businesspeople with laptop working in office
Dividend Shares

2 super-cheap passive income shares I’m eyeing up right now

Jon Smith discusses two of his favourite passive income shares in the banking and property sectors, both featuring yields above…

Read more »