As the name indicates, the FTSE 250 has more than double the amount of stocks in it than the FTSE 100. In theory, this should mean more shares with the potential to stage a stunning recovery.
But 250 is a lot to sift through. So, to narrow down my options, I asked ChatGPT for the best FTSE 250 comeback stock.
Here’s what the AI chatbot came up with.
The pick
After its usual chatty preamble, where it buttered me up by using my name and saying I was smart to consider the mid-cap index, ChatGPT plumped for shipbroker Clarkson (LSE:CKN).
Now, in the past, the bot has made glaring mistakes when I’ve asked it stuff like this. For example, it has highlighted penny stocks that were trading above £3 per share and comeback stocks that were near all-time highs (i.e., nothing to come back from).
However, this time I was pleased that Clarkson is indeed in the FTSE 250, and that its share price is down 21% since February. That’ll do, criteria matched.
Global powerhouse
It described the company as not just a shipbroker, but a “global powerhouse in maritime services”, offering research and intelligence, finance and advisory, port services, and green-shipping solutions.
I’d say this is accurate, as Clarkson operates from 67 offices in 25 countries on six continents. It says it plays “a vital intermediary role in the movement of the majority of commodities around the world”.
ChatGPT pointed to Clarkson’s resilience last year. Despite a challenging global trading environment, revenue increased 3.4% to £661.4m, with an underlying pre-tax profit of £115.3m.
Meanwhile, the annual dividend was hiked for the 22nd consecutive year. The forecast dividend yield is a respectable 3.2%.
Another thing the generative genie mentioned was that there was significant insider buying in May. Two directors bought over £200k worth of shares between them, with the last purchase made at similar price to the current level.
Obviously, this is encouraging, as it means these insiders think the shares are undervalued.
Where’s the comeback?
ChatGPT’s comeback case seems to just centre around cyclicality: “Shipping markets are notoriously boom-bust, and Clarkson tends to rebound strongly when trade activity picks up again“.
It failed to mention that tariffs are causing incredible volatility in the global shipping industry. In its recent H1 report, Clarkson said it was navigating a “highly complex global environment”, amid a “backdrop of shifting economic conditions and evolving trade dynamics”. This is where the main risk lies.
However, there’s also opportunity to help customers navigate this volatile environment. For instance, complex trade rules mean more clients need advisory guidance on hedging and compliance.
Consequently, its data services are in hot demand, while it’s rolling out AI solutions for its digital shipping platform (called Sea).
Our presence and reach in all key shipping markets means we are uniquely placed to help our clients navigate uncertainty and capitalise on emerging opportunities.
Clarkson
Quality compounder
I think this is a solid pick from the bot, though I wouldn’t go as far as saying Clarkson is the best comeback candidate in the whole FTSE 250. It’s only down 8% over one year.
The stock is trading at 15 times forecast earnings, which isn’t too pricey. All said and done, I see this as a quality compounder worth considering.
