After a 20% climb since the start of the year, I thought I was finished buying shares in JD Wetherspoon (LSE:JDW). But I’m still adding to my largest FTSE 250 investment in my Stocks and Shares ISA this month.
The stock is one of my largest investments, but there’s a very specific reason I’m still buying. And it has to do with the company’s unique strength as well as the way I approach investing more generally.
Long-term value
All industries go through ups and downs. But the best businesses are the ones that are able to take advantage when their competitors are under pressure.
Good businesses are able to hang in there when the going gets tough. But the best ones have the ability to strengthen their competitive advantages as their rivals falter.
Right now, the hospitality industry is facing significant challenges on several fronts. First, a rising cost of living is cutting into consumer discretionary spending.
Second, higher Living Wage and Employers National Insurance contributions are increasing costs. While JD Wetherspoon isn’t immune to these risks, I think it’s in a strong position relative to its rivals.
Supply and demand
I think the supply and demand equation looks very favourable for the FTSE 250 firm at the moment. There are a few reasons for this.
One is that demand in the pub sector has been strong, with like-for-like sales up consistently in 2025. And JD Wetherspoon has grown faster than the industry average.
In terms of supply, the latest data indicates that the number of hospitality venues has been falling at a rate of two per day since the start of the year. That means less competition for those that remain.
Higher costs are a real challenge for pubs at the moment and JD Wetherspoon’s focus on customer value makes increasing prices risky. But the balance between supply and demand is becoming much more favourable for those that can cope.
Long-term growth
While other companies are struggling to keep their venues open, JD Wetherspoon has gone into expansion mode. The firm is looking to open around 30 new outlets this year.
One reason the company is how to do this is the strength of its balance sheet. Since July 2019, the organisation has reduced its long-term lease liabilities by almost £144m.
This is the result of JD Wetherspoon investing heavily in freehold reversions in the last five years. And there’s another benefit to the firm investing in owning its properties.
Having lower costs is a key part of how the firm keeps its prices low for customers. And lower lease liabilities is a key part of this in the long term.
Final Foolish thought
Being greedy when others are fearful isn’t just for investors. It’s also what sets the best businesses apart from the competition.
Like other hospitality businesses, JD Wetherspoon is facing the prospect of higher staffing costs. And this is a genuine challenge for the company.
The firm, however, has a unique ability to take advantage of the current situation and invest for long-term growth. And at a price-to-earnings (P/E) ratio of 13, I’m still buying.
