The FTSE 250 can be a happy hunting ground for Foolish, long-term investors like me. From growth to value shares, industry leaders and new upstarts, the UK mid-cap index has something for everyone.
The index comprises 250 companies with a combined market cap of over £300bn and they can be hard to keep track of.
So I have picked out three FTSE 250 stocks that I think are worth considering for the future.
Soaring construction materials group
Breedon Group (LSE: BREE) is one of the first on my radar. The construction materials provider has seen its share price soar 591% in the last five years to 462p, including a 33.7% gain in the last 12 months.
For the half-year ended 30 June, Breedon posted a 3% increase in revenue to £764.6m despite a tough operating environment in the UK and Ireland.
Buoyed by the UK government’s plan to build 1.5m new homes in the next five years, combined with a strategic entry into the US market via its recent BMC acquisition, I think Breedon is positioned for growth.
Of course, there are risks. A cyclical downturn in the industry or major regulatory changes could knock the company’s strategy off course.
IT services company seeking growth
Softcat (LSE: SCT) is an IT infrastructure and services group that has seen its share price climb 22.5% in the last 12 months to 1,577p.
The current price to earnings (P/E) ratio of 26.5 is a significant premium to the 14.2 average for the FTSE 250. P/E ratios do vary by industry and I think the recurring nature of IT services justifies a premium over, say, financial services.
Softcat has delivered an impressive 19 consecutive years of organic profit growth. However, there are signs that it’s being challenged. 2024 revenue declined by 2.3% to £962.6m driven by lower hardware sales and a shifting software mix.
I think management’s strategy execution is key. Acquiring more customers and doing more with its existing base could help drive long-term growth in key areas like cloud computing and boost the share price higher.
Active investment manager
Man Group (LSE: EMG) is another that I am considering buying. The FTSE 250 group is a leading active investment manager with various strategies in both liquid and private markets.
The last couple of decades have seen a trend towards passive investing. However, a changing geopolitical and macroeconomic environment, as well as a significant influx of capital, has created opportunities for active investors once again.
Man has a number of hedge fund strategies and a stable investor base. With a technology-led approach to portfolio management, I think the investment manager could be a big winner from ongoing volatility in global markets.
Of course, active investing is a tough game. It only takes a bad year or two to see investors head for the exit and reduce funds under management which impacts on scale and profitability.
Under the microscope
These are just three FTSE 250 stocks that I am looking to add to my portfolio and hold for the long run. Each stock has a clear strategy and strong market position, with the potential for growing end markets. This gives me confidence that I can start adding them to my portfolio and test my investment thesis along the way.
