2 FTSE 250 shares I want to own before the next UK stock market boom

Paul Summers picks out two very different FTSE 250 stocks that, based on recent news flow, could do very well as the UK economy recovers its mojo.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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.

With inflation cooling and interest rates set to fall, I’m cautiously optimistic on how companies in the home-focused FTSE 250 index will fare in the rest of 2024.

Here are two I’ve got on my wishlist to consider buying when cash becomes available.

Confidence improving

Investment platform AJ Bell (LSE: AJB) should fare well as cost pressures ease. The more discretionary income people have left over, the more able they are to think about their long-term financial futures and put it to work in the market.

Should you invest £1,000 in M&G right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if M&G made the list?

See the 6 stocks

Based on today’s (18 July) trading update, there are signs this is already happening. Customer numbers rose by 25,000 to 528,000 in the last quarter. Gross and net inflows were also “significantly higher” than over the same period in the previous year.

Too expensive?

The snag is that some investors have seen it coming. AJ Bell shares are now up 40% in 2024. That’s a huge outperformance compared to the 9%-or-so achieved by the FTSE 250 as a whole.

Created with Highcharts 11.4.3Aj Bell Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Prior to markets opening, the former changed hands for 21 times forecast earnings — worth bearing in mind if the UK economy hits another sticky patch. In such as situation, anything remotely pricey may be punished. While undoubtedly one of the bigger players, AJ Bell also operates in a crowded market where retaining clients is a constant battle.

Then again, the current valuation’s still far below the company’s average over the last five years (38 times earnings). And a higher-than-usual price tag for a stock like this makes sense considering the chunky margins it consistently makes.

Rising demand

For a bit of diversification, I’d consider adding fellow FTSE 250 member Big Yellow (LSE: ) to my portfolio.

In sharp contrast to the hassle involved in buy-to-let, owning a slice of this real estate investment trust (REIT) would give me fuss-free exposure to rental properties and regular passive income.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Like AJ Bell, the self-storage specialist has also seen a uptick in business recently. Today’s update revealed a 4% rise in revenue in Q1 compared to the same three-month period in 2023.

The biggest driver of demand seems to be from domestic customers. I wonder if a decision by the Bank of England to cut rates (perhaps as soon as next month) could be the catalyst for a revival in the housing market and more business for firms like this as people look to temporarily store their clutter between moves.

But I also like that Big Yellow is positioning itself for growth. Having now received planning permission for nine new sites, the company is “embarking on an intense period of construction activity“.

If that’s not bullish, I don’t know what is!

Created with Highcharts 11.4.3Big Yellow Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Great dividends

An investment in Big Yellow seems to have many of the same risks as AJ Bell. Trading at a similar forward price-to-earnings (P/E) ratio, the shares aren’t cheap. I also need to be aware that this mid-cap is dependent on just one market — the UK.

For this reason, I’d make a point of checking that my portfolio also contained companies that made at least some of their money overseas.

But that 3.8% dividend yield is mightily tempting, especially as the company has a good history of hiking payouts in most years.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in M&G right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if M&G made the list?

See the 6 stocks

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.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Aj Bell Plc. 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

£20K invested in Tesla stock last April is now worth…

Despite all the bad headlines lately, Tesla stock has put in a storming performance over a 12-month timeframe. Is this…

Read more »

Investing Articles

If a 40 year old invests £600 a month in a SIPP, here’s what they could have by retirement

With no retirement savings at 40, an investor could put £600 a month into a SIPP and grow its value…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Why hasn’t its 9.9% yield boosted the Phoenix share price?

Phoenix Group has a dividend close to double digits, but saw a weak share price performance in recent years. Christopher…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio

Some of the best passive income gems can be found on the UK's smaller indexes like the FTSE 250 and…

Read more »

A coin being dropped into a piggy bank
Investing Articles

As the Barclays share price tanks 19% in 2 days, is this a great buying opportunity?

As a trade war sends the Barclays share price into a tailspin, Andrew Mackie steps back to look at the…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Fundsmith Equity still a good choice for a Stocks and Shares ISA in 2025?

Many Britons hold the Fundsmith Equity fund in their Stocks and Shares ISAs. Is this still a good move? Edward…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Down 25% since January, this resilient dividend stock’s catching my eye

Maintaining the UK’s rail, water, and energy infrastructure isn’t the most exciting business. But it has made this a solid…

Read more »